Debt Close to Retirement and Its Implications for Retirement Well-being

June 2019

Opportunities to borrow increased considerably in the U.S. over the past few decades, and many Americans today are approaching retirement with high levels of debt.


Older people (age 56-61) holding uncollateralized debt carrying high interest rates tend to be among those most subject to financial distress. Yet many people carry such debt into and through retirement. This study investigates three potential reasons for this troubling behavior: low financial literacy, lack of information and behavioral biases. The authors explain how each of these factors can lead older persons to hold excessive debt and the implications for their retirement well-being.

Key Insights
The most financially-knowledgeable older adults are the least likely to report that they hold too much debt or that they are financially fragile.
Older people with higher incomes and more education people tend to hold long-term debt, such as mortgages, while those with lower incomes and less education tend to carry high-cost debt, such as payday loans.
Short-term uncollateralized debt is strongly indicative of financial distress for older persons nearing retirement.
Older women and people with more dependent children are significantly more likely to report being over-indebted and unable to face financial emergencies.

The study’s authors use data from the 2015 wave of the National Financial Capability Study to examine the various types of debt people held close to retirement and the rationale for people’s financial decisions.