IDEAS home Printed from https://ideas.repec.org/a/kap/jfamec/v43y2022i4d10.1007_s10834-022-09828-1.html
   My bibliography  Save this article

The Role of Secured and Unsecured Debt in Retirement Planning

Author

Listed:
  • Zibei Chen

    (University of Southern Mississippi)

  • Karen A. Zurlo

    (Rutgers, The State University of New Jersey)

Abstract

Nearly 40 percent of Americans approaching retirement felt heavily indebted. Understanding the role of secured and unsecured debt in retirement planning becomes an urgent concern for researchers and policymakers alike. Using data from the 2015 National Financial Capability Study (NFCS), the current study identified secured debt (mortgage and auto loan) and unsecured debt (medical debt and credit card debt) among a national sample of pre-retirees aged 51–61 years. Logit regression models were estimated to examine and compare each debt’s relationship retirement planning among pre-retirees. We found a relatively large portion of the pre-retiree sample approached retirement in debt, and having debt was negatively associated with retirement planning. We also found that secured debt does not seem to facilitate retirement planning, and unsecured debt had a strong negative association with retirement planning. Our findings highlight differential impact that debt from different sources can have on retirement security, calling for closer examination on the role of debt in retirement security across income groups and those without retirement plans. Findings of this study yield policy implications on access to retirement accounts and financial education provision towards financial health and solvency of older Americans.

Suggested Citation

  • Zibei Chen & Karen A. Zurlo, 2022. "The Role of Secured and Unsecured Debt in Retirement Planning," Journal of Family and Economic Issues, Springer, vol. 43(4), pages 667-677, December.
    • Handle: RePEc:kap:jfamec:v:43:y:2022:i:4:d:10.1007_s10834-022-09828-1
    DOI: 10.1007/s10834-022-09828-1
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s10834-022-09828-1
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s10834-022-09828-1?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Barbara A. Butrica & Nadia S. Karamcheva, 2013. "Does Household Debt Influence the Labor Supply and Benefit Claiming Decisions of Older Americans?," Working Papers, Center for Retirement Research at Boston College wp2013-22, Center for Retirement Research.
    2. Wiltshire, J.C. & Elder, K. & Kiefe, C. & Allison, J.J., 2016. "Medical debt and related financial consequences among older African American and white adults," American Journal of Public Health, American Public Health Association, vol. 106(6), pages 1086-1091.
    3. Collins, J. Michael & Hembre, Erik & Urban, Carly, 2020. "Exploring the rise of mortgage borrowing among older Americans," Regional Science and Urban Economics, Elsevier, vol. 83(C).
    4. Annamaria Lusardi & Olivia S. Mitchell, 2005. "Financial Literacy and Planning: Implications for Retirement Wellbeing," CeRP Working Papers 46, Center for Research on Pensions and Welfare Policies, Turin (Italy).
    5. Annamaria Lusardi & Olivia S. Mitchell & Noemi Oggero, 2018. "The Changing Face of Debt and Financial Fragility at Older Ages," AEA Papers and Proceedings, American Economic Association, vol. 108, pages 407-411, May.
    6. Annamaria Lusardi & Olivia S. Mitchell & Noemi Oggero, 2020. "Debt and Financial Vulnerability on the Verge of Retirement," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 52(5), pages 1005-1034, August.
    7. Lusardi, Annamaria & Mitchell, Olivia S. & Oggero, Noemi, 2019. "Debt close to retirement and its implications for retirement well-being," CFS Working Paper Series 631, Center for Financial Studies (CFS).
    8. Yoon Lee & Jean Lown & Deanna Sharpe, 2007. "Predictors of Holding Consumer and Mortgage Debt among Older Americans," Journal of Family and Economic Issues, Springer, vol. 28(2), pages 305-320, June.
    9. James Poterba & Steven Venti & David Wise, 2011. "The Composition and Drawdown of Wealth in Retirement," Journal of Economic Perspectives, American Economic Association, vol. 25(4), pages 95-118, Fall.
    10. Butrica, Barbara A. & Karamcheva, Nadia S, 2020. "Is Rising Household Debt Affecting Retirement Decisions?," IZA Discussion Papers 13182, Institute of Labor Economics (IZA).
    11. Mathieu R. Despard & Terri Friedline & Stacia Martin-West, 2020. "Why Do Households Lack Emergency Savings? The Role of Financial Capability," Journal of Family and Economic Issues, Springer, vol. 41(3), pages 542-557, September.
    12. Jonathan Bauchet & David Evans, 2019. "Personal Bankruptcy Determinants Among U.S. Households During the Peak of the Great Recession," Journal of Family and Economic Issues, Springer, vol. 40(4), pages 577-591, December.
    13. Karen A. Zurlo & WonAh Yoon & Hyungsoo Kim, 2014. "Unsecured Consumer Debt and Mental Health Outcomes in Middle-Aged and Older Americans," The Journals of Gerontology: Series B, The Gerontological Society of America, vol. 69(3), pages 461-469.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Collins, J. Michael & Hembre, Erik & Urban, Carly, 2020. "Exploring the rise of mortgage borrowing among older Americans," Regional Science and Urban Economics, Elsevier, vol. 83(C).
    2. Stephanie Moulton & Donald Haurin & Samuel Dodini & Maximilian D. Schmeiser, 2020. "How federally insured reverse mortgages affect the credit outcomes of older adults," Journal of Consumer Affairs, Wiley Blackwell, vol. 54(4), pages 1298-1327, December.
    3. Mudrazija, Stipica & Butrica, Barbara A., 2023. "How does debt shape health outcomes for older Americans?," Social Science & Medicine, Elsevier, vol. 329(C).
    4. Lisa J. Dettling & Sarena Goodman & Sarah Reber, 2022. "Saving and Wealth Accumulation among Student Loan Borrowers: Implications for Retirement Preparedness," Finance and Economics Discussion Series 2022-019, Board of Governors of the Federal Reserve System (U.S.).
    5. Angelici, Marta & Del Boca, Daniela & Oggero, Noemi & Profeta, Paola & Rossi, Maria Cristina & Villosio, Claudia, 2022. "Pension information and women’s awareness," The Journal of the Economics of Ageing, Elsevier, vol. 23(C).
    6. J. Collins, 2011. "Mortgage Mistakes? Demographic Factors Associated with Problematic Loan Application Behaviors," Journal of Family and Economic Issues, Springer, vol. 32(4), pages 586-599, December.
    7. Junhao Liu & Anita Mukherjee, 2021. "Medicaid and long‐term care: The effects of penalizing strategic asset transfers," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 88(1), pages 53-77, March.
    8. Hyrum Smith & Michael Finke & Sandra Huston, 2012. "Financial Sophistication and Housing Leverage Among Older Households," Journal of Family and Economic Issues, Springer, vol. 33(3), pages 315-327, September.
    9. Francisco Gomes & Michael Haliassos & Tarun Ramadorai, 2021. "Household Finance," Journal of Economic Literature, American Economic Association, vol. 59(3), pages 919-1000, September.
    10. Alexandra Spicer & Olena Stavrunova & Susan Thorp, 2016. "How Portfolios Evolve after Retirement: Evidence from Australia," The Economic Record, The Economic Society of Australia, vol. 92(297), pages 241-267, June.
    11. Olivia S. Mitchell, 2018. "Enhancing risk management for an aging world," The Geneva Papers on Risk and Insurance Theory, Springer;International Association for the Study of Insurance Economics (The Geneva Association), vol. 43(2), pages 115-136, September.
    12. Youngwon Nam & Cäzilia Loibl, 2021. "Financial Capability and Financial Planning at the Verge of Retirement Age," Journal of Family and Economic Issues, Springer, vol. 42(1), pages 133-150, March.
    13. Annamaria Lusardi & Olivia S. Mitchell & Noemi Oggero, 2020. "Understanding Debt in the Older Population," NBER Working Papers 28236, National Bureau of Economic Research, Inc.
    14. Noemi Oggero & Maria Cristina Rossi & Elisa Ughetto, 2020. "Entrepreneurial spirits in women and men. The role of financial literacy and digital skills," Small Business Economics, Springer, vol. 55(2), pages 313-327, August.
    15. Stefania Basiglio & Noemi Oggero, 2020. "The Effects of Pension Information on Individuals’ Economic Outcomes: A Survey," Economies, MDPI, vol. 8(3), pages 1-16, August.
    16. Sconti, Alessia, 2022. "Digital vs. in-person financial education: What works best for Generation Z?," Journal of Economic Behavior & Organization, Elsevier, vol. 194(C), pages 300-318.
    17. Annamaria Lusardi, 2019. "Financial literacy and the need for financial education: evidence and implications," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 155(1), pages 1-8, December.
    18. M. M. Naeser Seldal & Ellen K. Nyhus, 2022. "Financial Vulnerability, Financial Literacy, and the Use of Digital Payment Technologies," Journal of Consumer Policy, Springer, vol. 45(2), pages 281-306, June.
    19. Elena Moreno-García & Sergio Hernández-Mejía & Héctor Francisco Salazar Núñez, 2024. "Financial Literacy and Financial Fragility in Mexico," Remef - Revista Mexicana de Economía y Finanzas Nueva Época REMEF (The Mexican Journal of Economics and Finance), Instituto Mexicano de Ejecutivos de Finanzas, IMEF, vol. 19(1), pages 1-21, Enero - M.
    20. Isler, Ozan & Rojas, Andres & Dulleck, Uwe, 2022. "Easy to shove, difficult to show: Effect of educative and default nudges on financial self-management," Journal of Behavioral and Experimental Finance, Elsevier, vol. 34(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:jfamec:v:43:y:2022:i:4:d:10.1007_s10834-022-09828-1. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.