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Understanding Debt in the Older Population

Author

Listed:
  • Annamaria Lusardi
  • Olivia S. Mitchell
  • Noemi Oggero

Abstract

Poor financial capability can erode well-being in later life. To explore debt and debt management among older Americans, age 51-61, we designed and analyzed a new module in the 2018 Health and Retirement Study along with information from the 2018 National Financial Capability Study. Even though this group should be at the peak of their retirement savings, it nevertheless carries debt due to student loans and unpaid medical bills; having children also contributes to carrying debt close to retirement. By contrast, the financially literate have more positive financial perceptions and behaviors. Specifically, being able to answer one additional financial literacy question correctly is associated with a higher probability of reporting an above average credit record and planning for retirement. Higher financial literacy is also linked to being less likely to carry excessive debt, being contacted by debt collectors, and carrying medical debt or student loans, even after accounting for a large range of demographics and other characteristics. Evidently, financial knowledge can help limit debt exposure at older ages.

Suggested Citation

  • Annamaria Lusardi & Olivia S. Mitchell & Noemi Oggero, 2020. "Understanding Debt in the Older Population," NBER Working Papers 28236, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:28236
    Note: AG
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    Cited by:

    1. 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.
    2. Boyle, Patricia & Mitchell, Olivia S. & Mottola, Gary R. & Yu, Lei, 2025. "Declining financial and health literacy among older men and women," The Journal of the Economics of Ageing, Elsevier, vol. 30(C).
    3. Alina K Bartscher & Moritz Kuhn & Moritz Schularick & Ulrike I Steins, 2025. "The Distribution of Household Debt in the United States, 1950-2022," Post-Print hal-05448445, HAL.
    4. Bartscher, Alina K. & Kuhn, Moritz & Schularick, Moritz & Steins, Ulrike I., 2025. "The distribution of household debt in the United States, 1950-2022," Open Access Publications from Kiel Institute for the World Economy 324154, Kiel Institute for the World Economy (IfW Kiel).
    5. Mudrazija, Stipica & Butrica, Barbara A., 2023. "How does debt shape health outcomes for older Americans?," Social Science & Medicine, Elsevier, vol. 329(C).
    6. Alina Bartscher & Moritz Kuhn & Moritz Schularick & Ulrike Steins, 2025. "The Distribution of Household Debt in the United States, 1950-2022," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 57, July.

    More about this item

    JEL classification:

    • G40 - Financial Economics - - Behavioral Finance - - - General
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • G53 - Financial Economics - - Household Finance - - - Financial Literacy
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

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