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

Our chapter aims to analyze debt among pre-retirees and its implications for retirement well-being using data from three waves of the National Financial Capability Study (NFCS). In particular, we will analyze what kinds of debt people carry into older ages and how different types of debt are related to older Americans’ ability to save for retirement. Moreover, we will investigate older Americans’ understanding of debt and its consequences by analyzing their level of financial sophistication. For instance, managing debt can be especially difficult for people who do not know the power of interest compounding or do not have the financial savvy to plan for retirement or execute a retirement saving plan. Our analysis is intended to better guide financial sector practitioners as well as policymakers seeking to help older Americans better prepare for retirement and sustain a reasonable standard of living in retirement.

[1]  David Laibson,et al.  A Debt Puzzle , 2000, Knowledge, Information, and Expectations in Modern Macroeconomics.

[2]  Wilbert van der Klaauw,et al.  The Graying of American Debt , 2020, Remaking Retirement.

[3]  O. Mitchell,et al.  Debt and Financial Vulnerability on the Verge of Retirement , 2017, Journal of Money, Credit and Banking.

[4]  Jialan Wang,et al.  Minimum Payments and Debt Paydown in Consumer Credit Cards , 2016, Journal of Financial Economics.

[5]  Jill E. Fisch,et al.  The Disruptive Impact of FinTech on Retirement Systems , 2019 .

[6]  A. Lusardi,et al.  Attitudes Toward Debt and Debt Behavior , 2018, The Scandinavian Journal of Economics.

[7]  Theresa Kuchler,et al.  Sticking to Your Plan: The Role of Present Bias for Credit Card Paydown , 2018, Journal of Financial Economics.

[8]  O. Mitchell,et al.  The Changing Face of Debt and Financial Fragility at Older Ages , 2018 .

[9]  John Gathergood,et al.  Financial Literacy, Present Bias and Alternative Mortgage Products , 2017 .

[10]  O. Mitchell,et al.  Older Women's Labor Market Attachment, Retirement Planning, and Household Debt , 2016 .

[11]  Lucia A. Reisch,et al.  Debt out of control: The links between self-control, compulsive buying, and real debts , 2015 .

[12]  A. Lusardi,et al.  Debt literacy, financial experiences, and overindebtedness* , 2009, Journal of Pension Economics and Finance.

[13]  A. Lusardi,et al.  Financial Literacy and High-Cost Borrowing in the United States , 2013 .

[14]  O. Mitchell,et al.  DEBT AND DEBT MANAGEMENT AMONG OLDER ADULTS , 2013 .

[15]  John Gathergood.  Debt and Depression: Causal Links and Social Norm Effects , 2012 .

[16]  João F. Cocco.  Evidence on the Benefits of Alternative Mortgage Products , 2012 .

[17]  John Gathergood,et al.  Self-Control, Financial Literacy & the Co-Holding Puzzle , 2012 .

[18]  Johan Almenberg,et al.  Exponential growth bias and financial literacy , 2012, SSRN Electronic Journal.

[19]  D. Vandone,et al.  Impulsivity and household indebtedness: Evidence from real life , 2011 .

[20]  John Gathergood,et al.  Self-Control, Financial Literacy and Consumer Over-Indebtedness , 2011 .

[21]  John A. E. Pottow.  The Rise in Elder Bankruptcy Filings and Failure of U.S. Bankruptcy Law , 2011 .

[22]  A. Lusardi.  Americans' Financial Capability , 2011 .

[23]  Annamaria Lusardi,et al.  Financial literacy and retirement planning in the United States* , 2011, Journal of Pension Economics and Finance.

[24]  Peter Tufano,et al.  Consumer Financial Protection. , 2011, The journal of economic perspectives : a journal of the American Economic Association.

[25]  A. Lusardi.  Financial Capability in the United States: Consumer Decision-Making and the Role of Social Security , 2010 .

[26]  Stephan Meier,et al.  Present-Biased Preferences and Credit Card Borrowing , 2009, SSRN Electronic Journal.

[27]  Jonathan Zinman,et al.  Exponential Growth Bias and Household Finance , 2008 .

[28]  Michael Reiter,et al.  Credit Card Debt Puzzles and Debt Revolvers for Self Control , 2008 .

[29]  Irina A. Telyukova.  Household Need for Liquidity and the Credit Card Debt Puzzle , 2007 .

[30]  Stephan Meier,et al.  Overborrowing and undersaving: lessons and policy implications from research in behavioral economics , 2007 .

[31]  Jonathan Zinman,et al.  How a Cognitive Bias Shapes Competition: Evidence from Consumer Credit Markets , 2006 .

[32]  S. Baum,et al.  College on Credit: How Borrowers Perceive Their Education Debt , 2003, Journal of Student Financial Aid.

[33]  S. Lea,et al.  The economic psychology of consumer debt , 1993 .