Wharton Pension Research Council Working Papers

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Working Paper

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Poor financial capability can have important consequences for wellbeing in later life. To explore aspects of financial management related to debt, we have designed and analyzed a new module in the 2018 Health and Retirement Study (HRS). We use these new data, along with information from the 2018 National Financial Capability Study (NFCS), to evaluate the factors associated with debt and debt management close to retirement. We show that a sizeable proportion of older Americans carry debt in the form of student loans and unpaid medical bills. We also find that women and Nonwhites are more likely to report feeling financially distressed, across a range of self-assessed measures. In addition, we see that having children contributes to older persons’ indebtedness, even on the verge of retirement. Negative income shocks are predictive of negative financial perceptions and behaviors such as feeling over-indebted, being contacted by a debt collector, having student loans for themselves or partners, and carrying medical debt. By contrast, the more 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 by 3-6 percentage points of reporting an above average credit record and planning for retirement. Therefore, people also need financial knowledge to limit their debt exposure at older ages.


Older adults, debt, financial knowledge, financial literacy, National Financial Capability Study (NFCS), Health and Retirement Study (HRS)

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Copyright/Permission Statement

This project received funding from the TIAA Institute and the Wharton School’s Pension Research Council/Boettner Center. The content is solely the responsibility of the authors and does not necessarily represent the official views of the above-named institutions. © 2020 Pension Research Council of the Wharton School of the University of Pennsylvania. All rights reserved.

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Economics Commons



Date Posted:13 February 2020