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Debt close to retirement and its implications for retirement well-being – TIAA Institute – June 2019

17 July, 2019

Senior citizens (56 to 61 years old) with unsecured debt and high interest rates, tend to be among those most exposed to financial difficulties. Many people also carry their debt into retirement. This study examines three potential reasons for this worrisome behavior: limited financial education, lack of information and behavioral biases. The authors explain how each of these factors can lead older people to carry excessive debt and the implications for their well-being in retirement.

Some key conclusions of this study are as follows:

  • Senior citizens with greater financial awareness are less likely to be financially fragile or report excessive debt.
  • Senior citizens with higher incomes and higher levels of education tend to have long-term debt, such as mortgages, while those with lower incomes and less education tend to have high-cost debt, such as payday loans (short-term).
  • Short-term unsecured debt is a strong indicator of financial difficulties for seniors who are about to retire.
  • Older women and people with more dependent children are significantly more likely to report over-indebtedness and cannot deal with financial emergencies.
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