Carrying debt while approaching retirement on the rise

Sabrina Karl
Personal Finance Writer
Data whiz and visual storyteller

While many Americans aim to shed all debt by the time they retire, new research indicates that the share who fall short is increasing over the generations.
A multigenerational analysis published by the National Bureau of Economic Research shows that for Americans born between 1931 and 1941, often called the silent generation, 64 percent indicated they had debt when they were age 56-61. For war babies, born 1942-1947, the percent with debt at that age climbed to 70 percent, and to 71 percent for early baby boomers, born 1948-1953.
The researchers also differentiated mortgages from other debt – which puts a spotlight on credit card and medical debt – and found a similar rising pattern. Among silent generation respondents, 37 percent reported having nonmortgage debt at age 56-61. The share climbed to 39 percent and then 42 percent for war babies and early boomers, respectively.
As these cohorts proceeded into the retirement ages of 62-66, almost 3 in 10 silent generation respondents (28 percent) still held nonmortgage debt. For retiring war babies, the share jumped to 38 percent, just a single percentage point below the share who held the debt at age 56-61.
But the trend levels off between the retirement-age war babies and early boomers, with a similar 38 percent of early boomers registering nonmortgage debt at age 62-66, suggesting that in the years leading up to retirement, early boomers have been able to chip away at more nonmortgage debt than war babies.
These findings from the NBER working paper, titled “Debt and Financial Vulnerability on the Verge of Retirement”, draw on six flights of data from the Health and Retirement Study, conducted in 1992, 1998, 2004, 2008, 2010 and 2014. Authored by Annamaria Lusardi, Olivia S. Mitchell and Noemi Oggero, the study was first published in August, and <a href="https://www.aeaweb.org/conference/2018/preliminary/1558?q=eNo1jLEKwzAMRP_l5gxNoUu-oWP2XCJcXIEFdmwsNSUE_3uVpt3ePe5uh7KqlGXeKmPa_xETRgzglRdzvqIPINUSPLg3btkpi4XIKblRphbiXVxc6fFDL4ulPRKpfb98_6Ttt5bMXCetwu-j3Wp1cbug9w-iPi4P" target="_blank"><b>presented</b></a> Jan. 5 at the American Economic Association annual meeting.

While many Americans aim to shed all debt by the time they retire, new research indicates that the share who fall short is increasing over the generations.

A multigenerational analysis published by the National Bureau of Economic Research shows that for Americans born between 1931 and 1941, often called the Silent Generation, 64 percent indicated they had debt when they were age 56-61. For war babies, born 1942-1947, the percent with debt at that age climbed to 70 percent, and to 71 percent for early baby boomers, born 1948-1953.

The researchers also differentiated mortgages from other debt – which puts a spotlight on credit card and medical debt – and found a similar rising pattern. Among Silent Generation respondents, 37 percent reported having nonmortgage debt at age 56-61. The share climbed to 39 percent and then 42 percent for war babies and early boomers, respectively.

As these cohorts proceeded into the retirement ages of 62-66, almost 3 in 10 Silent Generation respondents (28 percent) still held nonmortgage debt. For retiring war babies, the share jumped to 38 percent, just a single percentage point below the share who held the debt at age 56-61.

But the trend levels off between the retirement-age war babies and early boomers, with a similar 38 percent of early boomers registering nonmortgage debt at age 62-66, suggesting that in the years leading up to retirement, early boomers more than war babies have been able to chip away at nonmortgage debt.

These findings from the NBER working paper, titled “Debt and Financial Vulnerability on the Verge of Retirement,” draw on six flights of data from the Health and Retirement Study, conducted in 1992, 1998, 2004, 2008, 2010 and 2014. Authored by Annamaria Lusardi, Olivia S. Mitchell and Noemi Oggero, the study was first published in August and was presented Jan. 5 at the American Economic Association annual meeting.

Preretirement debt on the rise

See related: Poll: Pay with cash or card for $5 purchase?, More infographics

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Updated: 06-22-2018