Monday, December 16, 2013

Debt Delays Retirement

Older Americans with debt are more likely to delay retirement, according to a study by the Center for Retirement Research at Boston College. The study finds a growing share of older Americans in debt and their debt load rising.

The percentage of 62-to-69-year-olds with debt grew from 48 to 62 percent between 1998 and 2010, according to the study, which analyzed the financial and labor force status of a nationally representative sample of older Americans from the Health and Retirement Study. Among those with debt, the median amount owed grew from $19,020 to $32,130 per person during those years, after adjusting for inflation. Mortgages account for the largest share of debt, and the percentage of 62-to-69-year-olds with mortgage debt grew from 29 to 39 percent between 1998 and 2010.

The study found "striking differences" in the labor force participation of older adults with and without debt. Those with debt were much more likely than those without debt to work (46 versus 33 percent), and the debtors were less likely to receive Social Security benefits (71 versus 78 percent).

"It is encouraging to find that older adults with debt are delaying both retirement and Social Security benefits," conclude the authors. But they add: "At some point, however, age and health prevent most people from working. When that time comes, how will those with debt manage their monthly mortgage and credit card payments? Possibilities include selling their homes, buying reverse mortgages, or declaring bankruptcy."

Source: Center for Retirement Research at Boston College, Does Household Debt Influence the Labor Supply and Benefit Claiming Decisions of Older Americans?

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