Title: Debt of the Elderly and Near Elderly, 1992-2004
Abstract: When predicting the future income security of retirees, researchers typically focus on measures concerned with retirees' accumulated financial assets, particularly within tax-qualified retirement plans (e.g., 401(k) plans and individual retirement accounts (IRAs)), and coverage by supplemental health insurance to Medicare provided through a former employer. However, any debt that a near-elderly or elderly family has accrued going into retirement or during retirement is likely to offset its asset accumulations, resulting in a lower level of retirement income security. This paper focuses on the trends in the levels of debt among those ages 55 or older, those who are approaching retirement or are in retirement, as financial liabilities are a vital but often ignored component of retirement income security. The Federal Reserve's Survey of Consumer Finances (SCF) is used to determine the level of debt in this paper. Debt is examined in two ways: 1) debt payments relative to income, and 2) debt relative to assets. Each measure provides some insight into the ability of these families to cover this debt before or during retirement. For example, higher debt-to-income ratios may be acceptable for younger families with long working careers ahead of them, since their incomes are likely to rise and their debt (related to housing or children) is likely to fall in the future. A higher debt-to-income ratio may be more serious for older families, as they could be forced to reduce their accumulated assets to service the debt when their earning years are ending. However, if these high debt-to-income older families have low debt-to-asset ratios, the effect of paying off the debts may not be as financially difficult as it would be for those with high debt-to-income and debt-to-asset ratios.
Publication Year: 2006
Publication Date: 2006-09-19
Language: en
Type: article
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Cited By Count: 12
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