Walden: Taking on Debt before Retirement

Mary:  I’m Mary Walden with economist MW, welcoming you to the economic perspective.  Today’s program looks at taking on debt before retirement.   Mike, traditionally it was thought that once a person neared retirement, logic would suggest reducing debt in order to prepare for living off limited income during in retirement.  But I understand that some new statistics suggest many near-term retirees aren’t doing this. Please explain.


Mike:  Summary Answer

  1. yes, a new study from NBER found that debt levels relative to a person’s

income rose 25% between 2008 and 2014 and much more compared to 1998

  1. but the good news is that both before and after retirement, the data indicate

the individuals are not having problems carrying that debt

  1. a look behind the numbers shows much of the added debt is related to home


  1. one interpretation is that retirees are most more active and financially secure

today than in the past, and their willingness to use debt reflects that

  1. for example, although they may downsize the size of their home, they may

not downsize the amenities and cost

  1. another indication that retirement today is not the same as in the past
  2. I’m MW


Mary:  And I’m Mary Walden for N C State Extension

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