Financial Security at Older Ages

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This paper uses financial data from a major credit bureau for a nationally representative 2 percent random sample from more than 250 million consumer records to examine the financial health and indebtedness of older adults. The data cover the years 2010 through 2019 and follow the same consumers over time. Consumer records include numerous sources of debt and information on their total credit available, total balances, amounts past due, debt in collections, and bankruptcies and foreclosures. They also include a nationally recognized credit score that is becoming increasingly utilized by creditors. We supplement these data with the zip-code level information from the American Community Survey on neighborhood characteristics, including racial and ethnic composition, median household income, homeownership, median housing prices, housing cost burdens, and unemployment rates.

The paper found that:

  • Consumers ages 50 and older are decreasingly indebted since the Great Recession.
  • This trend masks the increase in indebtedness among adults ages 70 and older due primarily to mortgages. Not only are they more indebted, but our findings suggest that their financial health – reflected by their credit scores and capacity to borrow – has worsened over time.
  • Where older people live matters for their use of debt. Older adults from socioeconomically disadvantaged areas carry debt well into their retirement years, whereas those who live in wealthier zip codes appear to deleverage as they age.
  • More than other sources of debt, credit card debt is the most highly correlated with spells of poor credit – increasing both the likelihood of experiencing a spell and reducing the likelihood of exiting a spell. This has negative implications for consumers ages 70 and older since credit cards are their largest source of non-mortgage debt.