Older Americans now shoulder a heavier debt burden, and it's forcing them to stay in the labor force longer and delay claiming of Social Security. So found a research paper released by the Center for Retirement Research at Boston College.
The impetus of the study, written by Barbara A. Butrica and Nadia S. Karamcheva, was to ascertain whether indebted older adults would continue to work to settle their obligations, or claim Social Security sooner if they are unemployed or not earning enough to pay off their loans. Overwhelmingly, the researchers found, debt-burdened older workers are choosing to stay in the workforce longer rather than claim Social Security benefits as soon as they are eligible.
Before they came to that conclusion, Butrica and Karamcheva outlined some fairly startling statistics on household debt in the U.S. and how it's increased in recent years. Citing data from the Federal Reserve System's Board of Governors, the typical debt-encumbered family owed $70,600 in 2007, a significant jump from the $23,300 number charted back in 1989. By 2010, the median value of household debt was $70,700, with debt payments accounting for roughly 18 percent of their disposable income.
Those nearing retirement, in particular, are now more likely to not only carry debt, but have a heavier burdenas well. Between 1998 and 2010, the percentage of adults between 62 and 69 with any type of debt rose from 48 percent to 62 percent. What's more, the median value of per-person indebtedness climbed from $19,000 to $32,100 in 2010. Accordingly, the average debt-to-asset leverage ratio increased from 10 percent to 18 percent.
The Impact
As these debt-burdened pre-retirees prepare for retirement, what are they more likely to do: work longer, or claim Social Security sooner? Their solution, according to Butrica and Karamcheva, is to stay employed and thus postpone claiming Social Security.
