Advisors should help clients over age 50 reduce debt, not just build savings.

Little attention has been given to helping people over age 50 manage and understand debt, but it is just as crucial to retirement security as savings. That was among the key insights from a new working paper funded by the TIAA Institute and the Pension Research Council at The Wharton School of the University of Pennsylvania.

Per capita personal debt in the U.S. fell after the financial crisis, but has been growing since 2014. Older Americans increasingly are likely to carry debt into retirement, notes the paper, “Understanding Debt in the Older Population.” The paper’s authors are Annamaria Lusardi, a professor at The George Washington University School of Business; Olivia S. Mitchell, a professor at the Wharton School at the University of Pennsylvania; and Noemi Oggero, a post-doctorate fellow at the University of Turin in Torino, Italy.

That debt threatens retirement security. “For one, the increased debt burden may affect how much older persons can contribute to their retirement accounts and how they will manage their retirement savings,” they say. “Additionally, when interest rates rise, near-retirees and retirees will be required to allocate larger fractions of their income to service their debts. Rising debt can also prompt delayed retirement in order to recover one’s financial standing.”

The researchers, who focused on people aged 51 through 61, developed questions specifically related to debt that were included in a large 2018 study on retirement and answered by 1,336 people. Of the respondents, about 58% were women, and most were married, white and had at least a high school degree. Household income averaged $103,000, with average net assets at $274,000. The authors also evaluated data from another large study.

The working paper finds only about one-quarter of the respondents in the age range studied were completely or very satisfied with their personal financial situations. Two-thirds of the respondents said 10 years earlier they had given no thought to how much debt they would hold today, and most devoted very little attention to financial planning. Those most likely to feel overburdened by debt were women, nonwhites, and those with less education and income.