The effect of late-life debt use on retirement decisions

This paper examines parallel shifts in late life debt use and retirement behaviors. After discussing the conceptual linkages between credit and labor markets, I use data from the 1992 to 2008 waves of the Health and Retirement Study to examine the temporal patterning of retirement and debt behaviors. I rely on the longitudinal structure of the data to estimate the effects of debt accumulation on retirement behaviors, using alternative specifications to identify treatment and control groups. The findings suggest that debt accumulation in later life has a significant effect on decisions to remain in the workforce in later years.

► I model relationships among retirement, wealth, and debt behaviors.
► Debt accumulation later in life prolongs labor market participation.
► These effects are both social/behavioral and wealth-related.
► Debt should be understood as an independent component of household finance.