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Going broke in retirement?

Multinational study shows why households with elderly persons are increasingly indebted

(October 2016) Living in your own home, having enough money for a decent lifestyle and making ends meet with your savings – that is the traditional way in which many people imagine their retirement.
However, an international study based on data from 40,590 households in 15 countries with persons aged 50 years and older collected by the Survey of Health, Aging and Retirement in Europe (SHARE) scrutinizes this ideal.

Households spent more than they have

During the last years, household debt in most economically advanced societies was rising – as well as the number of elderly persons who are in debt. According to previous studies, this is caused by a combination of trends: Marketing strategies have influenced consumer behavior and many countries tried to boost their economy by making it easier to take out loans. Seduced by the promise to take the “waiting out of the wanting”, middle and lower class households are driven to spend more than their means permit. On the other hand, peoples’ life expectancy is increasing while in some European countries income levels are stagnant and welfare safety nets are weakening. This leads many people into indebtedness when they retire.

The differences between loan and debts

To gain further insight, the researchers from Tel Aviv University analyzed two different kinds of debt, mortgage and financial debts and found considerable differences within and between 14 different European countries and Israel.
In Sweden, Denmark, Switzerland and the Netherlands, mortgage debts are outstandingly high: Well over 40 percent of the households with persons aged 50 years and older have to pay loans.  Financial debts, however, were quite low among elderly people in Switzerland and the Netherlands: less than one in 10 households reported having such debt.
In France, the opposite was true: 20 percent of the households reported financial debts but only 9 percent had mortgage debts. In Luxembourg, Sweden, Israel and Denmark the number of elderly persons with financial debts is quite high (between 29 and 23 percent of the households).

Children, health problems and mortgage

The study showed that even in European countries with fairly generous welfare systems, there are two big risks for becoming indebted at old age: large families and households facing illness were more likely than others to rely on credit and loans to meet their needs.
The findings suggest that across countries, there is a worrying relationship between mortgage and financial debts: Households with one kind of debt tend to hold other forms of debt, too. The researchers explained this by the fact that homeowners usually have fewer problems to get a credit. However, when people get older and their incomes decline, mortgage payments strain their household finances, forcing them to borrow money to make ends meet.

The impacts of housing and financial market

The researchers point out that this effect is worsened by two global trends: With the housing costs rising in many countries, households are pushed into greater mortgage debt for longer durations. At the same time, global liberalization of financial markets leads to more accessible credits. Under such circumstances, household debts are carried into late life and job loss, decline after retirement or health problems can lead to over-indebtedness and financial ruin in old age.

Study by Noah Lewin-Epstein, Moshe Semyonov (2016): Household debt in midlife and old age: A multinational study. International Journal of Comparative Sociology 207-240. DOI: