The Role of Consumer and Mortgage Debt for Financial Stress

Objectives
Financial debt held by older adults in the U.S. has grown over the past two decades. This study examines the extent to which credit cards, other consumer debts, and mortgage debt increase financial stress. Outcome measures of financial stress include the material domain (“bill-paying difficulty”) and psychological domain (“ongoing financial strain”).

Method
We analyzed adults age 62 and older in the 2004 to 2016 waves of the Health and Retirement Study using random-effects logit regressions.

Results
Unsecured consumer debt is associated with more financial stress per dollar than mortgage debt. A detailed assessment of mortgage debt finds that greater levels of both first and secondary mortgages are associated with greater bill-paying difficulty and greater ongoing financial strain. An increase in new mortgage debt obtained after age 62 is associated with an increase in bill-paying difficulty, but is not significantly associated with ongoing financial strain. In contrast, a reduction in mortgage debt since age 62 is associated with lower bill-paying difficulty and lower levels of ongoing financial strain.

Conclusion
The relationship between consumer debt, mortgages, and financial stress is nuanced, and depends on both the type and timing of the debt.