UM20-11: Cognitive Ability, Cognitive Aging, and Debt Accumulation



Financial product complexity has increased substantially in the past few decades and recent evidence suggests that older adults are entering retirement with more debt than previous generations. This project will examine how cognitive ability and cognitive aging are related to debt burdens and financial security among older adults. Specifically, its aims are to assess (1) whether, as financial products become more complex over time, rising debt burdens are increasingly concentrated among individuals with lower cognitive ability, (2) whether financial literacy acts as a buffer against low cognition, and (3) whether poor understanding of mortgage conditions and frequency of mortgage refinancing are associated with higher levels of debt exposure. This research will document the extent to which increasing debt burdens are observed among those who may be less capable of dealing with changes in the financial marketplace (e.g., rising interest rates), highlighting potential future risk to economic security among older Americans.

Project Year