People get very emotional when it comes to debt; we now have a bit more insight into why. Although it has been well-known for some time that debt has an overall negative impact on health in older Americans, a new study out of Boston College’s Center for Retirement Research explored whether the amount or type of debt made any difference. The study found that while secured debt (e.g., car loans) has a limited negative impact on health outcomes, unsecured debt (e.g., credit cards, student loans) has a substantial negative impact. The study also showed that the more debt one carries, the more detrimental it is for older adults’ health.
With my clients, especially those nearing retirement, I often see a desire to pay off mortgage debt early, even though it may not be the best financial decision (e.g., when the interest rate is locked in at 2.5-3%). Clearly there is a very real “psychic” benefit of removing debt from your balance sheet. From a financial planning perspective, if you’re in your 30s or 40s and preparing to take on a home mortgage, you might consider when you plan to (or would like to) retire and structure the mortgage term to align with this date.