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Debt life stages
The debt treadmill can start during youth and keep going, sometimes straight into the not-so-golden years.
Out of the red and into the black

Life stages of debt

Many parents take on debt to fund children's education -- for instance, by taking out a second mortgage -- which puts them in the uncomfortable position of either entering retirement with more debt or using money that would otherwise be saved for retirement to service the debt.

Debt life-stages
Young singles
Young families
Mature families
Empty nesters

If parents put off saving for retirement until the kids are out of the house and out of school, they may not have enough time to accumulate adequate funds.

"It just means that people aren't going to be able to retire, and that's fine for people who enjoy their work and are in good health. But for people who aren't in such good health, that's one of the costs of debt that's going to really come back and bite them," says Mandell.

Empty nesters
In his study, "Living with debt," Manning found that older people weren't necessarily shifting their spending into a lower gear.

"By the time we see older people, they are used to living on debt and don't want to cut back on their standard of living. So they're maintaining. While their savings rate may go up, they're spending more -- maybe on helping their children. It was remarkable how many people in their 50s, 60s and 70s are helping a child or maybe a grandchild," says Manning.

With the kids out of the house and the accompanying pipeline into the wallet of mom and dad removed, empty nesters should be sitting pretty.

Using data from the 2001 Survey of Consumer Finances conducted by the Federal Reserve, Tansel Yilmazer, assistant professor in the Department of Consumer Sciences and Retailing at Purdue University, found that debt does decline with time.

It means people aren't going to be able to retire, and that's fine for people who enjoy their work.

"In general, the probability of carrying debt decreased with age," she says.

However, some experts believe that this could be changing, or shifting with the changing demographic. People are having children later in life and reaching the empty nest phase later as well. As acceptance of debt has increased, the older population is increasingly indebted.

"Some of them, of course, are maybe opting to work longer periods of time. That certainly is a trend that may be part of the changing life cycle stages," says Mandell. But he adds that attitudes toward debt at this stage are also changing.

"Also I think that the thinking that '60 is the new 40' is really encouraging older people who might in previous generations have been a little bit more sedate in their lifestyles. Now you look on TV and see a 60-year-old doing helicopter skiing and sailing boats across the Atlantic single-handedly. So I think the notion of settling into an empty nest sedate lifestyle is going against the grain."

-- Posted: Feb. 25, 2008
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