The more debt, the more dissatisfied a pensioner is with their finances
The amount of debt, the income level and health are strongly linked to financial satisfaction of old-age pensioners. Taking the differences in income and wealth into account, the financial satisfaction of pensioners is weaker in Southern Finland than in Eastern and Northern Finland. This is evident in a recent research article by the Finnish Centre for Pensions.
The more debt an old-age pensioner has, the less satisfied they are with their financial situation relative to those who are debt-free.
“Debt and the amount of debt weaken the financial satisfaction of low-income pensioners more strongly than among mid- and high-income pensioners. Debt and the amount of debt are not as strongly linked to financial satisfaction among the latter”, explains Economist Kati Ahonen (Finnish Centre for Pensions).
Being debt-free underlies financial satisfaction of older pensioners
Having no debt seems to be linked to the satisfaction paradox. Older pensioners have been observed to be more satisfied with their finances than younger pensioners, even though the former usually have a lower income than the latter.
“Older pensioners are debt-free or have less debt than younger pensioners. This seems to be linked to the satisfaction paradox. Debt and the repayment of debt are likely to burden younger age groups more often than older ones.
Amount of wealth affects satisfaction relatively little
Wealth and the amount of wealth strengthen the financial satisfaction of pensioners to some extent. However, the observed impact of wealth on financial satisfaction was lower than expected. This may be because the different forms of wealth, such as savings or housing wealth, were not examined separately.
“A considerable part of old-age pensioners’ wealth consists owned homes, which cannot easily be converted into cash. This is likely to be reflected in the degree of financial satisfaction”, Ahonen assesses.
Taking the differences in income and wealth into account, the financial satisfaction of pensioners is weaker in the capital region and Southern Finland than in Eastern and Northern Finland. This is probably because the housing and living costs in the capital region and elsewhere in Southern Finland are higher than in the rest of Finland.
The study is based on a survey on financial wellbeing conducted by the Finnish Centre for Pensions in 2020. It reviewed pensioners aged 64–88 years. The research article (in Finnish) was published in the journal Yhteiskuntapolitiikka [sociopolitics].