EMF23-02: The Relationship between Pre-Retirement Psychological Distress and Family Wealth at Retirement by Race and Gender: An Analysis from 2007– 2019 in the United States

This study uses Panel Study of Income Dynamics (PSID) data waves 2007–2019 to analyze the relationship between pre-retirement psychological distress and finances, specifically percent changes in wealth at retirement. Two measures of wealth were used for each respondent: percent change in wealth including home equity and percent change in wealth excluding home equity. The dual measurement of percent change in wealth allows for a better understanding of how wealth changes affect financial assets, while also illuminating the effects of home equity on overall wealth holdings. Social drift theory, which posits that psychological distress increases the likelihood of future financial challenges, was the guiding theory of this research. As hypothesized, respondents with a history of higher levels of psychological distress have greater and negative percent changes in wealth at retirement. Black race and female gender were also associated with greater negative percent changes in wealth at retirement for measures with and without home equity compared to White and male respondents. When examining the interaction terms of Race and Gender and Psychological distress, Race was negative and significant for Black respondents when using the wealth with home equity measure; however, this term was not significant for the wealth with home equity measure. The Gender (female) interaction term with psychological distress (K6) was negative and significant for both measures of wealth change. These findings highlight the importance of addressing mental health conditions such as depression and anxiety, even in pre-retirement years, to combat future financial implications of these conditions.