Debts You Should Pay off Before Retirement
As one prepares for retirement, it would be wise to prioritize which debts to focus on before you give notice to your employer that you’ll be exiting the workforce. If not, you might find that these debts could unbalance your golden years with heavy expenses that you may not have planned for.
And to make things more difficult, consumers are paying more for everything from groceries to gasoline, household income is failing to keep pace with a higher overall cost of living due to re-cent inflation. Over the past two years, median income fell 3 percent while the cost of living rose nearly 7 percent, due partly to rising housing and medical costs.
According to a study, housing debt has been the major component of debt for families with a head age 55 or older. The debt levels among those with housing debt have obvious and serious implications for the future retirement security of these Americans, perhaps most significantly that these families are potentially at risk of losing what is typically their most important asset—their home.
Between July and September, US household debt climbed to a new record of $15.24 trillion, according to the Federal Reserve Bank of New York. It was an increase of 1.9 percent, or $286 billion, from the second quarter of last year. Mortgages, which are the largest component of household debt, rose by $230 billion last quarter and totaled $10.67 trillion.
Among the Class of 2019, 69 percent of college students took out student loans, and they graduated with an average debt of $29,900, including both private and federal debt. Meanwhile, 14 percent of their parents took out an average of $37,200 in federal parent PLUS loans.
To put it another way: Americans owe over $1.71 trillion in student loan debt, spread out among about 44.7 million borrowers. That’s about $739 billion more than the total U.S. credit card debt.
Daniel Lerner, Executive Vice President, Investment Services at David Lerner Associates. Says “One thing to keep in mind here is that your child can finance their student loans, but you cannot finance your retirement.” If you’ve taken on the responsibility of paying for your child’s education, start repaying loans as soon as they come due, make more than the minimum payment, and as soon as your child gets a job after graduation, have them contribute a certain amount each month to paying down the debt, otherwise, it will certainly come back to bite you later on.
The current state of credit card debt in America stands at a mountainous $804 billion. That’s Americans’ total credit card balance, according to the latest consumer debt data from the Federal Reserve. The data shows that consumer credit card balances rose to $800 billion in the third quarter of 2021, which is a $17 billion increase from $787 billion in the second quarter of 2021.
This is the second straight quarterly increase but only the third jump we’ve seen since the start of 2020. To put it in context, Americans’ credit card debt is well below the record set in the fourth quarter of 2019 when balances stood at $927 billion. But credit card debt in America is still high by historical standards, however, and is also far beyond the $478 billion that we saw in the first quarter of 1999.
Eliminating debt doesn’t necessarily mean you have to make sacrifices, it just means you need to change your habits. So sit down, go through your budget and figure out where you can trim the fat.
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