Financial planning tools and services to put you on the path to the future you want
Your guide to financial planning and retirement
Connect with peers and experts
Get to know the people behind the company and the mission behind the work
Digital financial planning and guidance at scale
December 10, 2020
One of the greatest threats to retirement today may not be saving too little, but owing too much.
According to the Federal Reserve Bank, Boomers (Americans born between 1946 and 1964), are carrying ballooning amounts of debt into retirement.Will your debt take a big bite our of your retirement?
For many people, that debt is emerging as a serious threat to a successful future. Debt can be a constant source of stress and affect retirees’ ability to keep their homes, pay necessary living expenses, and even be accepted into independent- or assisted-living facilities.
The Federal Reserve Bank reports that the total debt burden in various age brackets has increased dramatically for the time period between 1999 and 2019:
According to an earlier survey from the Boston College Center for Retirement Research, 8 in 10 middle-income Boomers currently have some debt. Three in 10 devote more than 40% of their monthly income to debt and a quarter have a mortgage with more than 20 years remaining on it. More than half say they intend to enter retirement debt free, but only one-quarter of retired Boomers actually are debt free.
The Federal Reserve data suggests that these are the average debt levels by age:
While credit cards are problematic, homes, education and medical bills are the primary sources of debt in retirement.
The breakdown of the debt for people between 40 and 69 is roughly as follows. About:
duunnn dunnn… duuuunnnn duun… duuunnnnnnnn dun dun dun dun dun dun dun… Too much debt really should give you that terrified feeling that there might be a great white shark lurking beneath you.
Servicing debt payments on a fixed income can be a tremendous burden for retirees who cannot generate income from other sources to pay off that debt. It can be very hard to get ahead or even live comfortably while carrying large debt balances. A good percentage of your income could be diverted to paying interest and principal payments instead of shoring up retirement account balances or paying living expenses, such as food, housing, and medical bills.
Carrying large amounts of debt also has a detrimental effect on credit scores. Credit checks are typically a part of the application process for acceptance into independent- and assisted-living facilities. Even if you are able to get through the application process, debt payments could make it difficult to afford to stay there, as adult care facilities cost tens of thousands of dollars per year, depending on the level of care needed.
If you are at or near retirement, there are steps you can take to make sure that debt doesn’t destroy your retirement plans.
Below are 13 tips for making sure debt doesn’t not ruin your retirement. If you need some motivation, use the NewRetirement retirement planner to see your future finances with and without debt. After entering some initial information, you will get a complete analysis of your situation. Next you can try out different scenarios and immediately see the impact of each change. See what happens if you accelerate your debt payments, work longer, reduce interest rates or try any of the other options. You can achieve retirement security.
For many Americans, carrying debt into retirement is unavoidable, but the earlier you develop a plan to deal with it, the easier it will be to tackle – and the better chance you’ll have of being able to afford the retirement you’ve always dreamed of.
Use the Retirement Planner to see what happens if you improve your debt situation! Forbes Magazine calls this tool “a new approach to retirement planning” and it was named a best retirement calculator by the American Association of Individual Investors (AAII), CanIRetireYet and many others.
Do it yourself retirement planning: easy, comprehensive, reliable
Take financial wellness into your own hands and do it yourself retirement planning: easy,
Share this post:
Our weekly newsletter full of inspiration, podcasts, trends and news.
© 2022 NewRetirement, Inc. All rights reserved.
Disclaimer: The content, calculators, and tools on NewRetirement.com are for
informational and educational purposes only and should not be construed as professional financial
advice. NewRetirement Planner and PlannerPlus are tools that individuals can use on their own behalf to
help think through their future plans, but should not be acted upon as a complete financial plan. We
strongly recommend that you seek the advice of a financial services professional who has a fiduciary
relationship with you before making any type of investment or significant financial decision.
NewRetirement strives to keep its information and tools accurate and up to date. The information
presented is based on objective analysis, but it may not be the same that you find on a particular
financial institution, service provider or specific product’s site. All content, tools, financial
products, calculations, estimates, forecasts, comparison shopping products and services are presented