According to a recently published article by Michael Fletcher of the Washington Post, “the majority of Americans with 401(k)-type savings accounts are accumulating debt faster than they are setting aside money for retirement, further undermining the nation’s troubled system for old-age saving,” a new report has found.
Fletcher, basing his article on research done by Hello Wallet, a Washington D.C. firm that offers technology-based financial advice to workers and conducts research of economic behavior, states that three in five workers with defined contribution accounts are “debt savers,” according to the report, meaning their increasing mortgages, credit card balances and installment loans are outpacing the amount of money they are able to save for retirement.
This comes as no surprise to us at Nationwide Debt Reduction, as our debt negotiation services company has been seeing a rise in the age of individuals and small businesses who are turning towards our company and others for help. “This truly speaks volumes about the way our economy is suffering”, says John Henry, a Nationwide Debt Reduction executive. “Ten years ago, the majority of our business was made up of people in the 25 – 35 year old bracket, who were newlyweds or young executives getting their feet wet with a new change in lifestyle. That has now shifted to the 55 – 65 year old bracket,” Henry states.
There is no question that the economic growth in our country, especially over the past 5 years has been anemic, while the true cost of living including energy and grocery prices is more in the 6-7% range, far different that what the government reports, which excludes these commodities. Most people are at a crossroads in their life as to whether to put money into a retirement plan or pay down on their debt first.
Last year Nationwide Debt Reduction posted a blog about whether it is wise or not to borrow from your retirement plan to pay off your debt, and the answer was a resounding no. (See article below) The research was mainly based upon the tax ramifications and the loss of earnings power in your retirement plan. However, with the help of a debt reduction company negotiating and settling your debt for a fraction of what you owe, is allowing more and more people to increase both their earnings and their savings power.
The Hello Wallet report is the latest in an expanding line of research suggesting that the United States is facing a looming retirement security crisis. A growing number of researchers are concerned that the nation is on the cusp of a shift in which more Americans are on a track that will lead to a decline in their living standards when they retire.
The report says that debt is among the biggest culprits. The amount of money that households nearing retirement are dedicating to pay down debts has increased 69 percent over the past two decades, the report said. Households headed by people ages 55 to 64 now spend 22 cents of each dollar to pay off old loans — about the same percentage as younger people, the report found.
Therefore, if you find yourself in what we call “the debt trap” whereby you are paying your unsecured creditors vast amounts of money each month to pay down on your credit card debt, however getting nowhere because of the interest rate and fees these companies are charging you, we strongly recommend you contact one of our debt advisors to see if a debt negotiation services company would be in your best interest.
You can truly get rid of your credit card debt in three years or less, freeing up money for retirement savings or perhaps paying down on your secured debt (home, vehicles) faster, in order to be completely debt free in retirement. For more information, call us at 1-800-890-6658.