Daily Gains Letter


How to Save for Retirement Even When You’re Buried in Debt

By for Daily Gains Letter | Feb 14, 2013

DL_Feb_14_2013_JohnIt’s hard for some people to think of saving for retirement when they’re sinking in debt.

During the third quarter of 2012, total consumer debt stood at $11.3 trillion. Of the roughly 47% of American households with credit card debt, the average balance is more than $15,400. Average mortgage debt is $149,782, and average student loan debt sits at $34,703. (Source: “Quarterly Report on Household Debt and Credit,” New York Federal Reserve web site, November 2012, last accessed February 13, 2013.)

With an unemployment rate hovering near eight percent, a weak U.S. dollar, and anemic growth projected for the near future, U.S. households are trying to avoid further debt—especially high-interest debt, like credit cards. While less debt is good, a downturn in consumer spending also has the reverse effect of limiting the speed of economic recovery.

The need, or reluctance, to use credit cards for purchases also points to the fact that Americans have less money in their pockets, which does not bode well for a consumer-driven economy.

It also means that Americans have less money to set aside for retirement or a rainy day.

According to a study by the Employee Benefit Research Institute, just 14% of Americans are “very confident” they will have enough money to live comfortably when they retire; 23% say they are “not at all” confident. Many workers also noted that they have virtually no savings or investments. (Source: “The 2012 Retirement Confidence Survey; Job Insecurity, Debt Weight on Retirement Confidence, Savings,” Employee Benefit Research Institute web site, March 2012, last accessed February 13, 2013.)

Saving for retirement means investing in stocks and bonds; unfortunately, … Read More