Most Americans Accumulating Debt Faster Than They're Saving for Retirement

Friday, 01 Nov 2013 01:32 PM

By Kristin Caliendo

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A majority of Americans aren’t prepared for retirement.

Should they be worried? Definitely.

Americans are accumulating debt at an exponential rate and foregoing their saving and retirement accounts. People are plagued with increasing mortgages and escalating credit card balances, thus placing savings contributions and retirement on the back burner.

Alert: Obama’s Budget Takes Aim at Retired Americans

According to the Washington Post, workers with retirement savings accounts put aside more than 11 percent of their pay for retirement, 5 percent in their own accounts and 6.2 percent in Social Security.

Despite that, and despite the $2.5 trillion employers have poured into defined contribution accounts from 1992 to 2012, the retirement readiness of most Americans has been slipping, according to a report by HelloWallet, a Washington firm that offers technology-based financial advice to workers and conducts economic behavior research.

The reality looks bleak as a significant number of Americans aren’t going to have the "cushy" retirement lifestyle they once envisioned. An even harsher reality is that retirement might not even be an option.

According to the HelloWallet report, 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. 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.

It’s most problematic for the middle class, not just the lower class. Most of the people with accounts who are accumulating debt faster than retirement savings are older than 40, college educated and earning more than $50,000 a year, the report said. More than a third of them, the report said, are older than 50, a time when financial planners say people should be paying down debt and increasing their efforts to prepare for retirement.

One out of five families owes more on credit cards, medical bills, student loans and other unsecured debt than they have in savings, according to a University of Michigan study, USA Today reports.

Alert: Obama’s Budget Takes Aim at Retired Americans

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Americans: Hot for Debt, Lukewarm on Retirement

Retirement of Baby Boomers Is at Risk

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