Home > Managing Debt > The New Pre-Retirement Obstacle: Debt

Comments 1 Comment

Today, many Americans are still struggling under the weight of considerable debts for a large number of reasons, and one demographic that might be particularly affected by this trend are those in the baby boomer generation.

Credit card debt and other financial concerns can put a serious damper on retirement savings, and research from the AARP shows that 34 percent of older Americans use these accounts to cover basic living expenses, including paying for groceries and utilities, and even covering mortgage payments, according to a report from USA Today. As a consequence, the average amount of credit card debt held by people over the age of 50 is $8,248, and half of all people in that group have received calls from debt collectors in the past.

Just how big of a threat is this issue to older Americans’ retirement plans? Data from TD Ameritrade shows that the average baby boomer is short about $500,000 when it comes to covering all their requirement savings needs, the report said. Further, about 74 percent of those polled said they have plans to rely on Social Security payouts as their one of their primary income sources in retirement, but the average payout from that program is just $1,230 per month.

As such, more people are now working past the age of 65 by a few years or more as a means of making up some of the ground toward a fully-funded retirement, the report said. The proportion of people over the age of 65 who are now in the work force is 65 percent, up from just 12 percent in 1990. Another reason for this, though, is that retirement is generally growing more expensive.

“We will have to work a lot longer and get by with less,” Olivia Mitchell, professor of economics and executive director of Pension Research Council at Wharton School of Business, told the newspaper. “It’s just getting a lot more expensive to be old than it used to be.”

[Credit Cards: Research and compare credit cards at Credit.com.]

Of course, many baby boomers may be facing financial hardship as they approach retirement through no fault of their own. During the recent recession, many older workers were laid off and had to dip into retirement savings or lean more heavily on credit cards as a means of making ends meet, leading to greater financial problems today.

Image: iStockphoto

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

  • Kim

    I’m a baby boomer and found myself, over the course of 5 years, unemployed for 2.5 of those years. We dipped deeply into our savings, especially that saved for our youngest daughter’s college tuition, to manage that period of unemployment. I was fortunate to find new work a year ago and have been fanatically paying down both our mortgage and the college debt we have accumulated for our daughter. And no, we don’t qualify for any type of aid at all. While we have not saved immediate cash, we have saved ourselves years of principal payments and decreased our overall interest payments on our mortgage and college loans. It’s humbling and frightening because we absolutely lived within our means, have had no credit card debt, no auto loans, a small home with a low mortgage and had saved studiously for both a rainy day, college and retirement. This situation has put back my retirement by five years when considering the after-tax implications. I can’t imagine what it would have been had we not been as diligent as we were because we have definitely felt the impact of this. My current job is temporary and is scheduled to end at the end of 2013. While this is not ideal, I believe that through dedicated attention to our debt that we will end 2013 in better financial condition then a year ago. And, with hard work in a job search, I will land another position that will allow us to continue on the pathway to a debt-free lifestyle for retirement. However, we will live a humbler retirement then had been planned and can only hope that the federal and state governments do not continue to demand more while providing less.

Certain credit cards and other financial products mentioned in this and other sponsored content on Credit.com are Partners with Credit.com. Credit.com receives compensation if our users apply for and ultimately sign up for any financial products or cards offered.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team