Is Credit Card Debt Sabotaging Your Retirement?
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See if this sounds familiar: You want to give your retirement account a boost, but first you need to pay your credit card bill. Once you do that, there’s barely anything left, especially when you try to cover most or all of the balance.
A new survey from the Transamerica Center for Retirement Studies shows an estimated 52% of American workers find debt is inhibiting their retirement savings.
Inflation is a major factor. One fifth of workers say they’re accumulating new credit card debt just to get by, and 14% percent have reduced their retirement contributions or stopped saving for it altogether. Thirteen percent have even dipped into their retirement account to cover expenses.
That’s unfortunate enough, but consider the opportunity costs. The average balance among people who carry credit card debt month-to-month is $6,730, according to the latest data from the credit bureau Experian. If you put that same amount into an IRA that earned 7% a year (the average annual return for the S&P 500 Index after inflation,) you’d end up with more than $50,000 after 30 years.
Even older people are grappling with this. Forty-six percent of people 50 and older carry credit card debt from month-to-month, and nearly half of them worry about their ability to save because of it, a new AARP survey shows.
So what? Many people struggle with credit card debt. Paying it off can be challenging, especially if you’re on the minimum payment credit treadmill. But deferring your future financial security can lead to a vicious cycle where you’re relying more on credit cards once you’re retired because you don’t have enough saved.
If your debt is keeping you from achieving your financial goals, there are remedies. Take a fresh look at your discretionary expenses, try a payoff plan, or consider consolidating your debt at a lower interest rate. (SoFi can help with that.) With credit card interest rates near record highs, there’s no better time to take control.
Related Reading
• 60% of Americans Carry a Credit Card Balance — As Interest Rates Top 20%, Fed Report Finds (CNBC)
• An Ambitious Budget May Be Better Than a Realistic One (SoFi)
• Getting Help with Credit Card Debt: 5 Things Older Adults Should Know (National Council on Aging)
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