Earlier this year, The Federal Reserve Bank of New York reported that household debt balances set a record high of $17.05 trillion for the first quarter of 2023. This debt includes mortgages, home equity, auto, student, and other consumer loans of this $17.05 trillion, and credit card debt hovers just below $1 trillion.
These debt levels will most certainly impact retirement savings rates. With many of these lines of credit come variable interest rates, which have increased over the past year, making the cost of borrowing significantly higher. The math is simple; more debt plus higher interest rates equals larger payments. Larger payments equal less income in the monthly budget to allocate to other needs, like retirement savings. And for many, retirement savings doesn’t even make the list in the budget. Sometimes, just meeting basic living needs is a financial struggle.
As I read the report and saw the numbers, I couldn’t help but think of a quote from the character Tyler Durden in the movie Fight Club, “We buy things we don’t need with money we don’t have to impress people we don’t like.”
Excessive consumerism is a part of our society. There is no getting around that. It makes me contemplate retirement education and the need for more of the basics like budgeting, debt, and spending. Work some of those out, and there’s a little more room in the budget for retirement savings. The workplace retirement plan is one of the primary places this education is being delivered. But it is an uphill battle, though a battle worth fighting.
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