As baby boomers prepare for — or are already in — retirement, the issue of debt becomes increasingly important.
Indeed, those born roughly between 1946 and 1964 are planning to work to older ages than the generations before them, and they’re less likely to have a backup plan if forced to take retirement earlier than expected, according to the Transamerica Institute’s recent report “Retirement Security Amid COVID-19.”
One reason that baby boomers are struggling is due to debt. Here are the biggest sources of baby boomer debt, according to Transamerica.
10. Loan from family and friends
Baby boomer households with this type of debt: 1%
Borrowing from family and friends can be one way to keep costs low. In fact, you might not even need to pay interest.
But there are pitfalls. One of the biggest issues is that you might destroy relationships. When borrowing from family and friends, create a promissory note and go through the formal motions to reduce potential friction.
9. Payday loan
Baby boomer households with this type of debt: 2%
It’s not uncommon for a payday loan to have an APR of 400%. It’s one of the most expensive ways to borrow money. Rather than turning to payday loans to cover a financial shortfall, it might make sense to look for other sources of capital.
8. Tax debt
Baby boomer households with this type of debt: 5%
Those struggling with tax debt have options to settle this obligation before it begins to have a major impact on retirement.
For example, you might be able to set up an installment plan with the IRS or even go through an offer in compromise, or OIC, that will allow you to settle for less than the full amount owed. And if that doesn’t work, a local certified public accountant might be able to help you.
If you need this type of help, stop by Money Talks News’ Solutions Center and look for a reputable expert who helps with tax debt.
7. Home equity loan
Baby boomer households with this type of debt: 6%
Baby boomers are slightly more likely than Gen Xers or millennials to say that they might rely on a bank loan such as a home equity loan if their finances are impacted negatively due to the coronavirus pandemic, according to the Transamerica study.
6. Student loan
Baby boomer households with this type of debt: 9%
According to a study by Experian, baby boomer student loan debt is increasing — up 5.6% between 2018 and 2019 for those in their 50s, and up 4.5% for those in their 60s. Indeed, there were 17% more student loan borrowers age 62 and older during 2019 than in 2018.
4. Medical debt (tie)
Baby boomer households with this type of debt: 10%
Medical debt is one of the most common reasons for the rising number of bankruptcy filings among seniors, as we have previously reported. However, medical debt doesn’t have to completely derail retirement. For more, check out “How Do I Get Help With Medical Debt?”
4. Personal loan (tie)
Baby boomer households with this type of debt: 10%
Even though the amount of debt carried by baby boomers has been declining, Experian data indicates that they hold the highest average personal loan balance when compared to other generations. In fact, baby boomer personal loan debt beats the national average by about 18%.
3. Car loan
Baby boomer households with this type of debt: 34%
More than one-third of baby boomer households have car loan debt, according to the Transamerica study. One way to lock in some long-term savings is to refinance your car loan to improve your cash flow while reducing your interest rate.
2. Mortgage
Baby boomer households with this type of debt: 40%
Just 27% of baby boomers say they plan to pay off the mortgage as part of their retirement strategy, according to Transamerica. This is the lowest rate among the generations — even though 40% of baby boomer households have mortgage debt.
For pointers, check out “7 Painless Ways to Pay Off Your Mortgage Years Earlier.”
1. Credit card debt
Baby boomer households with this type of debt: 42%
Credit card debt is the most common type of debt held by baby boomers, according to the Transamerica study.
Americans owe more than $ 1 trillion on credit cards as of the first quarter of 2020, according to a WalletHub study. However, it’s possible to pay down such debt on your own by creating a plan that works for you — see “The Best Way to Kill Off Your Credit Card Debt.”
If you need more help, stop by Money Talks News’ Solutions Center to find a reputable expert who can help craft a strategy to pay off your credit card debt.
How to find cheaper car insurance in minutes
Getting a better deal on car insurance doesn’t have to be hard. You can have The Zebra, an insurance comparison site compare quotes in just a few minutes and find you the best rates. Consumers save an average of $ 368 per year, according to the site, so if you’re ready to secure your new rate, get started now.
