Baby Boomers Have the Highest Debts

Baby boomers are reaching the age of 65 and retirement is staring them right in the face.  While it might seem like yesterday that you bought your first house and started having children.  As your children grew up you decided to pay for new televisions, your parents medical bills and helping your kids through college, you did all of this instead of contributing to debtyour retirement.  You took on more debt than you can afford and now retirement is here and you don’t have enough money.  It probably doesn’t surprise you to find that baby boomers have the highest debt.

Welcome to Retirement

That may sound like an isolated incident but it is far more normal than you might think.  Baby boomers are reaching the age of 65 at a rate of 10,000 new retirees everyday.  Most of them don’t have the financial resources to live on and this is a new situation that has been faced away by retirees ever before.  Here is a video showing how unprepared boomers are for retirement.

Baby Boomer Debt is Rising

A report that was published by the Federal Reserve Bank of New York  claimed that those nearing retirement have 47% more mortgage debt and 29% more auto loan debt than they had in 2003.  This is even after adjusting for inflation.  They are taking equity from their homes and moving into bigger houses leaving them with more and more mortgage debt running into retirement.

Millennials and Their Debts

If you look at the statistics prior to the debt crisis, back then it was younger borrowers that had weaker credit, slow payment history and higher debt balances.  They were buying cars, homes and spending on credit cards.  Now with credit requirements being more strict, millennials faces different financial challenges.  Today a 30 year old is far more likely to carry student loan debt rather than having credit card or mortgage debt.

Baby Boomers and the Credit Crisis

Baby boomers went into the credit crisis with far more assets, stable incomes and stronger credit scores.  This gave them the ability to add debt that was largely unavailable to the average person.  Retirement age is right around the corner, figuring out how to pay off this debt is becoming a problem.  In 2015 alone there was a rise in debt balance of more than $50 billion dollars bringing consumer debt to a whopping $12.1 trillion dollars.  The previous two years saw increases as well, but mortgage debt remains the same, consumer debt is on the rise.

With rising debt delinquencies have risen at the same time.  The scary thing we all need to worry about is what happens to the rate of delinquencies as baby boomers leave the workforce and their income decreases dramatically?  Baby boomer debt can serve as a lesson to those looking into the future and preparing for their own retirement.  Be careful of the debt you incur and contribute to your retirement fund early before it is too late.

Options to Help You Manage Your Debt

debt Over the course of your life you’re going to incur some form of debt, be it a loan for school or the mortgage on your house.  During your life you will owe someone money.  In the past 20 years it is more and more common to borrow money.  Along with debt the cost of living has also increased over the same time frame.   It isn’t all doom and gloom, debt can be stressful but there are options to help you manage your debt.

Before you learn how to manage your debt, you must first understand a little more about debt.

How you fall into debt

You need to understand how you fell into debt and what bills you need to pay.  Debt comes from sources like student loan, credit cards, car loans and your mortgage.  You may also owe money for medical bills, gambling, divorce and poor management of your money.  While you need to pay your bills you also need to ensure your financial security.

Negative effects of debt

You need to understand the impact of debt to understand the potential risks that go with it.  Some of these are extreme cases but you should be aware of them anyway.

Wage Garnishment

If you owe debt such as student loans or child support you can have your wages garnished in order to cover what you owe.  Money will be deducted from your paycheck before you even see it.

Eviction or Loss of Your Home

If you can pay the rent or mortgage on time the bank or landlord can initiate proceedings to have you removed from your home.

Bad DecisionsH

Financial desperation can lead to some very poor financial decisions that give you even more problems.  Things like payday loans or borrowing at extremely high rates of interest will only make the situation worse not solve your problems.

Debt Relief Options

There are options out there to help you get out of the financial hole that you’re in most companies will offer strategies to help you pay the money back or at least a significant portion of it.

Credit Counselling

There are organizations that can help you learn to budget and take your debt and roll it into one monthly payment while reducing the amount of interest you will pay along with the rate.

Debt Negotiation

This is where someone will negotiate on your behalf to reduce the sum of money that owe, however you must demonstrate that you are experiencing financial hardship such as job loss or reduced employment.

Bankruptcy

Bankruptcy is your last financial resort and it may remove all of your debt at once, however it will affect your ability to borrow money, rent an apartment or find a job in the future.  Bankruptcy may stay on your financial records for years and debts like child support will not be affected by bankruptcy.

No matter the strategy you choose to get yourself out of debt there will be consequences that you need to understand before you try any of these options.