A majority of Americans with 401(k)-type savings accounts are accumulating debt faster than they are setting aside money for retirement, further undermining the nation’s troubled system for old-age saving, a new report has found.
Three in five workers with defined contribution accounts are “debt savers,” according to the report released Thursday, meaning their increasing mortgages, credit card balances and installment loans are outpacing the amount of money they are able to save for retirement.
In today’s news about our on-going retirement crisis, Americans with 401(k)-type retirement accounts put away a little more than 11 percent of their pay for retirement, but they’re also accruing more debt at the same time. And it’s not because Americans are any more or less responsible than they were a generation ago (Elizabeth Warren can explain this better than I can). And this is just among Americans with 401(k) accounts—59 percent of households headed by people age 65 and older currently have no retirement assets, according to Federal Reserve data.
Photo: Wikimedia Commons
Last week American Student Assistance released an 8-minute movie horror movie called THE RED. It’s about debt, and after the film ends, there’s a call to action to face your own debt (“you can’t outrun it, all you can do is face it and fight it”). I spoke with ASA managing director Sue Burton about her organization and what they’re doing to help people confront their student loans.
LS: Tell me about your organization, Sue Burton.
SB: American Student Assistance has been around for 57 years helping borrowers navigate repaying loans. SALT is our program to help students get ahead of their loans. We’ve found the best way to help students manage their loans is to help them when they’re make borrowing decisions, to get them informed and engaged for when they ultimately leave school.
LS: Your movie gave me a knot in my stomach.
SB: The goal is to drive awareness of the power of solutions. So much is written about the problem of student loan debt—but we want students to feel empowered to take action, to look at solutions, to get themselves informed about their options. You can ask people if they have student loans and they’ll say, oh yeah, but you ask much, they have no idea.
Students are disengaged from the details of their loans and how to manage those loans—they’re paralyzed.