How Racking Up Debt is Ruining Our Retirement
Life + Money

How Racking Up Debt is Ruining Our Retirement

Many Americans are accumulating debt faster than they amass retirement savings – making  them far less prepared for retirement.

Six in 10 Americans who participate in a defined contribution retirement plan, such as a 401(k), racked up more debt in 2010 and 2011 than they contributed to their retirement savings, according to an alarming new report from HelloWallet. One in 5 plan participants added more credit card debt than retirement savings to their family balance sheet. (The study analyzed consumer finance data from the Federal Reserve and the U.S. Census Bureau.)

“Through retirement plans and Social Security taxes, the average 401(k) participant now contributes over 11 percent of their paycheck to retirement savings every month, yet the typical worker near retirement has only about two years of replacement income saved,” HelloWallet CEO Matt Fellowes said in a statement. “The growth in household debt is one big reason why retirement readiness is so stubbornly low.”


Household monthly debt payments increased 69 percent from 1992 through 2010. They now account for 22 cents for every dollar earned by retirement plan participants near retirement (age 50-65).

Plan participants who accumulate debt faster than retirement savings have 50 percent less of their annual income saved for retirement, compared to those who are saving for retirement at a faster rate than they are accumulating debt.

Debt is not only hurting retirement savers – retirees  are also struggling with it. Just under half of retirees had debt when they quit working, according to a Securian study earlier this year. Among those with debt, 21 percent owed $100,000 or more. The study found that 59 percent had a mortgage when they retired; 59 percent carried credit card debt into retirement; and 31 percent owed money on a car loan.