Posts Tagged: ‘Retirement’

Student Borrowing Affects Retirement and Home Ownership

February 25, 2016 Posted by kingcade

New data released from The Center for Retirement Research at Boston College revealed that student loan debt is preventing Americans from saving for retirement. Student loan debt has reached massive levels, with 40 million people stuck with at least one student loan. It accounts for more than 30 percent of non-mortgage related household debt. According to the St. Louis Federal Reserve, more than 27 percent of student loan borrowers in repayment are delinquent on those payments.

The report found that student loan debt has the same impact on retirement savings as unexpected healthcare costs. This means that a greater percentage of households are at risk of not being able to maintain their standard of living in retirement, because they are unable to save while they are in the workforce.

Most college bound students are not thinking about retirement when they take out student loans for expensive degrees. Unfortunately, if students choose a degree that will prepare them for a low-earning career or a career with a deficit in jobs, student loans are going to be harder to pay back.

Student loan debt is not only affecting retirement, it’s also affecting borrowers abilities to purchase homes and buy new cars. Many borrowers are unable to obtain a mortgage because their student loans push their debt-to-income ratio disqualifies them.

The Center for Retirement Research used the National Retirement Risk Index, which measures the percentage of working households age 30 to 60 who are on track to be able to maintain their standard of living in retirement. It looks at what a person’s age 60’s retirement security would be if the person had the same level of student loan debt as today’s average, $31,000.

The Center found that the percentage of people at risk went from 51.6 percent to 56.2 percent, a 4.6 percent increase. Although it doesn’t seem like a great increase, a 19.6 percent across-the-board cut in Social Security benefits would raise the index by 10.7 percentage points. This means that the impact is roughly half of the impact of an unprecedented move such as cutting Social Security benefits.

Click here to read more on this story.

For borrowers who are struggling with student loan debt, relief options are available. Many student loan borrowers are unaware that they have rights and repayment options available to them, such as postponement of loan payments, reduction of payments or even a complete discharge of the debt. It is important you contact an experienced Miami bankruptcy attorney who can advise you of all your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade & Garcia, P.A. has been helping people from all walks of life build a better tomorrow. Our attorneys help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade & Garcia website at www.miamibankruptcy.com.

Financial Planners warn about “prepaying” Student Loan Debt over Retirement Savings

October 14, 2014 Posted by kingcade

National student loan debt has been increasing at a rapid pace over the past two decades. The total now tops $1.2 trillion, surpassing auto and credit card debt. It’s hampered many young people’s ability to purchase a home and even keep current on monthly bills.

However, financial planners are warning borrowers to not be in such a hurry to pay off this debt. In fact, young borrowers could wind up being poorer if they accelerate student loan debt repayment over saving for retirement.

Here’s why: Retirement contributions typically offer tax breaks, company matches and future compounding that are worth far more than the interest saved by accelerated loan repayment. Many young borrowers focus on the now, putting retirement savings on the back burner, which can be a costly mistake.

A $1,000 contribution made at age 25 would typically be worth $20,000 or more at retirement age, while the same contribution would be worth about $10,000 when made at age 35, assuming 8 percent average annual returns. Even if participants do not achieve 8 percent, which is the historical stock market average for periods over 30 years, the math still holds: contributions made earlier return dramatically more.

Thanks to compounding, contributions made when workers are in their 20s can be worth twice as contributions made later. That’s because the money has longer to grow.

A recent TransUnion study of “credit active” consumers — people with at least one credit account or loan — found that 51 percent of those aged 20 to 29 have student loan debt, compared to 31 percent in 2005. Balances have soared as well, the study found. The average balance for a 20-something borrower in 2014 was $25,525, compared to $15,853 in 2007. That’s a 60 percent increase.

An Experian study found an even greater rise in student loan debt when the rest of the population was counted in. The study found that student loan debt had risen 84 percent between 2008 and 2014 and that the average balance for borrowers of all ages was $29,000.

Some good advice… Student loan borrowers should always make the required payments on their federal education loans, since the penalties for default are severe. But do not postpone saving for retirement.  Make sure your employer is matching you on your retirement contributions, since that money is essentially free, before using any extra money to pay down student loan debt.

Click here to read more on this story.

For borrowers who are struggling with student loan debt, relief options are available. Many student loan borrowers are unaware that they have rights and repayment options available to them, such as postponement of loan payments, reduction of payments or even a complete discharge of the debt. It is important you contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade & Garcia, P.A. has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade & Garcia website at http://www.miamibankruptcy.com.

Related Resources: http://www.reuters.com/article/2014/10/13/us-column-weston-retirement-idUSKCN0I21CQ20141013

More Americans Facing Retirement with Debt

February 18, 2014 Posted by kingcade

According to a recent study, the majority of people who contribute to retirement plans, such as 401(k)s, have accumulated more debt than retirement savings in recent years. More troubling is the fact that those approaching retirement- between 50 and 65 years old- had a monthly debt obligation in 2010 equivalent to 22% of their earnings, up 69% from 1992, according to the analysis.

A study by the Center for Retirement Research at Boston College found that the proportion of people in their 60s with debt increased from just under half in 1998 to nearly two-thirds in 2010. Debt as a percentage of assets nearly doubled, from 10% to 18% over that time frame.

Mortgages account for the largest portion of that debt. Older Americans are not only more likely to have mortgages than in previous years; they are also taking longer to pay them off. Some owners enjoy low enough mortgage rates and large enough investment assets to feel comfortable taking out a home equity line of credit to pay for emergency expenses. But in some cases, this is not a good idea. Many financial institutions are encouraging homeowners to look at their houses as a cash machines, with low interest rates. A lot of baby boomers have done this and are now stuck with higher mortgages. To keep debt from derailing your retirement plans, it is important to meet with an experienced financial advisor to manage your post-retirement cash flow.

The typical worker – between 50 and 65 years old- has saved enough for just two years of working income, even though the median post-retirement life span is about 17 years. Balancing debt and saving for retirement starts with carefully measuring what your income and your expenses will be. Many people facing retirement will be on a fixed-income. It is important to make sure that the income streams have the ability to pay your debt.

Click here to read more on this story.

If you are in a financial crisis and are considering filing bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade & Garcia, P.A. has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade & Garcia website at www.miamibankruptcy.com.

Credit Mistakes that Can Wreck your Retirement

October 10, 2013 Posted by kingcade

A recent University study found that elderly people are more likely than any other age group to file for bankruptcy. The “boomer generation,” now thinking about retirement can learn from the seven credit mistakes below:

1.) Assuming that you are nearing the end of the road. According to the Social Security Administration, the average life expectancy is 84 for men and 86 for women. Keeping that in mind, treat credit as a long-term asset accompanied with risks, responsibilities and important benefits.

2.) Avoiding Credit. Many seniors are proud of their financial accomplishments. Whether they have finally paid off their mortgage, payed off their credit cards or car. But if you ever need a loan and you have little credit in your name, your credit score could have dropped. This means you will likely have to pay higher interest rates if you ever need credit for a life emergency. Instead, get a credit card. But use it only as you would a debit card, charging only what you can afford to pay at the end of each month. This will help rebuild your score.

3.) Taking on too much debt. A recent study by Demos found that Americans aged 50 and over have an average credit card balance of $8,278, compared to $6,258 for people under 50. Senior debt has many causes. More than a third of people over the age of 50 with credit card debt use their credit cards to cover basic living expenses, which is a big mistake. This makes them vulnerable to debt collection scams and withdrawing money from retirement accounts to pay off credit card debt.

4.) Student Loans. Think twice before signing for any student loans. The average borrower over age 60 owes $19,521 in student loan debt, and 12.5 percent of them are delinquent on their payments. Some took college classes later in life. Others have debt leftover from school days long past or cosigned on student loans for their children and grandchildren.

5.) Co-Signing. To help their children or grandchildren purchase a car, new home or pay for college, many seniors have co-signed loans. Oftentimes, not realizing that lenders and credit reporting agencies do not distinguish between borrowers and co-signers. Instead, lend money directly. This will help your loved one establish credit of their own without endangering your financial future.

6.) Failing to check your credit score. Check your credit score for free once a year with each of the three major credit bureaus and sign up for tools such as Credit.com’s free Credit Report Card, which allows you to see your credit profile and provides free scores that update monthly. 36 percent of seniors who did this found errors which severely damaged their credit scores.

7.) Failing to understand reverse mortgage risks. A reverse mortgage can provide seniors extra money during retirement by tapping all the equity they have built up in their home. The loan is repaid only when they die, sell or move out of the home. It is important that you do your homework. Meet with a certified financial advisor to see whether a short- or mid-term reverse mortgage is right for you.

Click here to read more on credit mistakes that can wreck your retirement.

If you are in a financial crisis and are considering filing bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade & Garcia, P.A. has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade & Garcia website at www.miamibankruptcy.com.