Some Arizona residents may be farther from retirement that they think if they have large amounts of debt. While most people believe that having a large amount of money set aside for retirement is enough to be able to leave the workforce, if they have large amounts of debt on credit cards, they may not have enough to retire and keep up with their payments. This can mean that people have to work longer than they expected or that their retirement fund will be depleted far more quickly than they had anticipated.
Financial advisers often focus on what investment funds people should put their money into and helping individuals maximize their 401K, but the issue of eliminating debt may not even be discussed. This can put people at a disadvantage if they continue to rack up debt even as they are putting money aside to retire. In the last few years, this has become an increasingly large issue.
Between 2006 and 2007, 46 percent of individuals who were actively participating in retirement plans were getting in debt faster than they could set aside money for their retirement. That number has grown to 64 percent between the years of 2010 and 2011. Additionally, according to HelloWallet, while people involved in contribution plans had $9.2 trillion in these plans, they also had accumulated $4.2 trillion in debt.
Even people with a solid incomes can find themselves having trouble financially if they have enough debt. Instead of struggling against an overwhelming amount of debt, people who file for bankruptcy may be able to eliminate most or all of what they owe. A bankruptcy attorney could help someone determine the best type of filing for their situation as well as let them know what types of debt it will eliminate.
Source: SF Gate, “Why credit card debt can derail retirement savings“, Jenna Goudreau, November 05, 2013