Survey: Debt Sitting in Consumers’ Blind Spot

Balancing today’s living with tomorrow’s security on the road to retirement

The greatest risk to financial security during retirement may be the debt consumers don’t see today. A recent survey of consumers found that nearly half (46 percent) declined to classify at least one common financial obligation, such as outstanding balances on credit cards or home-equity lines of credit, overdue utility bills — even “payday loans” from friends or family members — as debt.  In fact, 11 percent of people with debt don’t consider themselves as being in debt.

In a survey that included retired and working respondents alike, (43 percent) of non-retirees surveyed indicated that debt would affect their ability to save for a comfortable retirement a great deal, and 32 percent of non-retirees who have debt said they cut back on their retirement savings as a result of their debt.  Just more than half (52 percent) of the retirees acknowledged they were in debt when they entered retirement. Respondents with the heaviest debt loads were most likely to express feelings of financial insecurity.

“It’s understood that Americans have debt, but what’s surprising is the impact of debt on their ability to prepare financially for retirement,” said Kerry Geurkink, director, Annuity Marketing for Securian Retirement, which commissioned the online survey. “The challenge of finding the right balance between today’s living and tomorrow’s security becomes larger when consumers either don’t acknowledge or simply don’t understand the extent of their debt.” 

“Debt – The Blind Spot on America’s Road to Retirement: Securian’s Multi-Generational Study” was conducted by Washington D.C.-based Mathew Greenwald & Associates, which polled 2,061 consumers.  Respondents came from Generations Y and X, plus Baby Boomers and members of the Silent Generation who were retired or near retirement.

Goals versus actions
Respondents overall indicated that their top two financial goals were paying off debt and saving for retirement (or, for retirees, ensuring a comfortable retirement for the rest of their lives). Non-retirees with less than $2,500 in non-mortgage debt were much more likely to concentrate on the latter goal than respondents with higher debts. And while seven in 10 respondents said that disposing of debt was a strong priority, only four in 10 actually paid down more debt than they added during a 12-month period.

Retired respondents offered evidence that the debt concerns of working respondents were justified. More than half retired with non-mortgage debt, and about one in four (23 percent) said that their debt equaled or surpassed their savings and investments at retirement time. Thirty-eight percent said their current debt loads affect retirement security a “great deal.” The survey indicated that Boomers and Silent Generation-respondents may face a surprise as they prepare to retire: 26 percent of Boomers and 33 percent of Silents expected to carry non-mortgage debt into retirement, but 52 percent of actual retirees reported that they retired with such debts.

“More than anything, this survey points to the need for consumers to head toward retirement with their eyes wide open,” Geurkink said.  “Take a hard, honest look at your debt and how it’s affecting your ability to save for the future.  Resources such as financial advisors, debt counseling and other financial tools can help you assess your situation and find the right balance.”

Securian Retirement is a unit of Minnesota Life Insurance Company, a Securian company. It has been providing comprehensive retirement plan solutions since 1930 and serves over 3,300 retirement plans nationwide with more than $10 billion in assets. Securian Retirement offers annuities and retirement plans underwritten by Minnesota Life, one of the most highly-rated life insurers in the US. Securian also has over $634 billion of life insurance protection and over $30 billion in assets under management (as of December, 2007).