Consumer Debt Soars in Second Quarter of 2021

Consumer Debt Soars in Second Quarter of 2021

If you are anything like the average American, you are on a budget, and you may have noticed that the cost of consumer goods has skyrocketed during the COVID-19 pandemic. According to the New York Federal Reserve, consumer debt has increased more in one quarter (from April 2021 to June 2021) than it has in any of the previous quarters in the last 14 years since 2007. While consumer debt is not necessarily a bad thing, people in or near retirement must be careful about how much debt, and what kind of debt they are carrying into their retired years to ensure that they can continue to meet their financial obligations after they stop working. The retirement phase experts at Crash Proof Retirement have some questions you may want to consider if you are currently retired, or if you are approaching retirement age.

Will You Have Enough Income in Retirement?

As we mentioned earlier, consumer debt has soared to $313 billion in the second quarter of 2021. Home loans and mortgages made up the largest category of consumer debt, rising $282 billion while the worst kind of debt — credit card debt — rose $17 billion. If you don’t want to enter retirement drowning in debt, it is a good idea to pay down as much of your debt as possible. To be financially secure, you will need to develop a retirement plan that will give you enough income to cover your daily living expenses, as well as your financial obligations, such as phone bills, mortgages, and credit card balances. Can you accomplish that with your Social Security income and distributions from IRAs and 401(k) accounts alone? If not, there are guaranteed income solutions that can supplement your retirement to ensure all your financial obligations are met. 

Will Your Principal be Protected during an Economic Downturn?

Americans lost about $10.2 trillion in wealth during the 2008 crash and more than $6 trillion and counting in 2020. There is no telling how much wealth you and other at-risk investors could lose from your retirement savings when the next economic downturn comes. If you are relying on securities-based investments like stocks, bonds, and mutual funds to cover your expenses during retirement, you might find yourself unable to make ends meet when the stock market crashes or experiences a slight correction, especially if your holdings are ridden with costly fees. 

What Will Happen with the National Debt?

Consumer debt is not the only form of debt that is soaring. The national debt is also at its highest level since the Second World War. When Congress reconvenes after their summer recess, they will be forced to address this issue and if they cannot come to an agreement about raising the debt ceiling, we will default on the national debt. This would have unknown and far-reaching consequences because the United States has never defaulted on their debt obligations. Markets could crash, the value of the dollar could be severely impacted, and interest rates could skyrocket — ultimately derailing the economic recovery. If you do not have a safe retirement plan, this could be disastrous for you and your family.