If
you're facing a mountain of bills, chances are you've drowned out even the most
urgent warnings to save for retirement.
You're not
alone. No matter who's doing the polls or studies, results show that Americans
are awash in debt.
Three-quarters of households have debt
with a median level of $55,300, according to the policy group Demos. Just 41 percent
of American households save on a consistent basis. Roughly half of all credit
card holders have lingering balances that now average $12,000 to $13,000, says
the Consumer Federation of America. Among the six out of 10 households that haven't
saved for retirement in the past six months, 27 percent were allocating extra
funds to pay off credit cards, a Fidelity Research Institute study found.
No wonder all that traditional retirement advice about saving abundantly and investing
shrewdly seems like a ridiculously unrealistic goal for so many.
Professional financial planners generally agree that getting rid of debt should
be your No. 1 priority. "The best investment you can make is to pay off credit
card debt first," says Stephen Brobeck, president of the Consumer Federation
of America.
Not convinced? Stocks have historically gained
10.4 percent annually while bonds have earned 5.4 percent a year on average, according
to Ibbotson Associates. But credit card fees frequently run higher than that --
18 percent and higher. "All the people who are making two or three late payments
are paying penalty rates of 25 to 30 percent," says Brobeck.
That said, paying off debt is not a free pass to put your retirement on permanent
hold. Instead, you need to embrace strategies that can help you achieve the dual
goal of digging out from under the bills so you can then catch up on retirement
and move ahead in the future.
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| 9 steps to save for retirement | |
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| -- Posted: April 23, 2007 |
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