Average Personal Debt at Age 55 – BY CATEGORY | How Do you Stack Up…

This video discusses the average personal debt of a 55 year old in 5 different categories: average mortgage balance of a 55 year old, average credit card balance, average personal loan balance, average student loan balance and average car loan balance.

Transcript:

In this video, I discuss what the average personal debt of a 55 year old coming up next on Holy Schmidt

• Splat

• We all like to know where we stand vs others like us. There are many reasons for this: advertisers who tell us we are too heavy or too skinny, mutual fund companies who tell us that we don’t have enough saved for retirement,

• friends and family who tell us to take Social Security early because we could all die tomorrow, or take it late because we surely will outlive our savings and we need the higher payment.

• And there are a lot of opinions about debt,

• It can be bad if you are talking about credit card debt, good if you are talking about a mortgage

• That is unless you are over extended. 10 years ago that was a good thing because your income was going to go up and so was the price of your home – win win.

• For most people it didn’t turn out that way…

• In other words, conflicting message are everywhere.

1. So why does someone what to know what the average debt of a 55 year old is?

1. The big reason is that many people have debt going into retirement and they have been told to pay down the mortgage, pay off the credit cards and cancel personal loans.

1. Directionally not bad advice, but each person is unique and there may be reasons to have debt, perhaps even significant debt at age 55 depending on an individual’s station in life.

1. So what does the average personal debt profile look for an average 55 year old?

1. In order to answer that question, let’s talk about what I call the “Big 5” personal debt categories.

1. The first category is your car payment. This one varies wildly because many of you could go out tomorrow and buy a Porshe with a 3 figure a month payment,

1. or a high end Honda, also for three figures a month. The difference is that the Porshe payment starts with an 8 or 9 and the Honda payment starts with a 1 or 2..

1. By the way, please make sure you click subscribe and notification so that you are alerted the next time I post a video.

1. Also click the like button as well. YouTube uses the number of likes to drive a video up in the search results and I want to help as many people as possible. Now back to the video…

1.  The next category is credit card debt. This is what I call the “silent killer” because credit card debt sneaks up on you one purchase at a time and all of a sudden you are over over your head.

• Often it happens when someone says I’m going to use my bonus/tax return/next paycheck, etc to pay off the credit card

• But when that payment comes they don’t use it to pay off debt, [smile] they find another use for it!

• Repeat that 3 or 4 times and you have a big ugly balance

• Category three is mortgage debt. This includes a home equity line of credit, often called a HELOC and fix rate mortgage, usually a 30-year mortgage.

• HELOCs are harder to get today because folks were using them as ATMs as home prices soared in the early 2000s, but for someone in their 50s there is a good chance they have one in place.

• Category 4 is student loan debt. Like mortgage debt, Student loan debt is considered good debt.

• If you read my book the “Busy Adult’s Guide to Making College Happen!” you’ll find that people with a college degree earn on average [70%] per year more than people without a college degree.

• So theoretically student loan debt is good debt.

• But 70% is an average. An finance degree might pay substantially more and a philosophy degree might pay substantially less. For example.

• And then there is the Other category – Overall small compared to any of the others – think of things like financing a timeshare or a large consumer product through the manufacturer like a grill.  

• So where does the average 55 year old sit in each of these areas?

• It’s a little complicated because the information is not exact. First most graphs and charts give ranges. Age 50 to 69. For example.

• If you look at both sides of the range the numbers are not vastly different so in that regard the data here could be skewed slightly up or down – but not by much.

• The other point is that at age 55 there is also a spouse in the household much of the time. They share debt just like they share assets.

• So the numbers I am going to give you are for the average debt of a 55 year old’s household.

• The come from US Census Bureau’s 2018 report. The numbers won’t have changed much since them and I have found that information to be one of the best sources in terms of accuracy.

• At Age 55 the Average Debt Amount of a 55 year old is $69,215

• This is comprised of:

• Automotive debt of 5739. This is the total debt of one or more cars in the household.

• Credit card debt of $4480. Like automotive debt this is total of all credit cards

• Mortgage debt of $52,934 > this is subdivided in primary mortgage of $49,875 and Home Equity Line of Credit of $3059.  

• Student loan debt of $3962. At age 55, for most people it will be running down to zero soon.

• Other debt of $2100. This is a the miscellaneous category I mentioned earlier.

• For most people at age 55, $69,215 is a lot of debt when you think about the minimum payments are to service this debt.

• but for most people they have another 10 years to get this amount down to the magic number of zero, simply by paying a little more than the minimum.

• I’ll recommend a video at the end on how to obliterate debt in retirement. The lessons are equally applicable if you are in your 50s and 60s, or 20s and 30s.

• By the way, if you were to look at this same information for someone in their 40s and then again for someone in there 60s, the debt totals would be about 10% more in their 40s and 10% less in their 60s,

• so the average person does not, in fact, work it down to zero by age 65 unfortunately.

• But with a little work and focus now you can get there and live a debt free retirement [smile]

• If you like this video don’t forget give it a thumbs up and don’t forget to click subscribe and turn on notifications so that you get alerted the next time I post a video.

• Also, as mentioned check out my video on how to obliterated debt in retirement – it works equally as well in your 50s too.

• This is Geoff Schmidt, thanks for watching!