Personal finances can be challenging to navigate. You have to expertly steer your debt and savings, especially when approaching retirement.
How do your debt and emergency funds compare with those of other Americans? Let's find out.
Emergency Cash
What's your answer to this question, “Would you meet your financial obligations if your employer delays your paycheck by a week?”
If no is your answer, you’re not alone. More than three-quarters of adult Americans live from paycheck to paycheck. They have low cash reserves or no well-funded emergency fund.
Retirement Savings
The Federal Reserve shows that the average retirement savings for a U.S. individual is between $49,130 and $609,230, depending on their age.
For many, this is unlikely to be enough.
If you’re 50+ years old, the Internal Revenue Service (IRS) allows you to make additional contributions to your employer-sponsored retirement account, such as 401(k) or 403(b). In 2024, you can contribute an additional $7,500 per year for a total of $30,500.
Credit Card Debt
The average American owes $6,864 in credit card debt. New Jersey’s average is the highest at $8,909, while Mississippi's is the lowest at $4,956.
In 2024, the average credit card's annual percentage rate is 21.59%.
Jennifer, a 53-year-old civil engineer, has $15,000 of credit card debt at a 20% interest rate. She wants to build a market-beating investment portfolio to retire comfortably.
This requires her to invest in an aggressive portfolio, but it comes with an increased investment risk and only 3%–22% outperform the market over the long term, according to Stock Analysis.
Jennifer should consider prioritizing paying off her high-interest credit card debt before focusing too hard on a percentage point up or down on returns in the market. That could be an instant 20% improvement.
Student Loans
The average student loan per borrower in 2024 is $28,950. Washington, D.C., boasts the highest average at $54,708.52, while North Dakota has the lowest average student loan at $27,784.56.
Older borrowers typically owe more. For instance, the 50–61-year-old group owes an average of $47,660, which is $33,937.78 higher than the average for the 24-year-olds and younger.
Mortgage
The average mortgage balance in 2023 was $244,498, a 3.4% increase compared to 2022. Mortgage borrowers paid 7.31% in mortgage rates, which was more than double that in 2001.
Mortgage rates fluctuate with factors like inflation, job growth, and federal fund rates. For instance, a rise in federal fund rates may lead to an increase in mortgage rates.
Conclusion
Getting your personal finances in order can be daunting as you approach retirement.
Consult JDH Wealth to explore how you can best prepare for your retirement years.
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