Buyers’ Remorse for Student Loans?

The media routinely report that student loans are a major burden on families and young people. Several presidential candidates have even turned education-related debt into a campaign issue, pushing for across-the-board debt forgiveness. Is education-related debt really that much of a challenge? How exactly does it impact borrowers?  Consider some facts: 44.7 million Americans have student loans; 3-in-5 are age 30 or older.  63% of Americans under age 30 who earned at least a bachelor’s degree have education-related debt. The average education-related debt balance is $36,299. 15.4% of all student loan borrowers are either delinquent or in default, though this … Continue reading "Buyers’ Remorse for Student Loans?"

More Seniors are in Debt: An Unintended Consequence of Low Interest Rates

When interest rates are especially low—like today—Americans have a greater incentive to borrow and spend. The reasons are many. Buy a car, a home or a new appliance. Americans also borrow to pursue more education or take a vacation. All this contributes to a growing economy.  From the 1980s until about 2010, interest rates were on a downward trend. Since 2010 they’ve remained historically low. For example, in 1989 the interest rate on 24-month personal loans in the United States averaged 15.4%. 48-month auto loans averaged 12.1%, and the bank prime rate averaged 10.9% (see figure 1).  By 2016 these rates … Continue reading "More Seniors are in Debt: An Unintended Consequence of Low Interest Rates"

What’s the Difference of a Few Percentage Points for Retirement Savers?

As previously discussed, the United States is in a low interest rate environment. Low interest rates negatively impact people saving for retirement, including those who invest in fixed-return assets (assets that pay people a set interest rate). They can have a particularly severe impact on retirees and those nearing retirement. But how much do a few percentage points really matter? Consider two simple examples: 1) A 50-year-old invests $100,000 in a fixed-return asset that pays 2.5%, compounded annually. Putting aside taxes, 10 years later she’ll have $128,009. If the investment pays 5.0%, she would have about $162,889. If it pays … Continue reading "What’s the Difference of a Few Percentage Points for Retirement Savers?"

Low Interest Rates Equal High Costs for Retirement Savers

[First in a series of IMPACT posts examining the impact of a prolonged low interest rate environment] Since the 2008 financial crisis, much of the world has lived in a low interest rate environment. Low interest rates may be justified from a monetary perspective. But retirees and those in the later stages of their careers bear a substantial cost. Let’s take a look. Financial advisors recommend that workers approaching retirement should gradually lower their risk exposure to stocks by rebalancing retirement savings toward safe, fixed return investments such as U.S. Treasury bonds. Though U.S. Treasuries are indeed safe, the returns … Continue reading "Low Interest Rates Equal High Costs for Retirement Savers"

Don’t Wait for a Difficult Time to Start Thinking About Life Insurance

According to a recent survey by LIMRA and Life Happens, if faced with the loss of an income-earner, 35 percent of U.S. households would experience financial adversity within one month. Almost half would face financial hardship within one year. Clearly, adequate life insurance coverage would address that problem. But less than 60 percent of Americans have coverage. And most of those with coverage don’t have enough. The same survey also found that, despite the obvious need, Americans pay less attention to mortality-related financial concerns than health coverage or attaining savings goals. Inevitably, life insurance ends up at the bottom of … Continue reading "Don’t Wait for a Difficult Time to Start Thinking About Life Insurance"

Life Insurers Help Ease the Burden on Unpaid Caregivers

According to the Department of Health and Human Services, 59% of seniors will receive unpaid care during their lives, typically for about a year, from a family member. Currently, there are about 34 million unpaid caregivers in the United States who care for someone 50 or older. Helping people take care of the things that matter most is the American Council of Life Insurers’ (ACLI) most critical mission. Paid family medical leave (PFML) through short-term disability benefits and long-term care insurance are vital protections that help individuals and families care for themselves and those they care about most. In fact, … Continue reading "Life Insurers Help Ease the Burden on Unpaid Caregivers"

Why it’s Important to Start Saving Early

According to the Federal Reserve, only 42 percent of American households headed by someone younger than age 30 have any retirement savings. By some estimates only 5 percent of millennials are saving adequately. Retirement saving among younger workers often falls short because many lack access to workplace plans. Younger workers also face multiple financial demands that compete with retirement saving including student loans, car loans, building an emergency fund or saving for a house. By the time heads of households reach age 50 things look somewhat better. About two-thirds of households headed by a 50- to-54-year-old have some retirement savings, … Continue reading "Why it’s Important to Start Saving Early"