Mitchell said the main reasons for the growing debt appear to be greater spending on housing, larger and more auto loans, and more credit card debt.
Representatives of mutual fund companies, which manage much of the nation’s estimated $4.5 trillion in defined contribution accounts, have long argued that 401(k)s are good retirement vehicles — provided workers save consistently and in large enough amounts, do not raid their retirement money or current expenses, and make wise investment choices.
Many workers are acquiring more debt than retirement savings.
More business news
Senate and House negotiators are closing in on a modest accord that would partially repeal sequester cuts.
Economy-watchers will want to pay attention to the outcome of a regulatory vote on the Volcker rule.
The Dulles-based rocket and satellite company hopes the space station takes its profits to new heights.
More business news
Not only are relatively few people doing those things, but retirement account managers acknowledge that this traditional advice overlooks a crucial part of the picture: People must
pay attention to how much debt they are accumulating in the years before retirement.
“Individuals should consider their full balance sheet and financial picture, which for many households may mean saving for retirement through a 401(k) plan while also paying down student loans, taking out a mortgage to buy a house, or borrowing to send their children to college,” said Mike McNamee, chief public communications officer for the Investment Company Institute, which represents mutual funds that manage half the assets in 401(k)s and IRAs.
Citing the decline in traditional fixed-benefit pensions and the inability of many Americans to save adequately in 401(k)-type accounts, some advocates are calling on the federal government to bolster Social Security benefits or to create a new form of retirement help for future retirees.
But other policymakers are worried about the nation’s long-term debt, leaving them more concerned about finding ways to trim Social Security and other retirement benefits rather than increase them.
Fellowes, the HelloWallet founder, said his research tracked worker behavior before the recession, when many people were blithely taking on debt, and during the years after, when many Americans were working to repair their balance sheets. The report relied heavily on data from the Census Bureau’s Survey of Income and Program Participation as well as the Federal Reserve’s Survey of Consumer Finances.
Mitchell, the Wharton professor, said the debt problem probably would be worse if people were not being encouraged to save for retirement. “Without automatic enrolment in retirement plans, many people would have been deeper in debt and probably facing larger retirement shortfalls than they would have without those automatic saving mechanisms in place,” she said.