It seems increasingly likely that most baby boomers will retire with heavy debt. According to the survey of Employee Benefit Research Institute, almost 44% of baby boomers reported being concerned about their household debt.

Since indebtedness plagues every generation to some degree, it is important to know the distinction between good or bad debt.

So the question is: what differentiates a good debt from a bad debt?

When we talk about good debt, it refers to the debt which is more purposeful. The borrower assumes this debt in pursuit of some crucial financial or life objective. This may include a college degree or homeownership. This type of debt also offers the borrower a rather long-term potential to earn money exceeding the borrowed money. Nevertheless, good debt comprises both of these characteristics.

On the other hand, bad debt is taken by a person for a relatively trivial reason. These debts are usually provided through credit cards. These debts may charge the borrower heavy interest.

However, considering the different kinds of indebtedness, and as executive director of wealth management at Morgan StanleyThomas Anderson, identifies these debt types;

  • An oppressive debt is a debt, which is obtained at 10% or more rate of interest. A payday loan is an example of this type of debt.
  • Then there is working debt. This debt is obtained at a much lower interest rate and can be tax-deductible, such as mortgage payments. This debt is typically worth carrying.

Anderson introduces the idea of enriching debt. This is a more strategic debt, which is obtained based on the certainty that this may get erased at any time. Regardless what kind of debt we consider, households today lack a budget. Or perhaps your budget is reliant upon things going well. No matter what the case may be, all of these open doors for bad debt accumulation.

Debt Management in Your 50s

For an individual, the ages of 50 to 59 are the peak time for earning. Indeed, this can also lead to indebtedness, considering the flexible movement of money for things. This may start from mortgage payments to child support. This indicates that many baby boomers are likely to retire with debt. Hence, it creates a need for their retirement income to be large enough to cover these obligations.

Do you know the debt you are carrying right now?

Regardless of whether you want to retire debt-free or you are fine living with a debt, once you sell off your business or finish your career, you must maintain the financial capacity to either address or eliminate the debt. For this, you ought to obtain the assistance of a financial advisor. This will help you in figuring out your possible options and making decisions, which will help in overcoming this debt burden.

Griffin Financial provides knowledgeable counsel when it comes to handling your debt alongside retirement or other financial needs and opportunities on your horizon.  Call us at Griffin Financial LLC to discuss your situation today at (714) 912-4764.