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These may seem like tasks that are more appropriate for different types of financial professional or they even be viewed as “beneath” advisors and wealth managers, but there’s merit in offering clients budgeting and debt reduction services.
Focusing on paring debt, advisors are likely to find a receptive audience because even when excluding mortgage obligations, chances are a fair amount of clients carry some form of debt. That includes automotive, credit card and student loan debt, among others. As of mid-2024, the average American carried $23,317 in non-mortgage debt.
That’s a massive number, particularly when considering it can amount to half or a third of year’s salary for many people. Making matters worse is the point that, depending on the interest rates, it can take 10 to 15 years to eliminate that debt if the borrower merely makes minimum monthly payments.
In some cases, carry such obligations is tenable for some folks with the big “X” factor being employment. A working age person can probably carry some debt for awhile because, well, they’re working. Dealing with debt in retirement is a different ballgame and one that data confirm needs to be addressed.
Retirees Dealing Elevated Debt Levels
The good news is that retirement-age adults in the U.S., specifically the 50 largest metropolitan areas, have average nonmortgage debut of $11,349, or less than half the national average, according to a recent Lending Tree study. Good news part II: getting rid of some of those obligations could prove easy.
“An average of one-third (33.3%) of this debt comes from auto loans, while 31.7% is from credit card balances and 15.6% is from student loans,” notes LendingTree.
The “easy” part (just my opinion) is the auto debt. Advisors can discuss with retired clients their level of automotive obligations, the benefits of downgrading to less expensive models and exactly how much retired couples need two cars, assuming there are two loans on those vehicles.
Regardless of the form of debt that’s most concerning to retired clients, advisors should know that odds are many of these clients are carrying some form of nonmortgage debt. According to LendingTree, 97.1% of retirement age adults contend with automotive, credit card and/or student loan bills.
Geographic Implications
The above statistics, including the 97.1% of retirement age adults carrying debt, are national data points. On a state-by-state basis, the reality is retirees in some states are more likely to want debt-reduction advice than those in other jurisdictions. As LendingTree notes, retirees in the biggest cities in Florida and Texas deal with the highest levels of debt.
However, they’re not the only offenders as San Francisco and San Jose score poorly in terms of high credit card debt among folks that are of retirement age. Likewise, folks of retirement age living in some of the larger cities in the Southeast are grappling with personal loan obligations.
Bottom line: regardless of where an advisor is located, probabilities are high that the advisor has older clients dealing with debt and they want help improving that situation. Be the source of that assistance.
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