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Debt is something that nearly every American deals with. For some it is difficult to handle. For others, it is easier and they find that they are optimistic when it comes to when they expect that debt to be eliminated. As time goes on, these same Americans start to change their debt-free outlook a little bit.
The average American says they will be free from debt by the age of 53. At least that is what the goal is, according to a recent poll conducted by a well-known credit card comparison group. But as each American ages, their expectation to have a clean slate in the future becomes more and more out of their reach.
Consumer finance experts see Americans that have fairly high incomes. Their incomes indicate that they should be comfortable financially. However, their spending is actually more than their income and they are falling more behind than before because of this increased spending. As a part of the poll, people were asked to predict when they will be free from debt, including credit card debt and mortgage debt. What they found was that 9 percent of Americans expect to never be out of debt. Others predicted their debt freedom to occur around the age of 53.
The most optimistic group was those in the 18 to 24 demographic. They actually predicted that they would be debt-free by the age of 33. As the poll continued through the different demographics, they found that the prediction kept advancing. Those 25 to 34 said that they predict their debt-free age to be 38. Those 35 to 49 years old predicted their debt-free age to be 56. Those 50 to 64 predicted their debt-free age to be 62. Those over the age of 65 predicted their age of debt freedom to be 77.
As those polled became older, so did their predicted age of debt freedom. Overall, Americans tend to be rather optimistic, according to a professor at Golden Gate University. Individuals in the U.S. tend to overestimate how fast they will get out of debt, how fast they will lose weight, and how quickly they will do other things.
Over a 3 day period in May and June, a telephone survey of just over 1,000 adults that was conducted by GfK Roper had a mix of responses from couples and singles, as well as individuals with and without mortgage debt. In the results, there were traces of individuals who had experienced the housing boom and the housing bust. As some of these individuals head into their later years, they expect to drag a lot of payments with them. Among those over the age of 65, around 23 percent of them expect to die before their debts are paid.
This prediction by the older grows is in sync with the research done by the Employee Benefit Research Institute. They found that large mortgage debts are following seniors into their golden years. In February 2013, the Employee Benefit Research Institute found that over fifty percent of individuals 55 to 64 still have a lot of debt and they are taking on even more debt.
Experts say that those in the 55 to 64 demographic would be in better financial condition if they could get their debt under control. Doing so would better prepare them for the days when they will be on a fixed income.
Debt Riddled Retirees
In all reality, the expectations for debt and actual debt do not measure up. Many individuals looking retirement right in the face have debt burdens that are large and they have few working years left to pay it.
Approximately 63 percent of families with a head of household over 55 are still carrying the burden of high debt payments. Their average debt was $75,082 several years ago. That is an increase of around $1,400 three years before that. Housing is the main reason why this has happened, as the house price bubble and borrowing on home equity in the past have increased what people owe on their homes. This fact has caused any hope of paying the debt down to dwindle away.
Those polled who did not have as much debt was not as optimistic as those who had more debt. Oddly, those with less than $1,000 in debt expected to be making payments after they turn 60. It is believed that this gap in expectations has something to do with differences in education and income, as well as debt levels. People who had more than $250,000 in debt were more optimistic about paying their debt off by the age of 60.
Psychologically speaking, this optimism may be tied to the fact that the individuals were optimistic when they piled on the debt. The mindset of "I am going to pay this off" is there, but the payoff doesn't happen. Those that can pay the payments on high amounts of debt also tend to be those with more education and decent paying jobs, so they keep a "bright side" insight when it comes to anything that could potentially weigh them down.
As far as debt elimination, it can be done. Those who are optimistic that they can do it need a plan. Once they establish that plan, they need to be optimistic that they can follow it. It can be a heavy lift for many individuals with a lot of debt. In May 2013, it was found that 40 percent of adults lack a savings account. Many of them don't even have a rainy-day fund. This means they are living paycheck-to-paycheck, so that debt elimination plan needs to be established. At the same time, the building of a savings account needs to be integrated into that plan so that the bills do not fall behind at a bad time.
Optimism can be a person's worst enemy when it comes to racking up debt because they wholeheartedly believe they can pay it off. But without any disposable income to create a savings account with, it can be hard to pay debt down.