A recent Federal Reserve report contains some disturbing news about personal debt trends in the U.S. First, total consumer debt is at its highest level since 2011. ($11.5 trillion if you like to read large numbers!) Even worse, the level of consumer debt (mortgages, car loans, student loans and credit card debt) increased by 2.1% during the last quarter of 2013. That’s the fastest rate of increase since the third quarter of 2007. Do you remember what happened shortly after that? I sure do, which is why I am so reluctant to trust the equity markets with my retirement money.
I don’t like using detailed budgets because of the time involved in monitoring and entering expenses in multiple categories. Using a detailed budget also conflicts with my continuing goal to simplify my life. On the other hand, I like to know and confirm that my pre-retirement outgo is less than my income. That brings a peace of mind that is important to my “big picture” goal of increasing my net worth while I am still in the accumulation phase of retirement planning.
Forbes likes to publish online slide shows in the personal finance domain. A recent slide show topic: “10 Terrible Pieces of Retirement Advice.” I read it and take issue with some of it. Let’s see if you agree or disagree with Forbes or with me.
We are re-financing our mortgage again. In 2010 we refinanced to an adjustable rate mortgage at 3.875% for 7 years with a 30 year amortization. Recently I began investigating improving this because market rates continued to fall. This investigation has paid off so we are now going through another refinancing.
After more than two decades as customers, Mrs. P and I dropped Bank of America completely – including mortgages – in 2010. Even if we hadn’t changed then, BOA’s announcement that it will begin charging a monthly fee for using a debit card would have caused me to dump them now. Citi is moving in the same direction with more fees and all of the other big banks are sure to follow.
The news continues to be bad about folks who are close to retirement age and their debts. It seems that some boomers are just slow to understand that the more they borrow now, the longer they will have to work to pay it off, if they can keep working. I don’t get it. Maybe some of you can explain it to me, after considering the recent statistics.
Much continues to be written about the use of reverse mortgages as a source of retirement income. Also, reverse mortgage products are aggressively promoted by the companies that offer them. That by itself should raise a red flag for those considering them. With so much invested in marketing these products, you have to suspect that a reverse mortgage is a much better deal for the lender than for the homeowner-retiree. That means, of course, that they are a very expensive way to generate retirement income.
Condominiums have a lot of appeal to some retirees and baby boomers looking to downsize. We are brand new condo owners ourselves. I’m not going to review in this post all of the potential benefits and drawbacks of condominium living, because we are still learning. So far, so good for us. However, other potential condo buyers out there need to be aware of new mortgage lending standards being applied.
What is financial success? The American consumer’s definition of financial success seems to be changing by year and varying by age. That’s what broker TD Ameritrade learned from a recent survey. [Read more...]