America’s REAL Debt Crisis

Written By Jason Simpkins

Posted March 16, 2024

For the past four years, economists, journalists, politicians, and even regular folks have struggled to explain why so many people feel like the economy is bad when so much of the data suggests it’s good.

Well, one reason might be that while people are spending money, increasingly, they’re borrowing to do it.

That is, credit card debt in America has increased by $50 billion, or 4.6%, in the past year. 

As a result, Americans collectively are carrying more than $1 trillion of credit card debt for the first time ever. That amounts to an average balance of $5,733 per cardholder.

But that’s not all.

More Americans today are also borrowing from their own future by prematurely dipping into their 401(k) funds.

Per The Wall Street Journal, “Emergency distributions hit back-to-back record highs in 2022 and 2023, according to Vanguard, which administers 401(k)-type accounts for nearly 5 million people and published the data ahead of an annual report scheduled for June.”

Overall, 3.6% of plan participants withdrew emergency distributions from their retirement savings in 2023, up from 2.8% in 2022 and 2% prior to the pandemic. 

The IRS lets you do this only to prevent hardship wrought by medical bills, tuition, or a potential eviction.

As such, “nearly 40% of those who took a hardship distribution last year did so to avoid foreclosure, compared with 36% in 2022,” says the WSJ.

That’s not surprising considering how expensive it’s become to buy a home and pay for a mortgage. (I could run through the data here, too, but I think we’re all aware that record-high home prices and climbing interest rates have put homeownership out of reach for many.)

Additionally, soaring costs for everyday necessities like groceries, child care, and car insurance have also sapped America’s savings.

Unfortunately, though, the penalty for tapping into your retirement plan is stiff, as it incurs a tax charge and a 10% penalty.

And doubly unfortunate is the fact that that money is unlikely to ever make it back into a person’s retirement nest egg. 

Indeed, “credit card debt that moved into serious delinquency amounted to 6.4% in the fourth quarter of 2023, a 59% jump from just over 4% at the end of 2022,” as reported by CNBC.

So if borrowers are falling short on their credit card payments, they’re probably not replacing the money they borrow from their retirement accounts, either. 

This is last-resort borrowing we’re talking about. But people are doing it because higher interest rates have made a 10% charge on early retirement withdrawals look competitive by comparison.

You also don’t have to worry about defaulting to a lender — just falling into poverty when you retire.

This is what the underbelly of America’s “booming” economy looks like.

But the good news is that you don’t have to be a part of it. 

You can generate enough income to satisfy your retirement and furnish your lifestyle without racking up debt, robbing your 401(k), or getting a second a job in the gig economy. 

And Brian Hicks can tell you how.

This here is a link to his free e-book.

It’ll show you exactly how to finance your retirement in a way that lets you live life the way it’s meant to be lived.

Consider it a road map, an investment bible that will help you navigate the chaos, dysfunction, and corruption that surrounds us all — making retirement far harder than it should be.

It’s a quick and easy read that will change your life.

So if you want to ensure that your retirement is anything more than a pipe dream, do yourself a favor and check it out.

Fight on,

Jason Simpkins Signature

Jason Simpkins

Simpkins is the founder and editor of Secret Stock Files, an investment service that focuses on companies with assets — tangible resources and products that can hold and appreciate in value. He covers mining companies, energy companies, defense contractors, dividend payers, commodities, staples, legacies and more…

In 2023 he joined The Wealth Advisory team as a defense market analyst where he reviews and recommends new military and government opportunities that come across his radar, especially those that spin-off healthy, growing income streams. For more on Jason, check out his editor’s page.

Be sure to visit our Angel Investment Research channel on YouTube and tune into Jason’s podcasts.

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