SHOW NOTES: 2018-11-29 MiM

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Last Week’s Question of the Week: What is the personal savings rate for Americans in 2018 expected to be around?

ANSWER: The personal savings rate for Americans in 2018 is expected to be around 3.72%.

HOST: I know you work with people concerning their retirement planning, but again, it sounds like we all need to get a handle on our debt and savings at the same time?

KLAAS FINANCIAL: Yes, we want to discuss debt and its impact, and we are going to tell you the take-away for today’s show right out of the gate:

The take-away from today’s show, baby boomers and everyone else listening, is that you should make retiring debt-free, and even mortgage-free a priority. This needs to be done, at the same time you are still making sure you have saved enough for retirement.

Why? A few weeks ago on our show we talked about the amount of debt the “retiring” demographic (ages 65-74) has is approximately $66,000. Total household debt—a category that includes mortgages, student loans, and car loans along with credit card and other debt—dipped in the wake of the Great Recession, but it has since steadily rebounded since. Overall, Americans’ debt hit a new high of $13 trillion last year, and we are hoping that this demographic eradicates their debt before they retire.

Best first steps towards eliminating debt:

If you don’t have an emergency fund, work on building one. While it may be difficult to save for a rainy day while paying down debt, having an emergency fund can help you avoid tapping credit cards when unexpected expenses come up, such as home or car repairs.

Say No: Think twice about co-signing loans or going into debt to help adult children or grandchildren. While you may feel good about helping in the short-term, if you put yourself in a difficult financial situation, you could end up becoming a financial burden on your family members later.

Set up a plan. Listen to Dave Ramsey if you are unclear as to the importance of this. You may need to change your lifestyle and spending habits which requires that you start today to set realistic goals. but it does mean being both aggressive about paying down your debt, changing your lifestyle and then making sure you start saving on a regular basis. When in doubt, many behavioral finance experts suggest putting the two habits on autopilot.

Pay down debt versus saving for retirement — it depends- on how much and what kind of debt you have and what the interest rate is. There is one exception for this; if you participate in a 401k with a match, you should contribute to the match at the very least (free money!)

HOST: What about borrowing from my retirement account to pay off my debt? And what about rising interest rates? Should we be concerned?

KLAAS FINANCIAL: This is an idea that many people have, but not one we generally support.

Borrowing from your 401k: No, although this may seem like a good idea at first, this is not usually in your best interest. Yes, it’s a low-cost loan. But borrowing money from your 401(k) could create even more problems should you get laid off from your employer. Typically, you have to pay loan off within 60 days of leaving your employer.  If you are under age 59½, you’ll be charged an additional 10% penalty in addition to income taxes for any withdrawals from 401(k) and traditional IRA accounts. Plus, taking out large distributions from a qualified plan could push you into a higher tax bracket.

Another idea is to work longer if you are able. If you plan to retire with debt, especially non-mortgage debt, you may put yourself in a bind. Living on a fixed income and servicing debt is a recipe for disaster. Working full-time or part-time, for as long as you can until you eliminate your debt. Once you eliminate your debt, then you can retire.

Pay your bills on time. Late payments will result in fees that will further increase your debt balances and hurt your credit score.

This is a great time to get everyone up to date with rising interest rates: Be aware!

Credit Card Rates:
The average credit card interest rate for new offers is 19.05% as of the second quarter of 2018, according to WalletHub’s Credit Card Landscape Report. But existing accounts have an average interest rate of 13.08%.

Home Loans:
Today, according to, a 30 yr mtg rate is around 5.10 %; whereas a 15 yr mortgage is around 4.47%.

Auto Loans:
A 5 year new auto loan is hovering around 4.95%.

HOST: What are some tips to help people with achieving retirement security if they have debt today?


Stop: Stop adding to your debt balances. Remove credit cards from your wallet to reduce the temptation to use them on impulse purchases or things you can’t really afford.

Utilize a debt reduction calculator ( to figure out how to extinguish your debt quicker.

Prioritize: Prioritize paying off high-interest credit card debt. Federal Reserve rate hikes can send shockwaves through stock markets and also really crush people with credit cards.

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Catch C.J. Klaas and Maleeah Cuevas on Money in Motion every Thursday on Madison's 1310 WIBA from 8:05-8:35am.