What age are people debt free?
The Standard Route is what credit companies and lenders recommend. If this is the graduate's choice, he or she will be debt free around the age of 58. It will take a total of 36 years to complete. It's a whole lot of time but it's the standard for a lot of people.
“Shark Tank” investor Kevin O'Leary has said the ideal age to be debt-free is 45, especially if you want to retire by age 60. Being debt-free — including paying off your mortgage — by your mid-40s puts you on the early path toward success, O'Leary argued.
Analysis of the debt share in the U.S. shows that people aged 40-49 hold the largest amount of debt at $4.21 trillion in total. People aged 50-59 have the most credit card debt in total at $0.21 trillion, and people aged 30-39 have the most student loan debt at $0.5 trillion.
But with nearly two-thirds of retirement-age Americans having paid off their mortgages, it means that the average age they have gotten rid of that debt is likely in their early 60s. Stats from 538.com, for example, suggest the age is around 63.
Generation | Average total debt (2023) | Average total debt (2022) |
---|---|---|
Gen Z (18-26) | $29,820 | $25,851 |
Millenial (27-42) | $125,047 | $115,784 |
Gen X (43-57) | $157,556 | $154,658 |
Baby Boomer (58-77) | $94,880 | $96,087 |
Between the ages of 55 and 64, many Americans start to think about retirement. But among heads of household who have debt and are in this age bracket, average debt levels stand at $145,740. They might have assets in excess of this debt, but they might have negative net worth.
Here's the average debt balances by age group: Gen Z (ages 18 to 23): $9,593. Millennials (ages 24 to 39): $78,396. Gen X (ages 40 to 55): $135,841.
Age Group | Average Debt | Delinquency Rate |
---|---|---|
36-45 | $26,048 | 1.11% |
46-55 | $32,508 | 0.83% |
56-65 | $26,628 | 0.74% |
65+ | $14,338 | 0.87% |
Debt-to-income ratio is your monthly debt obligations compared to your gross monthly income (before taxes), expressed as a percentage. A good debt-to-income ratio is less than or equal to 36%. Any debt-to-income ratio above 43% is considered to be too much debt.
How Many Americans Are Living Paycheck to Paycheck? A 2023 survey conducted by Payroll.org highlighted that 78% of Americans live paycheck to paycheck, a 6% increase from the previous year. In other words, more than three-quarters of Americans struggle to save or invest after paying for their monthly expenses.
Is being debt free the new rich?
Myth 1: Being debt-free means being rich.
A common misconception is equating a lack of debt with wealth. Having debt simply means that you owe money to creditors. Being debt-free often indicates sound financial management, not necessarily an overflowing bank account.
Most have paid off their mortgages. In 2020, 58% of the state's equity millionaires owned their homes free and clear. Statewide, there has been a dramatic rise in the number of Californians who have paid off their mortgages, from 1.6 million households in 2000 to 2.4 million in 2020.
Age by decade | Average net worth | Median net worth |
---|---|---|
40s | $713,796 | $126,881 |
50s | $1,310,775 | $292,085 |
60s | $1,634,724 | $454,489 |
70s | $1,588,886 | $378,018 |
“That's because the best balance transfer and personal loan terms are reserved for people with strong credit scores. $20,000 is a lot of credit card debt and it sounds like you're having trouble making progress,” says Rossman.
There's no specific definition of “a lot of debt” — $10,000 might be a high amount of debt to one person, for example, but a very manageable debt for someone else. Calculating your debt-to-income (DTI) ratio gives you a rough idea.
Around 23% of Americans are debt free, according to the most recent data available from the Federal Reserve. That figure factors in every type of debt, from credit card balances and student loans to mortgages, car loans and more. The exact definition of debt free can vary, though, depending on whom you ask.
As such, having to make debt payments as a retiree could constitute a major strain. Unfortunately, it's a strain many people risk dealing with. A recent Nationwide study finds that Americans of retirement age have an average of $70,000 in debt. And that's not the most comforting piece of data.
It's no wonder just 23% of Americans say they live debt free, according to the Federal Reserve.
Fewer than one quarter of American households live debt-free. Learning ways to tackle debt can help you get a handle on your finances.
Credello: Studies show that Millennials often have debt. The average amount is almost $30K. Some have more, while others have less, but it's a sobering number. There are actions you can take if you're a Millennial and you're carrying this much debt.
How much debt is unhealthy?
Key Takeaways
If you cannot afford to pay your minimum debt payments, your debt amount is unreasonable. The 28/36 rule states that no more than 28% of a household's gross income should be spent on housing and no more than 36% on housing plus other debt.
Gen Z (up to age 26): 20.8% have no loan, 72.4% have one loan, 6.3% have two loans; average monthly payment is $429. Millennials (27-42): 36.8% have no auto loan, 52.9% have one, 9.3% have two; average monthly payment is $547.
The general rule of thumb is that you shouldn't spend more than 10 percent of your take-home income on credit card debt.
$5,000 in credit card debt can be quite costly in the long run. That's especially the case if you only make minimum payments each month. However, you don't have to accept decades of credit card debt. There are a few things you can do to pay your debt off faster - potentially saving thousands of dollars in the process.
Credit card debt in America by the numbers
In short, that amounts to an average balance of $5,733 per cardholder. Eye-watering, to say the least–and the fact that many of us carry no balances makes this statistical average even more alarming.
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