A recent report showing that Utah ranks high in average credit card debt comes as disturbing news at a time when people are saving less than they need for retirement and as Congress contemplates tax reform that might end up providing a diminished incentive for people to save more. One reason for a higher-than-normal debt load is the relative youth of the state’s general population, as people tend to focus more on saving for retirement as they age. But there also appears to be a proclivity among many to spend beyond reasonable means, which does not bode well for their future.
A report by the American Bankruptcy Institute says the average Utahn has credit card debt that would take 17 years to pay off with minimum monthly payments. That should shock people into taking stock of their financial situation and formulating an appropriate household budget. But the report shows debt tends to be proportionate to income, meaning people are apt to spend more if they make more, which suggests a lot of people see credit card debt as a routine consequence of day-to-day living.
What they are not seeing is the predicament they are working themselves into come retirement time. Studies show that more than half of all Utahns in the workforce have saved less than $1,000 for retirement, while they are carrying three or four times that much in credit card debt. The arithmetic points to dire personal and social consequences. People will eventually have to rely more on entitlement programs that are under pressure, and that’s not likely to lessen.
As Congress looks at tax reform, it’s disturbing to hear little discussion about the impact of proposals on the nation’s long-term debt and specifically on entitlement programs. It’s also unsettling to hear talk of efforts about potentially reducing the amount of pretax contributions to retirement accounts people can make annually. A new development in the tax reform debate is an effort by Utah Sen. Orrin Hatch to alter the way retirement contributions made by those nearing retirement might be taxed. While the details of the proposal are still not completely clear, on the surface it appears to be a better approach than one that would remove or reduce tax benefits for younger people putting money away for retirement.
There are always pressures and temptations to spend beyond one’s means, and financial institutions are adept at luring consumers into a relationship that binds the credit card holder into a cycle of nearly perpetual debt. It’s easy to flash a card when enticed by a new appliance, vacation travel or the latest high-tech gadget. But short-term gratification can translate into long-term exasperation. High levels of debt make it harder to accumulate sufficient savings for the future. Financial responsibility means making tough choices between what a person believes they need now, as opposed to what they will certainly need down the road. The statistics on credit card debt in Utah show that too many people are choosing not to look ahead, which means they will be behind the curve when it comes to future financial security.