Northwestern Mutual Sees Fear of Debt Crowding Out Savings

By Allison Bell

News September 19, 2023 at 03:06 PM

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Americans seem to be getting more serious about eliminating debt, and that could be holding down their retirement savings.

Northwestern Mutual found evidence of crowdout when it conducted an online survey of 2,740 U.S. residents ages 18 and older earlier this year.

The percentage of participants who said they had non-mortgage debt fell to 67% this year, from 68% in 2019, before the COVID-19 pandemic began.

Over that same period, the non-mortgage debt load of the average participant with debt fell to $21,800, from $29,803.

What It Means

For a typical survey participant, over the past four years, about $8,000 in cash that could have flowed into an IRA, a 401(k) plan or an annuity was used to pay down debt.

Priorities

This year, about 61% of the Northwestern Mutual survey participants said that, if they had a choice between saving money and using extra cash to pay down debt, they would pay down debt.

When the company conducted a similar survey in 2022, it found that 57% of the participants said they would use extra money to pay down debt and 43% to save.

About 20% of the participants in the 2022 survey said they had delayed saving for retirement because of debt, and 8% said they had delayed getting married or having children because of debt.

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