{"id":12673,"date":"2023-09-05T17:11:20","date_gmt":"2023-09-05T17:11:20","guid":{"rendered":"https:\/\/zacksim.com\/blog\/?p=12673"},"modified":"2024-01-10T17:15:10","modified_gmt":"2024-01-10T17:15:10","slug":"consumer-debt-is-rising-will-it-be-like-2008","status":"publish","type":"post","link":"https:\/\/zacksim.com\/blog\/consumer-debt-is-rising-will-it-be-like-2008\/","title":{"rendered":"Consumer Debt Is Rising\u2014Will It Be Like 2008?"},"content":{"rendered":"\n

Will and Judith M. from Appleton, WI ask:<\/em> Hi Mitch, we\u2019ve been seeing some stories about rising debt levels for U.S. households. Credit cards, mortgages, student loans, etc. are all going way up, and we\u2019re a bit worried about the impacts of mass defaults. Eerily reminds us of 2008. What\u2019s your take? Thank you.<\/p>\n\n\n\n

Mitch\u2019s Response:<\/strong><\/p>\n\n\n\n

Thank you for sending in your question. There is much debate in macroeconomic circles about the health of the U.S. consumer and households. On one hand, retail spending has remained steady despite higher prices, and wages have gone up. On the other, we\u2019re starting to see signs of strain on consumer finances in the form of rising delinquencies (i.e., being 30+ days late on a debt payment).1<\/sup><\/p>\n\n\n\n

The chart below shows the delinquency rate of single-family mortgages (purple), consumer loans (green), credit card loans (red), and all loans (blue). All loans include business loans, commercial real estate loans, and others, and can be viewed as an aggregate economic view of how loans are performing.<\/p>\n\n\n\n

Spending Money in Retirement<\/a><\/span><\/strong><\/p>\n\n\n\n

Retirement means living the life you want, in the place you want, with activities you enjoy. Of course, making all that happen means spending some of the money you\u2019ve worked so hard to accumulate.<\/p>\n\n\n\n

If you want to ensure your money will last, it’s essential to understand some strategies and best practices. Our free guide, 4 Strategies for Spending Money in Retirement2<\/sup><\/a><\/span><\/strong><\/em> offers some guidelines to help ensure your retirement nest egg lasts as long as possible. You\u2019ll also get insight on:<\/p>\n\n\n\n

\u2022 Spending 101: Understanding Tax Buckets
\u2022 The 4% Rule
\u2022 Dynamic Spending with the 5% Rule
\u2022 And more\u2026<\/p>\n\n\n\n

If you have $500,000 or more to invest, download our guide 4 Strategies for Spending Money in Retirement.<\/em>2<\/sup> Simply click on the link below to get your copy today!<\/p>\n\n\n\n

Download Zacks Guide, 4 Strategies for Spending Money in Retirement2<\/sup><\/em><\/a><\/span><\/strong><\/p>\n\n\n\n

\"\"
Source: Federal Reserve Bank of St. Louis3<\/sup><\/strong><\/figcaption><\/figure>\n\n\n\n

In my view, there\u2019s a clear takeaway from the chart above: households are starting to feel some pressure in consumer loans and credit card loans, but mortgages (benefiting from low rates) and the broad economy are holding up well. The uptick in credit card, auto loan, and other consumer loan delinquencies is certainly worth keeping an eye on here. According to the Federal Reserve Bank of New York, the percentage of credit-card and auto-loan balances transitioning into delinquency is happening at a faster pace than we saw in 2019, which while noteworthy is also arguably not grounds for sounding the alarm. The economy was in good shape in 2019.<\/p>\n\n\n\n

There are a few reasons I don\u2019t think it\u2019s time to worry just yet. The first is that the economy remains flush with jobs and wages are higher, both of which support household finances. The second is that bank account balances across various income groups in the U.S. are about 30% higher than they averaged in 2019, according to the Bank of America Institute. Even though inflation is eating into savings to a certain degree, households are also bringing home more income. A final factor to note is that a wide majority of U.S. homeowners are benefiting from the 10+ year period of ultralow interest rates, which followed the 2008 Global Financial Crisis and the 2020 pandemic. A majority of homeowners purchased or were able to refinance at low rates, which translates to relatively low mortgage payments. According to mortgage data firm Black Knight, the average monthly principal and interest payment for households was $1,355 in June, which is just 21% of median household income \u2013 near a record low.<\/p>\n\n\n\n

One factor we\u2019ll be watching this fall is the resumption of student loan payments, which are scheduled to resume in October. The impact of these monthly payments returning could mean less spending capacity for some households and also the possibility of falling behind on other payments, which could see the delinquency rate tick even higher. Time will tell, but I don\u2019t think you need to be worried about a return to 2008.<\/p>\n\n\n\n

As investors await the outcome of the market \u2013 I also recommend taking a look at your retirement plan.<\/p>\n\n\n\n

Today, I am offering our exclusive guide, 4 Strategies for Spending Money in Retirement4<\/sup><\/a><\/strong><\/span><\/em>, to all Mitch\u2019s Mailbox readers. In this guide, we explore some effective strategies and best practices that investors should consider when developing a retirement spending plan. You\u2019ll get insight on:<\/p>\n\n\n\n

\u2022 Spending 101: Understanding Tax Buckets
\u2022 The 4% Rule
\u2022 Dynamic Spending with the 5% Rule
\u2022 And more\u2026<\/p>\n\n\n\n

If you have $500,000 or more to invest and are ready to learn more, click on the link below to get your copy today!<\/p>\n","protected":false},"excerpt":{"rendered":"

As debt levels rise and delinquencies among mortgages, credit cards and other loans rise, Mitch looks at the chances for a repeat of the 2008 financial crisis. <\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[66,71],"tags":[],"class_list":["post-12673","post","type-post","status-publish","format-standard","hentry","category-mitchs-mailbox","category-private-client-group"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/12673","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=12673"}],"version-history":[{"count":2,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/12673\/revisions"}],"predecessor-version":[{"id":12676,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/12673\/revisions\/12676"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=12673"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=12673"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=12673"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}