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July 13, 2003 at 08:00 PM
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Americans say they want to pay off debt and save for retirement, but many are not doing enough to ensure their future comfort, according to a survey of 1,000 Americans by the Million Dollar Round Table, Park Ridge, Ill.
Given this fact, financial advisors offered their opinions on working with a client who is in debt.
Thirty percent of respondents identified paying off debt as their top financial priority. Yet, only half of them would use extra income to reduce that debt, MDRT says.
Further, 76% say they feel comfortable with their knowledge of retirement saving, but 35% arent contributing to 401(k)s, IRAs or any other form of retirement investing.
Joseph Sciabica, a certified financial planner with The Guardian Life Insurance Company, New York, says that often when young people are in debt, it is precisely their adherence to contributing to their retirement accounts and other such investment vehicles that helps keep them in debt.
“What I find is that people who have debt dont recognize how to creatively get rid of it. They make decisions and they see the debt as just one aspect of their financial life and dont consider how other aspects can impact it,” he says.
For example, younger people often continue contributing to 401(k)s–accounts they wont likely use for 30 or 40 years–rather than using that money to spend down high-interest credit-card debt, Sciabica says.
“Young people get too caught up in retirement or saving for education when thats too far down the road; they contribute to their 401(k) when they have debt today,” Sciabica says. “Its a matter of first things first and recognizing what makes an impact on finances today,” he says.
Although people with debt arent his most coveted prospects, Sciabica does not turn them away. Instead, in the interview process, he shows them how savings, insurance and debt are interrelated, and develops a strategy that will help them pay off their debt and realize their objectives.
