Be debt-free when you retire

WHEN PEOPLE talk about retirement, it's often in the context of how much money they have to save for their senior years.

People know or have heard enough that they need to factor into their retirement plan their cash savings, investment account holdings, Social Security and, if fortunate, any pension benefit. But what's often not emphasized enough is the importance of your family balance sheet.

I thought about this as I read a new report from the Government Accountability Office about the increase in the number of older Americans who drag student-loan debt into their senior years.

Although the percentage of seniors with student loans is low, I'm still troubled by the growth of debt among this group.

The percentage of households headed by people 65 to 74 with student loans increased from 1 percent in 2004 to about 4 percent in 2010, the GAO said. That's a big jump especially when you put it in dollar figures. Outstanding federal student debt for this age group grew from about $2.8 billion in 2005 to about $18.2 billion in 2013. Much of the debt is theirs - not something incurred on behalf of their children. Additionally, the size of their loans is comparable to that of younger age groups.

Here's another sad fact: A higher rate of borrowers 65 and older have defaulted federal student loans. And for those of you who don't know, a portion of their Social Security disability, retirement or survivor benefits can be snatched to pay off the loan.

From 2002 through 2013, the number of individuals whose Social Security benefits were offset to pay student-loan debt increased from about 31,000 to 155,000.

But it's not just student-loan debt that's worrisome. Older Americans are still carrying mortgages, car loans and credit-card debt at a time they should be rid of these obligations.

About 29 percent have mortgages and 27 percent carry credit-card debt, the GAO reported. For those 65 and older, the overall debt ratio - total debt as a percentage of household assets - doubled from 1998 to 2010, rising from 6.4 percent to 13 percent. The percentage may not seem like a lot, but if you're mostly relying on Social Security any amount of debt can be a burden.

National Public Radio has been holding panel discussions around the country, inviting multigenerational audiences to talk about money. I've joined the tour in a few cities along with some other experts. It's been a great window into the concerns people have especially about retirement. During the most recent tour of "Family Matters: Your Financial Lifetime" hosted by NPR's Robert Smith from "Planet Money" and David Greene of NPR's "Morning Edition," we spent a fair amount of time discussing retirement issues.

During one session, at the University of Rochester in upstate New York, people expressed a lot of anxiety - even those who have been diligently saving and, barring some great financial crisis, will be OK in retirement. Consider this finding shared by one of the panelists, Erin Currier, who directs projects on family financial security and mobility at the Pew Charitable Trusts. Currier said early boomers - people born between 1946 and 1955 - are in better financial shape than the age groups that came before them. Early boomers have higher overall wealth than Depression babies (born between 1926 and 1935) or war babies (born between 1936 and 1945) had at the same ages, according to data from Pew.

The key is net worth, Currier said.

You want far more assets than liabilities. So, can I help you put some of your fears at bay?

When planning for retirement, focus also on your cash flow, recommended Louis Barajas, a California-based wealth manager and certified financial planner, who was on the panel in Rochester.

Barajas said he tries to get his clients to rethink their financial decisions leading up to retirement.

"It's about sitting down and projecting how to get the house paid off before they retire," he said. "It's about how to get the school loans paid off and how can they sacrifice now to pay off long-term debt that will affect them in retirement."

That's right. Retirement planning is also about setting yourself up to have the least amount of debt and expenses possible. Because the truth is that many people won't amass millions for retirement. They won't even come close.

Retirement planning is as much about how much you got going out as you have coming in.