Personal finance weekly news roundup November 16, 2024 ~ Credit Sesame

Credit Sesame’s personal finance news roundup November 16, 2024. Stories, news, politics and events impacting personal finance during the past week.

50% of retirees find retirement savings inadequate

An Employee Benefit Research Institute survey found that half of retirees between 62 and 75 saved less than they needed for retirement. About a third say they saved the right amount, and 17% said they saved more than needed. 31% said spending is higher than they can afford, up from 27% in 2022 and 17% in 2020. The shortfall of savings has driven growing numbers of retirees into credit card debt. 68% of retirees surveyed said they owe credit card debt, up from 40% in 2022 to 43% in 2020. See summary at EBRI.org.

Consumer debt grew faster pace in Q3 2024

Non-mortgage consumer debt grew at a seasonally adjusted annual pace of 3.2% during the third quarter of 2024. That was the fastest growth rate this year and faster than the overall growth for 2023. This faster pace was fueled by a 6.5% growth rate in July. The annual pace of growth had slowed to 1.4% by September. In a departure from the trend of recent years, consumers took on nonrevolving debt faster than revolving debt. Nonrevolving debt grew at a 3.4% pace during the third quarter, compared to 2.8% for revolving debt. This is significant because most revolving debt is in credit cards, which charge higher interest rates than most other forms of consumer debt. See report at FederalReserve.gov.

Over 75% middle-income Americans save for retirement

A new study by the Principal Financial Group found that 77% of Americans earning between $50,000 and $99,999 are saving for retirement. Among these savers, the average saving rate is 7.8% of income. That doesn’t include any employer-matching contributions that may add to that percentage. Depending on the size of those matching contributions, the 7.8% of income employees set aside falls short of the recommended target of 15%. Worse, 30% of middle-income Americans report taking money out of their retirement plans to deal with a financial setback. See article at Morningstar.com.

Consumer credit delinquencies continue to rise

Delinquency rates for all major types of consumer credit except student loans rose during the third quarter of 2024. The percentage of balances that are more than 90 days overdue rose for mortgages, HELOCs, auto loans, and credit cards. The overall consumer debt rose by $147 billion during the quarter to $17.943 trillion. That represents the highest total ever. The amount owed in each individual category of consumer debt rose during the third quarter. See report at NewYorkFed.org. 

Inflation continues to rise at moderate pace

The Consumer Price Index (CPI) rose by 0.2% in October. That was the fourth consecutive month that the CPI rose by that amount. 0.2% represents an annual pace slightly below the 2.6% increase over the past 12 months. More than half of October’s increase was attributed to a 0.4% rise in shelter cost, the CPI’s largest single component. A 1% decline in energy costs, including a 4.6% drop in the cost of fuel oil, helped keep inflation under control in October. See CPI report at BLS.gov. 

Credit card approval standards continue to tighten

Some banks have reported tightening standards for approving consumer credit cards over the past three months, while none have reported loosening those standards. 16.3% of banks reported tightening those standards somewhat, while 2.0% reported tightening them considerably. According to the Federal Reserve’s latest Senior Loan Officer Opinion Survey, the remaining banks reported leaving standards unchanged. This trend has seen more banks tightening standards than loosening them in recent years. See SLOOS report at FederalReserve.gov. 

Consumers spending plans exceed income growth

According to the October 2024 Survey of Consumer Expectations from the Federal Reserve Bank of New York, consumers expect to increase spending by more than any income increase. Household spending is expected to grow by 4.9% over the next year, compared to 3.0% for household incomes. Despite this, consumers became slightly more optimistic about being able to make their debt payments. 13.9% of consumers expect to miss a debt payment over the next three months, a decline of 0.3% from the prior month. However, this percentage is still above the average of 12.6% for the past 12 months. See details at NewYorkFed.org.  

Mortgage rates pause after 6-week climb

30-year mortgage rates eased by 0.1% last week after rising for 6 weeks. 15-year mortgage rates fell by the same amount. 30-year rates now stand at 6.78%, while 15-year rates are at 5.99%. See mortgage rate update at FreddieMac.com.

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