Individuals who choose to avoid bankruptcy generally will be poorer in retirement, fed study shows.
The Federal Reserve of New York (FRBNY) in a study researching the impact of the bankruptcy reforms put into place in 2005 revealed that trying to avoid bankruptcy has long-term financial penalties.
Amount the financial penalties are the loss of contributions to your retirement over time, which makes for a smaller nest egg come time to exit the rat race. Many people in their attempt to avoid default or bankruptcy will mistakenly opt to either liquidate already accumulated retirement savings at a very high cost or divert monthly retirement contributions to pay debt instead of saving for retirement.
A small diversion of $300 away from retirement towards debt over a five-year period can have an impact of between $170,000 to $1 million, depending on the age of the person and the interest rate projected. The younger the person begins diverting funds from retirement, the greater the positive financial impact on their retirement savings.We are programmed to think paying our debt under any circumstance is the best decision. How the negative financial impact of struggling with debt is clear:
Pay more in higher interest rates due to bad credit and have less access to credit;
And, continued to vulnerability to collections actions including garnishments.
So does bankruptcy sound right to you? The Fed says it might be better choice. Call us today for a free consultation 800-662-8813. As my Dad says, “it is easy to be poor when you are young. No so easy when you are old.”
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Keyword: Norfolk Bankrupcy, Hampton, Suffolk, Yorktown.