4 in 10 Americans aren’t confident their savings will last through retirement — and they may be right if they don’t pay off these 3 debts first

Emma Caplan-FisherSun, February 22, 2026 at 2:00 PM UTC

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4 in 10 Americans fear retirement shortfalls — these three debts could be why.

Retirement confidence, or the measure of a person’s belief that they will be able to live comfortably after their career sunsets, is at a troubling low.

According to the Pew Research Center, 40% of American adults don't feel confident they'll have enough income and assets to last their entire retirement, or feel they won't be able to retire, period (1).

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Only about a quarter express high confidence in their retirement finances.

Even among older adults already in or nearing retirement, confidence remains shaky. Fewer than half of people in their 60s and 70s feel highly confident about their financial future, though that improves to 50% among those 80 and older.

The problem may not just be insufficient savings. It could also be excessive debt creating a lack of preparedness. Carrying high-interest obligations into retirement means fixed income and savings are diverted to creditors instead of supporting your lifestyle.

Three types of debt deserve particular attention: student loans, auto loans and credit card or personal loans.

1. Student loans: The 20-year burden

Student debt doesn't disappear at retirement age. According to Education Data, the average borrower takes 20 years to pay off student loans (2). That means someone who borrowed at 22 might still be making payments at 42 — well into their prime earning years when retirement savings should take priority.

Federal undergrad student loan interest sits at 6.39% for 2025-2026, the highest in 10 years. Graduate rates reach 7.94% to 8.94%. Medical school graduates carry an average debt of $199,220, while law graduates owe approximately $140,870 (2). These professional degree holders face decades of substantial monthly payments.

Alarmingly, 21% of borrowers' balances rise during their first five years of repayment despite making payments. These extended timelines mean less money for retirement contributions during crucial wealth-building years. Someone making monthly payments of $442 on nearly $40,000 in student debt at 6.39% interest needs 10 years to reach a zero balance (2).

2. Auto loans: Rising rates eating into budgets

Vehicle financing has become expensive. According to Experian, average new car loan interest rates hit 6.73% last year, with average monthly payments of $745. Used car buyers face even steeper costs, with rates averaging 11.87% and monthly payments of $521 (3).

Credit scores heavily influence rates. Excellent credit of 78 or higher secures new car loans at around 5.18%, while poor credit between 300-500 faces as high as 15.81%. For used cars, that gap widens from 6.82% to a staggering 21.58%.

The Federal Reserve reports auto loan balances of $1.66 trillion in the third quarter of 2025 (4). With average new car loans totaling $41,720, Americans carry substantial vehicle debt that drains retirement resources. A $40,000 auto loan at 6.73% over six years means paying nearly $9,000 in interest alone, money that could have grown in a retirement account instead.

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3. Credit cards: The retirement killer

Credit card debt represents the most dangerous threat to retirement security because of punishing interest rates and revolving balances.

The Federal Reserve Bank of New York reports credit card balances jumped by $24 billion in the third quarter of 2025, reaching $1.23 trillion — up 5.75% from the previous year (4). According to Federal Reserve data, these balances carry an average interest rate of 20.97% as of November 2025 (5).

Unlike mortgages or student loans, credit card debt offers no tax advantages and builds no equity. Carrying $5,000 in credit card debt at 20% interest costs $1,000 annually just in interest, before your principal balance is reduced.

Why clearing these debts matters

If prospective retirees can pay off these three things before retirement, they may feel more secure in their golden years.

Back to Pew Research's survey, when younger adults were asked what worried them about aging, financial concerns ranked second only to health. Thirty percent cited worries about insufficient retirement funds and rising costs.

The research reveals stark disparities. Among lower-income adults, 57% feel uncertain about retirement finances compared with just 15% of higher-income adults. Debt burdens prevent wealth accumulation, which widens this gap.

Taking action now

If you're carrying these debts, consider these strategies to help clear them:

Target high-interest debt first: Use the avalanche method, which prioritizes credit cards, then auto loans, then student loans, based on interest rates.

Consolidate strategically: Personal loans with lower rates can consolidate credit card debt, reduce interest costs and create fixed timelines.

Refinance when beneficial: Student loan and auto loan refinancing can lower rates for qualified borrowers, though federal student loans may offer protections that private loans don't.

Seek professional guidance: Financial advisors can create individualized strategies that balance debt elimination with retirement savings.

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Article sources

We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.

Pew Research Center (1); Education Data Initiative (2); Experian (3); FRBNY (4); FRBSL (5).

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

Original Article on Source

Source: “AOL Money”