The so-called “Baby Boom” generation enjoyed childhood in the era of Leave it to Beaver and came of age with the British Invasion and Woodstock. With those glory days of youth long past, a lot of “Boomers” are now preparing to retire, if not already retired, but a new study shows that debt among American consumers 55 and above is still escalating.
According to Washington, D.C.’s Employee Benefit Research Institute and its “Debt of the Elderly and Near Elderly, 1992-2013” survey, average debt per consumer went down from $80,465 in 2010 to $73,211 in 2013. Total debt payments in relation to income were down from 11.4 percent to 10 percent over the same timeframe.
The study also indicated that there are more older American consumers in debt. 65.4 percent of households where the head of the family was 55 and up and burdened by financial liabilities were recorded in 2013; this is up from the 63.4 percent share in 2010 and the 53.8 percent share in 1992. As for the percentage of families with debt payments exceeding income, that share ticked up from 8.5 percent in 2010 to 9.2 percent in 2013.
What does this mean for older consumers? Simply put, there are more Boomers who may have to take extra care of their home loans and make sure they do not incur any debt they could not handle any further. This could also mean a figurative tightening of the belt. “Percentages of families whose debt payments are excessive relative to their incomes are at or near their highest levels since 1992,” read the report. “Consequently, even more near-elderly and elderly families are likely to find themselves at risk for severe changes in lifestyle after retirement than past generations.”
Mortgage payments, and not credit card debt, were the number one driver, or variable, that caused debt levels to increase significantly between 2010 and 2013. As of two years ago, 39 percent of all families with the head of the household being 55 or older had housing debt; this is a huge increase from the 24 percent share in 1992.
Among those with heads of family in retirement age (65-74), 42 percent of these households had housing debt in 2013. This is a huge jump from the 18 percent of households in 1992. 20 percent of those whose heads of family are 75 or older had mortgage debt in 2013, or double the 10 percent share in 1992.
All this could redound to “either a forced sale (of a primary residence) or limited ability to use any housing equity for funding requirement,” according to the study. And going forward, the Employee Benefit Research Institute believes that Baby Boomers will still have a rough go at things due to the numerous challenges they have to deal with. “This level of debt, along with asset values still recovering from the 2008 recession, will add to the difficulty for many people of this age to save for a retirement that will not run short of money,” said the report.