Baby boomers are the first generation in American history to be entering retirement saddled with debt, including unpaid balances on credit cards.
The financial crisis in 2008 that sent the economy into a recession crippled many baby boomers’ retirement accounts, forcing many to stay in the workforce or significantly alter their retirement lifestyle plans. Now, the oldest of the boomer generation are receiving Social Security checks alongside notices from bill collectors.
According to the report The Plastic Safety Net by public policy organization Demos, Millennial’s (those born after 1980) average credit card debt is $2,982. For those 65+, the average credit card debt is $9,283—and that amount could continue to rise as they age since they have fallen into the trap of financing their lives on credit cards.
The brutal financial reality for baby boomers is that they have entered their supposed golden years during a period when it has become increasingly difficult to build, protect, and grow wealth. Traditionally the highest level of compensation comes from working in your 50s and 60s. These decades used to be a time to increase 401(k) balances and settle into a financially-secure retirement. Instead, if baby boomers were fortunate enough to be employed in a recessionary economy, they often found they were earning less than they had in comparable jobs or assignments before the downturn. If they were unable to find work after being laid off, they may have opted to take Social Security early, which reduced their lifetime payment.
Financial Losses and Burdens
The financial crisis that brought down the stock and housing market was a major blow to baby boomer’s retirement savings. To add to their financial strain, nearly 60% of baby boomers provide financial support to adult children, according to a YEAR report from the National Center for Public Policy.
Many boomers have accepted carrying debt into retirement. A 2012 poll by CIBC bank found that 80% of the generation is not anxious about carrying debt or the amount of it. In addition, CIBC found less concern among the respondents of getting their finances in order to be able to pass on an inheritance to the next generation.
Recent reports have focused heavily on the growing amount of student loan and credit card debt students are graduating college with, but will they learn from their elders and work to shed the debt before entering retirement? After all, they certainly can’t count on an inheritance from boomer-aged parents and grandparent to help them pay down the debt.
Roman Shteyn is co-founder of Credit-Land.com. He frequently writes on credit-related topics.