Baby boomers are reaching the age of 65 and retirement is staring them right in the face. While it might seem like yesterday that you bought your first house and started having children. As your children grew up you decided to pay for new televisions, your parents medical bills and helping your kids through college, you did all of this instead of contributing to debtyour retirement. You took on more debt than you can afford and now retirement is here and you don’t have enough money. It probably doesn’t surprise you to find that baby boomers have the highest debt.
Welcome to Retirement
That may sound like an isolated incident but it is far more normal than you might think. Baby boomers are reaching the age of 65 at a rate of 10,000 new retirees everyday. Most of them don’t have the financial resources to live on and this is a new situation that has been faced away by retirees ever before. Here is a video showing how unprepared boomers are for retirement.
Baby Boomer Debt is Rising
A report that was published by the Federal Reserve Bank of New York claimed that those nearing retirement have 47% more mortgage debt and 29% more auto loan debt than they had in 2003. This is even after adjusting for inflation. They are taking equity from their homes and moving into bigger houses leaving them with more and more mortgage debt running into retirement.
Millennials and Their Debts
If you look at the statistics prior to the debt crisis, back then it was younger borrowers that had weaker credit, slow payment history and higher debt balances. They were buying cars, homes and spending on credit cards. Now with credit requirements being more strict, millennials faces different financial challenges. Today a 30 year old is far more likely to carry student loan debt rather than having credit card or mortgage debt.
Baby Boomers and the Credit Crisis
Baby boomers went into the credit crisis with far more assets, stable incomes and stronger credit scores. This gave them the ability to add debt that was largely unavailable to the average person. Retirement age is right around the corner, figuring out how to pay off this debt is becoming a problem. In 2015 alone there was a rise in debt balance of more than $50 billion dollars bringing consumer debt to a whopping $12.1 trillion dollars. The previous two years saw increases as well, but mortgage debt remains the same, consumer debt is on the rise.
With rising debt delinquencies have risen at the same time. The scary thing we all need to worry about is what happens to the rate of delinquencies as baby boomers leave the workforce and their income decreases dramatically? Baby boomer debt can serve as a lesson to those looking into the future and preparing for their own retirement. Be careful of the debt you incur and contribute to your retirement fund early before it is too late.