Why boomer debt has soared
A new Census Bureau report also shows a sharp increase in the debt load among older retirees -- at a time when they should optimally be debt-free.
This post comes from Matthew Heimer at partner site MarketWatch.
The Census Bureau released a new study today that measures changes in U.S. household debt between 2000 and 2011, and the numbers offer some insight into the financial pressures that baby boomers face as they transition into retirement.
Among the potentially discomfiting figures in the report: Average household debt for people age 55 and over increased faster than for any other age group, and the 65-and-over group was the only category in which the percentage of people holding debt has increased since 2000.
The report identifies some broader trends about the debt that Americans are juggling. Overall, fewer households carried debt in 2011 (69%) than in 2000 (74%).
We're much less likely to hold credit card debt than we used to be: The percentage of households carrying a balance fell from 51% in 2000 to 38% in 2011. On the other hand, what the Census Bureau labels as "other unsecured debt," a category that includes medical bills and student loans, is up sharply, with 19% of households now holding it, up from 11% in 2000.
That unsecured debt is a big burden for younger households -- particularly student debt, which has raced ahead far faster than wages and salaries have.
Medical debt grows for retirees
The medical elements of that category, meanwhile, are part of what's weighing down retirees. The median amount of "other debt" held by people over 65 has more than doubled since 2000, to $4,000 today.
Overall, 44% of 65-plus households hold at least some debt, and their median household debt is $26,000 -- also more than double the 2000 level in inflation-adjusted dollars.
The biggest debt factor for most households, including those older ones, remains mortgages and home-equity debt, which accounts for about 78% of all household debt. In part as a legacy of the price inflation and overspending that came with the real-estate bubble, Americans are now much more likely than they used to be to carry mortgage debt when they retire.
That's undoubtedly part of the burden for those baby boomers in the age 55-to-64 category: The median household debt in that age group is $70,000, up 64% from 2000.
Of course, those younger boomers are also juggling medical bills and, often, student debt and other expenses they've shouldered for their kids. The data shows a boom there, too: The "other debt" burden for 55- to 64-year-olds reached $8,688 in 2011, more than triple the level from 2000.
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Why is this so hard to understand. Retirees who planned well and responsibly and voluntarily retired had a very common plan. Move their assets to a low risk enviroment assuming a 3% return which had been the average for decades. Budget distributions and add Social Security. But the Fed in its' wisdom has decided to penalize savers to push people into a risky market, further enrich the thieves on Wall Street and screw the old folks. Yes, it is that simple. Many of those retirees have that $70,000 debt load because that is about the interest they would have earned in the years that Bernanke has screwed with interest rates and accomplished nothing by it.
Now, to top it off, the politicians want to label SS and Medicare recipients deadbeats.
A Christian country my ****. One of the most ignored commandments is "Honor thy father and thy mother".
I'll have my house paid off next year. I'm 34, a single parent, and make less than $50,000 a year. I've already paid off more than $110,000 in debt over the last 5 years, and I put 15% into retirement.
I live well below my means, and make sure my family is taken care of first.
if you're willing to say NO once in a while you can get ahead, and stay ahead
Too bad many people thought they'd have a job forever and that inflation would some how save them.
Overspend, live beyond your means, run up debt and your retirement will probably suck.
Too bad schools don't teach simple economics to our young kids. Hope they learn from others mistakes.
The 3 most important things you must do when gettig ready to retire are: 1. Pay off your house. 2. Pay off your house, and 3. You really must pay off your house. You will sleep a lot better.
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