In retirement, Baby Boomers will face a new set of challenges, including longer lives and more years to fund in retirement. They are entering the golden years with more debt than any previous generation. Mortgage payments, credit cards, and student loans are still being paid. These dynamics leave less income for leisure activities and a lower level of financial security, not to mention added stress.
Where is The Income?
Social security was only designed as basic income protection and was never meant to provide a meaningful retirement. Today’s retirees face declining pension plans and increased responsibility for funding their own retirements. This shift came throughout their career and have left many short of retirement funds to rely on. This, combined with the increased debt load, is leaving Baby Boomers rediscovering new ways to fund their retirement dreams.
Low savings and retirement balances have plagued workers due to the shift from pension plans to self-funded 401k Plans. The rising cost of living and stagnant wages combined with a volatile market have also contributed to the massive shortfalls. These factors are forcing many to rethink the traditional retirement age and find other avenues of income. Working longer in a current job, taking on part-time work, and even starting a new business are popular options that give up and coming seniors a way to contribute while still enjoying the last quarter of their lives.
What is The Debt?
A recent report by the Federal Reserve Board of New York estimated that retirees are carrying nearly double the mortgage balances than those in 2003. In the last 12 years, auto debt has also grown by nearly 30%, resulting in seniors carrying record levels of debt into retirement.
Instead of celebrating a mortgage payoff, refinances, trading up to larger homes, and living beyond their income has left seniors with less financial security than those who have gone before. Instead of living debt free on a pension and social security, seniors are now facing smaller financial reserves and higher debts, forcing them to re-evaluate what their personal retirement will look like.
Age and Debt
Prior to the Great Recession from 2008 to 2010, younger families carried the bulk of the debt. Young families were buying homes and cars as they began their career and started families. They had a weaker payment record and lower payment histories, but credit became easy and they enjoyed the benefits credit granted. The high level of spending early in a career was often followed by more conservative spending in order to pay down debt as careers advanced and income grew.
The average 30-year-old today is carrying less overall debt than in 2003 but triple the student loan debt. The overall numbers are lower because of delays in home purchases and other forms of credit being put off due to high student loan balances.
Those 50 years and older went into the debt crisis with larger assets and stronger credit records which enabled them to continue to access credit even as the economy declined. Now with retirement just around the corner, they are faced with less time to pay off debt before leaving their employment.
The Federal Reserve showed an increase in debt balances of 51 billion dollars in the fourth quarter of 2015, bringing the total indebtedness to 21.1 trillion dollars in consumer debt. The data showed an increase primarily in credit cards, auto and student loan debt, where mortgage balances remained roughly the same. Delinquencies have remained low, building consumer confidence that higher debt loads can be maintained, but that’s as long as the economy continues to grow.
If you are burdened with high amounts of credit card debt and are struggling to make your payments, or you’re just not seeing your balances go down, call Timberline Financial for a FREE financial analysis today. Our team of highly skilled professionals will evaluate your current situation to see if you may qualify for one of our debt relief programs. You don’t have to struggle with high interest credit card debt any longer. Call (855) 250-8329 or get in touch with us by sending a message through our website here contact-us.