Personal Finance

Baby Boomers 'Had It All' But Are Now Drowning in Debt

Maurie Backman

Published: December 16, 2024 1:49 pm

Key Points from 24/7 Wall St.

• Baby boomers are loaded with debt due to factors that include rising healthcare costs and helping grown children.
• Consolidating costly debt is essential for boomers on a fixed income.
• Seeking help from an advisor can get boomers back on track.
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It would be fair to say that baby boomers were born at the right time. Many entered the workforce when unemployment levels were low and had established careers by the time more recent crises like the Great Recession erupted. Boomers also benefitted from proportionately lower higher education costs than younger generations, allowing them to embark on successful careers without being weighed down by student debt.

Despite the strong start many boomers had, a large number are carrying large amounts of debt at a time when they should be gearing up for retirement or, worse yet, are already there.

Experian puts the average total debt among baby boomers at $94,880 as of 2023. But there are some troubling details within its findings.

The average credit card balance among baby boomers was $6,642 as of last year, while the average personal loan debt was $22,551. Average auto debt for boomers, meanwhile, was $21,609.

It’s also worth noting that while many boomers may be sitting on a nice amount of home equity in light of a recent increase in home values across the nation, that generation still carried an average mortgage balance of $191,557 as of 2023. And all of this begs the question: How did boomers get here?

Why baby boomers continue to carry debt

While debt is a problem at any age, it’s particularly concerning for boomers who may be gearing up to end their careers and give up their paychecks, or who may already be retired and living on a fixed income.

There are a number of reasons why boomers may be in the situation they’re in. First, healthcare has gotten increasingly more expensive. The Peter G. Peterson Foundation finds that healthcare costs have increased from 5% of GDP in 1962 to 17% in 2022.

Rising costs — particularly in the context of higher education — have also pushed boomers into the impossible position of feeling obligated to help support their adult children. Bankrate reports that 43% of parents with adult kids have sacrificed retirement savings to help a grown child, while 49% have put off paying down debt of their own.

For this reason, it’s not surprising to learn that baby boomers not only carry loads of debt, but lack retirement savings in a very big way. As of 2022, the median retirement plan balance among younger boomers was $185,000, and among older ones, it was just $200,000.

How baby boomers can shed their debt

It’s hard enough juggling a mountain of debt when you’re working and potentially have years of higher wages ahead of you. As a boomer, you may be winding down your career or already retired and living on a lower income than what you’re used to. So it’s important to try to eliminate your debt to the best of your ability, especially in the context of non-mortgage debt that may be costing you a boatload of interest.

One option is to consolidate your various debts into a personal or home equity loan. With solid credit, you may be able to qualify for a competitive loan rate, which could make your debt less expensive to pay off.

Also, the nice thing about these loans is that they come with predictability. If you continue to carry a credit card balance, the amount of money you owe each month could change with market conditions. With a personal or home equity loan, you get to enjoy a fixed interest rate on your debt and set monthly payments that may be easier to fit into a limited budget.

Another option is to work with a financial advisor or counselor if you’re having trouble keeping up with your debt. They may be able to recommend a path forward that makes your debt more manageable. They should also be able to tell you if you might qualify for any sort of debt settlement arrangement.

One thing you may need to get on board with, though, is making some adjustments to your spending. Think about your largest expenses and whether it’s possible to reduce them to a reasonable degree.

If you’re retired with a large home you occupy alone or with a spouse only, downsizing could not only mean spending less on housing going forward, but also put a chunk of cash in your pocket you can use for debt payoff purposes (this assumes you own a home and have decent equity in it, which is the case for many older Americans given current property values). It may also be possible to downside from a two-car household to a single vehicle if you’re retired already and don’t have a daily commute.

Along these lines, being generally mindful of spending could free up money in surprising ways. The stress of carrying debt can be almost as detrimental as the financial impact, so any amount you’re able to whittle down could do a lot for your overall wellbeing.