Compared to older generations, baby boomers are facing retirement with more debt, smaller savings accounts, and less home equity, a new report from the Stanford Center on Longevity reveals.
The center recently released its special report “Seeing Our Way to Financial Security in the Age of Increased Longevity.” This work is part of the Sightlines Project, which looks at how well older adults are doing in three areas: healthy behaviors, financial security, and social engagement.
Along with boomer savings and debt, the report dove into generational shifts in U.S. homeownership, the prognosis of Americans’ retirement contributions, and women’s financial decision-making. The report sought to answer the question of how older Americans are embracing longer lifespans and if they taking advantage of it.
“Or are we missing the mark, reaching old age ill-prepared and in worse shape than preceding generations?” the report queries.
When it comes to financial security, the evidence was not encouraging, the report states.
In general, baby boomers are more financially vulnerable compared to the silent generation before them. When comparing the two groups, results prove boomers had less home equity accumulation, financial wealth, and total wealth. Mid boomers — those born 1954 to 1959 — had the least amount of net worth and home equity. The report emphasizes that the financial crisis in 2008 was especially hard for boomers who were trying to retire at that time.
“Earlier cohorts enjoyed a long and steady growth in home equity, helping them to withstand the burst of the housing bubble in the late 2000s,” the report reads. “Boomers in their mid to late 50s were hit relatively hard by the housing market crash, with greater loss in equity.”
In addition boomers have less saved, with the report stating that one-third of boomers had shored up nothing in retirement accounts — either workplace plans or IRAs — in 2014, leaving them with limited time to save. For those who had contributed to an account like this, the median was only about $200,000.
In addition, this retiring generation has mounting debt.
“About two-thirds of baby boomers had debt in 2014, compared to only 20 percent and 40 percent of those born before the early 1940s,” the report states. “Among households with non-zero debt, mid-boomers’ average debt reached $120,000, much higher than that of prior generations. Holding age fixed, boomers age 55-60 had a higher debt burden.”
Although these financial findings are discouraging for those immediately facing retirement, this lack of preparedness will have far reaching effects for younger age groups.
“Considering the vast size of the boomer population, increased life expectancy, and the rate at which today’s boomers are retiring, being ill-prepared for retirement has profound implications for the overall well-being of individuals, families, and society today and for generations to come.”
Written by Maggie Callahan