Despite millennials’ lingering reputation as financial delinquents, it turns out not everyone drowning in credit card debt has a newly-printed college diploma and a stack of student loan bills.A recent article by Reuters’ Chris Taylor reveals baby boomers are facing an even steeper road to financial freedom.
Taylor highlights a Demos study that found low- and middle-income Americans over the age of 50 are carrying an average $8,278 in debt. By comparison, under-50 households owed about $2,000 less — an average of $6,256 in debt.
The reason? Simply put, older consumers often have longer credit histories, greater financial responsibilities, and personal economies that have yet to fully recover from the Great Recession.
All of these circumstances have earned them a new nickname in a recently study by the Pew Research centre–– the “sandwich generation.”
Here’s how boomers’ debt is broken down:
Boomers aren’t just supporting their kids anymore. Pew’s report also found that an increasing number of Americans in their late-40s to late-50s are helping to support both an ageing parent as well as their adult children. That’s where the term “sandwich” comes from. Squeezed by both different sets of dependents, 75 per cent of boomers say they feel responsible for their elderly parents, and more than half feel obligated to help out their children, even as adults.
They aren’t going into debt for fun. According to Demos, boomers have been relying on credit for everyday essentials. One-third of those surveyed said they had used credit cards to help fund basic expenses, like rent, mortgage payments and utilities.
They’re still funding their own education. The New York Federal Reserve Bank estimates boomers carry one-third of all student loan debt –– and it’s not all coming from their children. From 1990 to 2010, education expenditures increased 80 per cent for 45 to 54-year-olds and 22 per cent for 55 to 64-year-olds, according to a 2012 study by the National centre for Policy Analysis.
They owe more to their doctors. These days, boomers have seen their health care costs soar by 21 per cent surge, according to the NCPA. And Demos found half of Americans over 50 have coped by charging medical expenses on their cards, including prescription drugs and dental bills. These fees are likely to increase with age, especially as their health begins to fade.
They’re putting retirement on hold. When credit isn’t enough to cover expenditures, there’s an increasing likelihood that boomers will dip into their retirement savings. A new report by HelloWallet found one in four workers dips into 401(k) loans each year to the tune of $70 billion, nationally. And Demos found 18 per cent of survey respondents aged 50-64 had taken this step as well.