Retirement Now Includes Debt, Working, Despair

For once the younger generation has it right. As the Baby Boom generation matures, we’re seeing the total number of older people in our overall population increase. We’re also seeing the numbers of younger people in the workforce increase, as you’d expect. But there’s a strange disconnect between these two groups. Older Americans are increasing their levels of debt at the very point in their lives they should be reducing their financial obligations in preparation for retirement, and a sharply reduced income, if any. At the other end of the scale, younger people, whom you’d expect to be charging it up, aren’t borrowing money, according to this report from the New York Fed.

In a disturbing, even alarming trend, debt held by borrowers fifty to eighty years old has increased by sixty percent between 2003 and 2015. The primary form of debt younger Americans are taking on is student loans. While it’s good they’re getting an education, it should be troubling that as a nation we’re saddling the younger generation with a mountain of debt during what should be their most productive years. Instead of buying a house and starting a family, young people are putting off marriage and opting for apartments in town where they won’t need cars.

The Younger Generation is Saving Money

In another apparent age-related disconnect, it’s young people putting money away for emergencies. That’s likely due to the fact that many entered the job market at a particularly bad time. Jobs were hard to come by, easy to lose and many watched family and friends struggle through layoffs and even home foreclosures. Apparently these hard times left an impression with the younger generation. Bizarrely, it’s people approaching retirement who seem to have forgotten the saving lesson. We should also point out that one in five, that’s twenty percent, save nothing at all.

Retirement? What Retirement?

The numbers paint an increasingly dismal picture of an older generation that may not expect to retire soon, but couldn’t even if they wanted to. The primary reason driving older Americans to work longer is debt, in particular mortgages. Forty-seven percent of those sixty-five and older were carrying mortgages and the same age group carried auto loans that was nearly thirty percent higher than in 2003. The only type of senior debt that remained relatively constant was credit card debt.

A Nation of Debtors

When today’s older generation was growing up our parents and grandparents were savers. Once credit cards were introduced as an economic tool that whole mindset started to change. Eventually the Debt Economy that we live in today became the new normal. With our government leading by example, revolving debt became a permanent and accepted part of our lives. We borrowed money to buy homes, cars, clothing and food. So it is we find ourselves in the bizarre situation where sixty-two percent of young people are saving five percent or more of their income and watching their spending, while the older generation, who should know better, are piling up more debt.

It’s an interesting if academic study on how debt has become so pervasive in our economy and the mindset of millions. What’s certain is our decades-long casual attitude toward debt is coming back to bite for entire generations of Americans. It’s a generation living debt to debt rather than saving for the future. What’s going to happen when those Americans can no longer physically keep working one can only guess, but it’s not going to be pretty.