Still, all this debt is likely to put a crimp into the free-wheeling, traveling-often retirement lifestyle that many boomers say they want. “Debt is a financial obligation that limits financial freedom for boomers to live the retirement they expect and ...and more »
Many boomers think theyâ€™ll retire debt-free, but thatâ€™s not likely to be their reality. More than eight in 10 middle-income Baby Boomers â€” with an annual household income between $25,000 and $100,000 and less than $1 million in investable assets â€” now has at least some debt, according to a survey released Tuesday by insurance firm Bankers Life Center for a Secure Retirement. That finding was mirrored by a study from the nonprofit think tank Pew Research Center, out last year, showing that 80% of boomers had debt and the median amount was a little over $70,100.
And many boomers have more debt than ever: The average 65-year-old borrower now holds 47% more mortgage debt and 29% more auto debt than a 65-year-old did in 2003, according to inflation-adjusted data from the Federal Reserve Bank of New York released in February of last year. And yet, many average boomers engage in this common delusion: That theyâ€™ll retire debt-free. More than half (53%) of non-retired, middle-income boomers say they plan to retire without debt, the Bankers Life data shows. But the reality will likely be quite different. For one, middle-income boomers â€œhave too much debt to be able to completely eliminate it before retiring,â€ says Scott Goldberg, the president of Bankers Life. Indeed, more than one in four (28%) now devote over 40% of their monthly income to debt, and about one-quarter (23%) have a mortgage with more than 20 years remaining, the data showed. (Some experts say that debt payments should take up no more than 10% of your income.) Furthermore, data from current retirees show that itâ€™s unlikely boomers will pay their debt down before retiring. Indeed, fewer than one in four retirees say they are debt-free, according to Bankers Life.
Of course, having some debt in retirement isnâ€™t always a bad thing, as MarketWatch columnist Robert Powell discusses here, and plenty of retirees eventually pay off the debts they carry into retirement. (Pew data shows that only about 58% of the members of the Silent Generation, most of whom are retired, have debt â€” the lowest percentage of any generation.) Still, all this debt is likely to put a crimp into the free-wheeling, traveling-often retirement lifestyle that many boomers say they want. â€œDebt is a financial obligation that limits financial freedom for boomers to live the retirement they expect and want,â€ says Goldberg. â€œAs boomers retire, every dollar that they spend to pay off debt is one less dollar that they can spend on these new retirement activities.â€
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