What Expenditures Hinder Baby Boomer Retirement Savings?

With apologies to Pete Seeger, baby boomers nearing or at retirement, may well be lamenting, “Where has all the money gone?/Long time passing.” For years, retirement and financial experts have sounded the alarm that baby boomers, especially, may not be saving enough to sustain them through their retirement years. When will they ever learn?

A survey of 1,400 investors conducted in May by Millionaire Corner finds that “not saving enough for retirement” is the top financial regret of investors in their 40s and 50s.” Saving, though, has become more of a challenge in the wake of the economic collapse that devastated family savings.

But a new report by the non-profit National Center for Policy Analysis finds that boomer households are facing increasing demands on their declining disposable income. They are spending more on education, their adult children and mortgage, the report finds. One area, at least, in which they are not spending more is entertainment.

Between 1990 and 2010, education expenditures have increased the most: 80 percent for 45-to-54-year-olds and 22 percent for 55-to-64-year-olds. “As with health care,” the report notes, “the cost of a college education has grown faster than income for decades,” a boomers are helping their college-age children will expenses and loan payments.

Boomers are giving their adult children a financial helping hand. The report cites a recent National Endowment for Financial Education survey that finds more than half (59 percent) of parents are helping to support their adult children who are no longer in school. This support includes living expenses (48 percent), transportation costs (41 percent), spending money (29 percent), medical bills (28 percent) and loan payback (16 percent).

Home mortgages comprise almost three-quarters of all consumer debt, the three-quarters of middle-aged and older workers’ households have mortgages, the report notes. Between 1990 and 2010, the share of expenditures on housing for these age groups increased about 25 percent, while the portion of income 55-to-64-year-olds spend on mortgage interest increased 47 percent, from 4.3 percent to 6.3 percent.

In addition, with young people forced by the bad economy to delay buying a home, they are becoming first-time homeowners at a later age, increasing the probability that a household will carry a mortgage into its preretirement years. The report also cautions that with boomers who were close to paying off their phones instead refinancing or dipping into their home equity, that 15 percent will not get out of debt in their lifetimes.