Baby boomer debt: Baby boomers have the second-highest debt burden of any generation – a study by Experian has found that people between the ages of 55-73 have an average debt of $95,095. This debt burden is only exceeded by Generation X, which has an average debt burden of $134,323. But where is this debt coming from? Let’s look at the top 10 sources of debt held by baby boomers, based on a study released by Transamerica Institute.
Top 10 Reasons Baby Boomer Debt is Increasing
- Loan From Family/Friends (1%)
Only a very small percentage of people report owing money to family and friends. Borrowing money from those who are close to you can cause a lot of issues with your relationships, so it’s not surprising that this is not a major source of debt among baby boomers.
- Payday Loans (2%)
13% of millennials and Gen X’ers have taken out payday loans within 2 years, but this is less common for older baby boomers, who are typically more financially stable, and may know more about the financial pitfalls of payday lending.
- Tax Debt (5%)
Tax debt is a relatively common baby boomer debt, and it’s important for older individuals to resolve this issue before retirement – unpaid debt can result in the garnishment of Social Security.
- Home Equity Loan (6%)
A home equity loan is a loan that’s taken out against the value of your home. These loans are most often used for home improvements like redoing kitchens, bathrooms, and other areas (similar to a home improvement loan, but without the higher person loan interest rates). However, they can also be used as a source of emergency funds for homeowners.
- Student Loan (9%)
Older borrowers have mostly paid off their student loans, but this not the case for everyone. An Experian study found that there were 17% more student loan borrowers above the age of 62 in 2019 compared to 2018.
- Medical Debt (10%)
Older individuals have more medical loan needs, and the high cost of care and insurance means medical debt is a major baby boomer debt – in fact, it’s the #1 cause of bankruptcy in America across all age ranges.
- Personal Loan (10%)
Baby boomers hold a higher amount of personal loan debt than any other generation, according to Experian, with an average balance of nearly $20,000.
- Car Loan (34%)
While some baby boomers have paid-off vehicles, more than ⅓ of all older adults are still paying off a car loan – and more expensive vehicles and longer loan terms mean they may continue to owe auto loan debt for years to come.
- Mortgage (40%)
Baby boomers have a home ownership rate of over 60%, and most boomers have paid off their home loans, though about 40% still owe on their mortgages.
- Credit Card Debt (42%)
This is the most common type of baby boomer debt, but the amount of debt held by this generation is decreasing. They have an average of around $6,788 per borrower in 2019, a decrease of -1% from 2018 – and the lowest debt burden among this age range in the past 7 years. In contrast, millennials have an average balance of about $4,712 – but this grew 7% year-over-year between 2018 and 2019.