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.
Here Are The Top 10 Reasons Baby Boomer Debt is Increasing
10. 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.
9. 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.
8. 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.
7. 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.
6. 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.
5. 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.
4. 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.
3. 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.
2. Mortgage (40%)
1. 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.
Kevin O’Leary, also known as “Mr. Wonderful,” recently shared some advice on CNBC about financial success and the importance of proper budgeting.
Americans have paid down more than $100 billion in credit card debt since March of 2020, according to the Federal Reserve – bringing total credit card debt below $1 trillion for the first time in 3 years.
Debt can be paralyzing and weigh heavy on anyone’s shoulders, especially when you’re struggling to make ends meet. If you’re feeling like the road to being debt free looks like a long and fruitless one, don’t give up yet! Here are steps you can take to speed up the journey.
Brian Allen has been helping people make smarter financial decisions for over 10 years. As the Editor-in-Chief for Goloans, Brian writes about sage financial advice, “how to” articles, and reviews about lenders and creditors.