How Are Baby Boomers Spending Their Money?

In an August blog post, I referenced a New York Times Economix blog article highlighting the falling median income among 55 to 64 year olds during the past three years.  One of my blog readers asked me about consumer spending for this age group.  Has it fallen along with income?

Alas, my new NCPA study finds that the spending habits of 55 to 64 year olds (and 45 to 54 year olds for that matter) have changed in 2010 compared to the same age groups 20 years ago. The good news is that expenditures for items such as food, clothing and home furnishings have fallen significantly.  The not-so-good news is that other necessities have increased; housing expenditures as a share of total spending have increased about 25 percent; mortgage interest accounts for about half of this increase even though interest rates have fallen over the past 20 years!  What is going on here?

Several things have happened.  Since 1985 the median age of the homebuyer has increased and the median square footage of house has increased.  If individuals are waiting longer to buy a home, and buying bigger homes with smaller down payments, it is no surprise that more 55 to 64 year olds report having a mortgage compared to the same

age group 20 years ago. Add to that my finding that utility payments as a share of expenditures have increased as well.  No surprise here since bigger homes mean more energy consumption, and the cost per kilowatt hour has increased over time.

Finally, not only are baby boomers trying to secure their own finances, many are evidently helping out their adult children, perhaps to the detriment of their own needs.  Fifty-nine percent of parents are providing financial support to adult children who are no longer in school.  This is quite a shift from back in the day when asking your parents for money was like Oliver Twist asking for more gruel.

Even if parents are offering to help their adult children, they should keep in mind how much it

will cost to retire and limited workings years they have ahead of them compared to their adult children.

There is no doubt that the economy downturn has severely affected boomers” ability to prepare for retirement, but some of the lack of preparedness rests with individual decisions about how income is spent.  It”s time for them to take a hard look at where the money is going.

Comments (5)

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  1. Jordan says:

    60 percent are helping their adult children! That’s absolutely outrageous. No wonder the government sees them as a cash cow.

  2. Nichole says:

    Well lets think about this. Sixty- five percent of graduating college students from a four year university can not find work within a year of their feet walking across the stage. Eight percent of them have to moved back home.In addition, nearly 700,000 graduates under 25 were unemployed, though some had returned to school, according to the research, based on 2011 data from the U.S. Department of Labor. Less than half of last year’s 2.7 million college grads under 25 had jobs that required a college degree. These students take jobs as fastfood employees, waiters, low paying jobs and are still supported a little by their parents. So their parents are not cash cows!

  3. seyyed says:

    its sad to consider how much the economic downturn has effected a family’s financial priorities. hopefully we’ll be out of this mess soon so college graduates can find jobs and leave their parents to take care of themselves!

  4. Alice says:

    It looks like we have an ethical question. If someone has makes a mistake, should they suffer the consequences alone? What responsibility do others have?

  5. Alex says:

    They’re helping their children because their children need help living while having their income drained by entitlements.

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