Older Americans are increasingly confident about the economic recovery and, at the same time, are creating a drag on it.
A recent study showed that there has been a 44% year-over-year increase in consumer confidence for Americans ages 55 and older. Increased optimism normally drives increased spending – but not for our recovering hippies and love children of the ’60s.
Younger people, ages 35 and below, have shown fluctuations in their confidence level. In fact, it has stagnated recently for that group. But their spending has increased between 3% and 7%.
Here’s where things get interesting…
For the same period, the over-55 crowd has slowed its year-over-year spending by 1.34%.
Yet, as I mentioned, economic confidence is up 44%.
The increase in confidence for the older age group is driven by the huge move in the markets since the election and booming real estate prices in most locations.
Pockets of the Florida real estate market, a favorite with the over-55 group, were up 11% year over year and 25% over a three-year period. That’s a big move in an area that has a large number of retired people living on fixed incomes.
I’m sure I don’t have to tell anyone how much the stock market has run up. Increasing stock account balances always drive spending.
But despite improving confidence, boomers are tightening – not loosening – their purse strings. The debt they’re carrying into retirement could be the reason why.
The number of homeowners ages 65 and older who are carrying mortgage debt into retirement has increased by 8% since 2001. Retirees older than 75 have seen a 12.8% increase. All things considered, those aren’t ridiculous amounts.
But the amount of mortgage debt has increased by 82%, from $43,400 to $79,000. That’s significant and can put a big dent in available incomes!
A bigger bite of available income has to be the amount of credit card debt carried by the over-65 group. It more than doubles the average monthly full retirement check from Social Security – a $2,639 check versus $6,351 in debt.
And carrying debt on a fixed income, especially high-cost credit card debt, is a near death sentence for retirees. We have no way of generating more income to get ahead of it, so we have to eat the interest costs… 12% to 18% is not unusual.
I haven’t seen any research that confirms it, but my hope is that boomers are cutting back their spending to reduce their debt.
I have been writing about the boomers and their spending and savings habits long enough that I’m not ready to say it is all about their debt numbers. It is also possible their incredibly poor retirement savings history is driving their backs to the wall as well.
In any event, their spending is not matching their confidence in the recovery. It could be an indication of things to come for the love generation… not good things, I’m afraid.
For those carrying student loan and medical debt, I know it’s tough to eliminate all of it before retirement, but eliminating high-cost credit card debt should be first on your list.
Debt-free golden years is a lofty goal for most, but it will eliminate a big stressor in your lives.