NCPA - National Center for Policy Analysis

How Are Baby Boomers Spending Their Money?

September 11, 2012

For a number of years now, retirement and financial experts have bemoaned the fact that baby boomers and others who should be thinking about retirement saving are nowhere near ready to retire, says Pamela Villarreal, a senior fellow with the National Center for Policy Analysis.

Using data from the Bureau of Labor Statistics' Consumer Expenditure Survey, Villarreal compares the preretirement spending habits of today's middle-aged workers (45 to 54 years old) and today's older workers (55 to 64 years old) with the spending habits of those age groups 20 years ago. Real incomes for these age groups have not changed much. But the portion of disposable income households spent on certain categories of goods and services has increased.

Mortgage debt:

  • Home mortgages comprise almost three-quarters of all consumer debt, and three-fourths of middle-aged and older workers' households have mortgages.
  • From 1990 to 2010 the share of expenditures on housing -- including principal, mortgage interest, taxes, maintenance and insurance -- for these age groups increased about 25 percent.
  • For 55 to 64 year olds, nearly half of this increase was due to an increase in the interest portion of housing expenditures -- even though mortgage interest rates have fallen over time.
  • The portion of income they spend on mortgage interest increased 47 percent, from 4.3 percent to 6.3 percent.


  • From 1990 to 2010, education expenditures increased the most -- by 80 percent for 45 to 54 year olds and 22 percent for 55 to 64 year olds.
  • Though some individuals choose to further their own education during midlife, it is likely that many baby boomers are helping their college-age children with college expenses and loan payments.

Spending on adult children:

  • A recent survey from the National Endowment for Financial Education found that more than half of parents are helping to support their adult children.
  • Among parents of 18-to-39-year-old children, 59 percent of parents are providing financial support to adult children who are no longer in school.
  • Another survey found that two out of five parents have paid off debt for their adult children, including 29 percent who had paid off student loans for their children.

The decision to forgo present consumption for future retirement savings is a matter of individual choice. Contrary to the belief that the savings rate has been stagnant, or even declined, retirement accounts appear to be playing a larger role for baby boomers. However, retirement savings is nowhere near the 10 percent that is often recommended as the share of income that should be dedicated to savings.

Source: Pamela Villarreal, "How Are Baby Boomers Spending Their Money?" National Center for Policy Analysis, September 11, 2012.


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