NCPA - National Center for Policy Analysis


March 10, 2006

Today's debt bubble may derail many baby boomers' retirement plans -- and it's already hurting the generation that follows, says the Wall Street Journal.

As a nation, our borrowing is growing as fast as our wealth, we are loading up our kids with college debt and we are continuing our spendthrift ways into retirement, says the Journal.

For example:

  • Federal Reserve data show that the value of household real estate climbed 71 percent over the past give years, but mortgage debt grew even faster, up 75 percent, as folks cashed out part of their home's value when they refinanced or took out second mortgages.
  • At the same time, car loans and credit card balances are also rising; outstanding consumer debt is up 27 percent over the past give years, well ahead of the 13 percent cumulative inflation rate.
  • Meanwhile, parents are increasingly leaving their kids to pick up the tab for college; over the ten years through the 2004-2005 academic year, annual borrowing through student and parent loans jumped 194 percent.
  • Even retirees are getting in on the act; among households headed by someone age 75 or older, 40 percent had some sort of debt in 2004, up from 29 percent three years earlier.

All this seems like a betrayal of family financial values, says the Journal. In many cases, our parents sent us into the adult world with little or no college debt and they strove mightily to bequeath us their house and often more. Yet our kids are starting their working lives deeply in debt, and when they settle our estate, it looks like they will be settling with our creditors.

Source: Jonathan Clements, "The Debt Bubble Threatened to Derail Many Baby Boomers' Retirement Plans," Wall Street Journal, March 8, 2006.

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