One in 10 Baby Boomers state that they have been forced to borrow money to cover daily expenses, says an AARP study examining Baby Boomer spending habits, with 6 in 10 saying that they have cut back on restaurant dining and entertainment. The telephone survey of 1,002 participants found that one-third of respondents had stopped contributing to their 401(k) or retirement account, while 14 percent have cut back on their medications.
“A big factor in tougher times for Baby Boomers is a result from harder economic times, mainly in the sharp decline in residential real estate prices. It has had a trickle-down effect throughout our economy,” Greg Womack, CFP explains.
“Construction jobs have diminished, manufacturing of housing products have slowed, resulting in drops in employment; and people’s home equity has either disappeared or dropped substantially, Womack says. “Couple this with higher food and energy costs, and many people are now faced with cutting expenses to make ends meet.”
Womack, an OK-based financial planner, adds that it wouldn’t hurt for people to learn how to manage under these new circumstances. “This is not really an unusual phase. Tough times come and go, and they have a way of culling out the fat and waste in our lives—teaching us to be more frugal and better planners,” he adds.
Increasing Medical Expenses
Prohibitively high medical and insurance costs are complicating financial matters for aging Baby Boomers, many of whom struggle with chronic illnesses or conditions, says Mellanie True Hills, CEO of the American Foundation for Women’s Health and author of the award-winning A Woman’s Guide to Saving Her Own Life.
“The biggest financial issue for many of us Boomers is the outrageous medical expenses we have to pay, especially when we have chronic diseases such as heart disease or atrial fibrillation,” Hills says.
“As CEO of http://www.StopAfib.org, a resource for atrial fibrillation patients, I know that atrial fibrillation impacts at least 5.1 million Americans, and is growing exponentially as Boomers age. It can be life-threatening due to the risk of stroke and congestive heart failure,” Hills, who has atrial fibrillation herself, says.
Hills says that the financial impact of a condition such as atrial fibrillation, along with other chronic health issues, can be devastating for Boomers. From high medical expenses and copays, the inability for many to secure health insurance, to lost wages or loss of employment due to illness, there are a myriad of ways chronic conditions can chip away at funds.
The medical costs are “financially devastating, even for those of us who saved rather than spent. It wipes out your savings, retirement funds, and everything else that you have. Many just give up, and go on disability as it’s their only option, but many of us refuse to give up, no matter how hard it is,” Hills says.
“Yes, many Boomers are worse off than their parents, and our country and society will suffer as a result. Our medical bills, when we reach Medicare, may eventually bankrupt this country,” Hills adds.
Medical issues aside, the Boomer reputation for big spending invites little sympathy from those who dismiss this sudden bout of so-called hardship. “There is no generation in American history that has been more self-indulgent than the Baby Boomers,” contends Dr. Herb London, president, Hudson Institute, professor emeritus New York University. “The fact that there is some retrenchment hardly does justice to the opportunities that have been afforded that generation. If they go to fewer restaurants or frequent stores less often it’s hardly an indication of depravation.”