Financially Frail Boomer Women

By Olivia S. Mitchell
Olivia S. Mitchell is a professor of insurance and risk management as well as business economics and public policy, and Director of the Pension Research Council, all at the Wharton School of the University of Pennsylvania.

Baby Boomer women – now in their 50’s and 60’s – are doing worse financially than older women in the 1990s. My new research with Professor Annamaria Lusardi explains why, using national representative survey data from the Health and Retirement Study and the National Financial Capability Study. We track changes in older women’s work plans and debt burdens, along with the links to financial literacy and debt stressors.

Photo by Mikael Kristenson on Unsplash

One reason they’re in worse shape is that older women today hold more debt than their peers did in the past. Boomers bought more expensive houses during the real-estate run up, and at the same time took on larger mortgages with smaller down payments. The result has been that more women are reaching their 60s in debt, and the amount of their debt has also soared. It is worrisome that this will make them particularly susceptible to rising interest on adjustable-rate mortgages, when the Federal Reserve decides to boost rates.

Our study also shows that less financially literate women are unlikely to plan for retirement, rendering them financially fragile. This is an important result, and it adds to a growing body of research showing that the financially illiterate do less well in managing their credit cards, pay more in financial service fees, and spend more on interest and late fees. Indeed, financial literacy is key to enhancing women’s wellbeing in their later years.

Indeed, higher fractions of older women today are in financially fragile circumstances compared to two decades ago. We define as fragile having less than $25,000 in savings, and a full third of the Boomers we surveyed reported having this little, versus one fifth of the women in prior decades.  A large number of Boomers reported that they did not regularly pay their credit card balances in full, and many paid only the minimum due, used their cards for cash advances, were charged fees for late payment, or exceeded their credit limits.  Such behaviors tend to lead to people digging themselves into ever-deeper debt.

One reaction to this larger debt has been that many Boomer women are remaining employed to pay their bills. They have also worked more their entire lives: for instance, older Boomer women age 51-61 were 8-11% more likely to be working now, compared to almost two decades previously. This makes it easier to work at older ages, with 20% more Boomer women planning to still hold a job at age 65 compared to the past. This will help as deferring retirement can boost Social Security benefits by about 8% per year of delay – or over 75% for delaying claiming benefits from age 62 to 70. Not a bad return for a few more years of work, and a good way for Boomer women to enhance their golden years.


This article originally appeared as a WSJ Experts post on September 11, 2016. Views of our Guest Bloggers are theirs alone, and not of the Pension Research Council, the Wharton School, or the University of Pennsylvania.