Generational Differences and Debt

Anna M. Rappaport
Anna Rappaport is an actuary and phased retiree.  She chairs the Society of Actuaries Committee on Post-Retirement Risk and she serves on the Aging and Post-Retirement Steering Committee. She is also past president of the Society of Actuaries.

Older Americans are carrying growing levels of debt into retirement. This topic was the main focus of the 2019 Pension Research Council symposium, and debt was also studied in a recent Society of Actuaries (SOA) study entitled “Financial Perspectives on Aging and Retirement Across the Generations.” Both efforts provide important insights into what people say about financial priorities and debt across generations, and both confirm that debt is important in retirement planning.

Of course not all debt is “bad” – mortgages enable people to buy their homes, and student loan debt helps people afford higher education. As a result, both can be beneficial, as long as the level of debt remains manageable. Yet the SOA study indicates that being able to pay everyday household bills is a key concern identified by many respondents surveyed. Building emergency funds and paying off credit card debt are also important financial priorities for the older population. Not surprisingly, the most common types of debt reported are credit card debt, home mortgages, car loans and lease payments, and student loan debt.

Interestingly, the debt mix by generation differs:

  • Student loan debt is reported by 31% of Millennials (age 20–38 in 2018), 12% of Gen Xers (age 39–53), and 4% or fewer of other generations.
  • Mortgage loan debt is held by 51% of Gen Xers, and only 37% of Late Boomers.
  • Credit card debt is widespread, standing at just over 40% for Millennials, Gen Xers, and Late Boomers (age 54–63); retirees are less likely to have this type of obligation. Car loans are also widespread.
  • One-third of the “mostly-retired” generation reports no debt, while only 17% of the Gen X group holds no debt.

There are also differences across groups in terms of the impacts of debt, relative to their overall situations:

  • Millennials are struggling to establish themselves financially. Many hold student loans (31%), and debt often complicates their ability to manage their finances (31%). They also lack confidence when making financial decisions, with 64% reporting that their planning horizon is 12 months or shorter. Financial pressures they face include the need to build up emergency fund, save for a home, and pay off student loans and credit cards.
  • Gen Xers are more confident than Millennials, with few having student loans and only 26% reporting that debt makes managing their finances difficult. More are focused on retirement saving.
  • Late Boomers are the generation gearing up for retirement, with only 17% reporting that debt complicates their financial picture. They seek to grow their money and produce income, but almost a quarter (24%) have borrowed from their retirement savings plans in the past.
  • Early Boomers (age 64–72) are mostly retired and are the most financially stable of all groups examined. Some 6 in 10 say they could afford an unexpected expense of $10,000, and only 14% state that debt makes financial management more complex. Fewer than one-fifth (19%) have borrowed money from their retirement plans in the past.
  • Most Silent Generation (age 73–83) individuals are not working, and they tend to be the most confident about managing their finances: only 14% report that debt complicates their financial picture.

Undeniably debt is an increasingly important part of the financial picture for older Americans.  For many, the ability to borrow well has helped them build their lives. Yet debt has also undermined some households’ ability to manage their finances and save for the future. Overall, today’s retirees are better off in this regard, while Millennials appear to face the greatest challenges, driven in part by student loans and challenges they face in establishing their careers.


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