In the past month, three studies shed light on consumer debt and retirement prospects. The New York Federal Reserve Bank cheerily reported that consumer debt levels dropped by $110 billion to $11.23 trillion in the first quarter of 2013, well below the peak of $12.68 trillion in the third quarter of 2008. As well, loan delinquencies declined, with about 8.1 percent of outstanding debt in some stage of delinquency, compared with 8.6 percent the previous quarter. Like the overall economy, consumer debt is recovering slowly. But just as progress differs between industries, progress differs between consumer segments.
Price Waterhouse and Pew Research separately looked at the financial condition of consumer cohorts. Pew focused on retirement readiness for boomers (age 48 to 67) and Gen-Xers (age 38 to 47). Because Gen-Xers have considerably higher levels of student loans, mortgages or credit cards, their ratio of assets to debts stands at half the level boomers enjoy. Debt service, pre-recession buying habits, and low yields on investments make progress toward retirement readiness a daunting challenge for Gen-Xers. The recent recession hit Gen-Xers especially hard. They lost 45% of their wealth, compared to just one-quarter of wealth lost by boomers. The depressing result for Gen-Xers is that they have only half of the assets that they will need in retirement… and the clock keeps ticking.
Price Waterhouse acknowledges that despite a recent stock market high and improvement in other key economic indicators, the results of its employee survey are just slightly more positive than earlier studies of the work and home impact of financial pressures on employees. They found that retirement is a confounding problem for many employees with only 35% confident they will be able to retire when they want to. As a result, 29% plan to delay retirement.
Even more troubling, about four in ten employees find difficulty paying routine expenses each month. Gen-Xers face the toughest financial struggle and most dip into retirement savings to meet pre-retirement needs. These families have no room for the hand that grabs extra taxes and fees to support someone else’s grandiose political ambitions. Most Americans need their meager earnings left for them to allocate to family needs.
Alan Daley is a retired businessman who lives in Florida and who writes for The American Consumer Institute Center for Citizen Research