MacroMonitor Market Trends December 2011

MacroMonitor Market Trends is a newsletter from Consumer Financial Decisions that highlights topical news and trends of interest to you and your colleagues. If you would like more information about the topic in the newsletter or would like to discuss other ways that we can assist you in your research and marketing efforts, please contact us.

Uh-Oh! Younger and Older Boomers Reach Parity in Home Equity

Older Boomers (people born between 1946 and 1953) tend to have many financial advantages over Younger Boomers: They are first to graduate, first to find a job, first to buy a home. Older Boomers tend to have more assets, lower debts, and even better jobs than do Younger Boomers. Because of the impact of the recession, however, their home equity—the biggest asset for many households—is now at parity with that of their Younger Boomer brethren. The Older Boomer–headed households that are approaching retirement and counting on using home equity to fund retirement are having to rethink their strategy.

Figure 1: Trend: Mean Balance in Baby Boomers' Home Equity

In comparison with Younger Boomer households, Older Boomer households still have:

  • Higher net worth ($463K, in comparison with $417K)
  • Higher investable assets ($219K, in comparison with $161K)
  • Higher retirement-account balances ($227K, in comparison with $199K)
  • Lower total debt ($75K, in comparison with $102K).

Although Older and Younger Boomers are equally likely to have "boomerang kids" still living in the household (13% and 14%, respectively), Older Boomer households—in comparison with Younger Boomer households—are:

  • More likely to have dependent adults (22%, in comparison with 16%)
  • Less likely to have dependent adults in a younger generation (9%, in comparison with 22%)
  • Just as likely to have dependent adults in an older generation (31%, in comparison with 29%)
  • Surprisingly, more likely to have dependent adults in the same generation (70%, in comparison with 52%).

Older Boomers are the first to reach retirement: Currently, 23% of Older Boomer households are retired households. On average, nonretired Older Boomers report they will retire in 7 years; Younger Boomers report they are, on average, 14 years from retirement. Older Boomers have little time to sprint to retirement by adding to their savings. Because recent economic conditions have drastically reduced home equity just as Older Boomers approach retirement, and because of the burden of dependent adult children, parents, and other adults, 15% of Older Boomers report they are working in retirement. Many Older Boomers may have little choice but to embrace Revolving Retirement.

Consumer Financial Decisions (CFD) developed the Revolving Retirement concept and has tracked revolving-retired households for the past decade. Subscribers can read the initial report, Redefining Retirement.

To learn more about Older Boomers and their financial needs in Revolving Retirement, contact CFD.