The outlook for the retirement years of baby boomers, those born between 1946 and 1964, is bleaker than that of previous generations. Studies indicate that baby boomers have less money to retire on than their predecessors. This doesn’t come as a surprise to Cambridge Realty Capital President Jeffrey Davis, who knows firsthand the rising cost of developing, building and maintaining senior housing and care facilities. “Development costs have risen significantly since we first began financing senior living 30 years ago,” he stated. “Baby boomers have been caught off guard by higher-than-expected living expenses.”
It’s not that this generation has poor money management habits. Baby boomers have faced some unique challenges compared to their predecessors, like the housing market bubble burst of 2007 to 2008. Although this particular incident hit multiple generations, the baby boomers have had little, if any time to recover.
That’s not all the new generation of seniors is contending with. Baby boom retirees are also strained by:
*The rising cost of medical care. Everything from doctors’ fees all the way down to the price of bandages has risen exponentially over recent decades. Not only is medical care far more expensive than it used to be, but its cost is outpacing inflation in terms of its growth. Although medical care costs vary by region, and some places remain significantly cheaper than others, costs are outpacing inflation by anywhere from an estimated 2% to 16% or even higher. By the year 2030, when all of America’s baby boomers will have reached age 65 or older, medical costs will be even higher than they are today.
*Debt load. Baby boomers are entering seniorhood with more debt than previous generations. Many will still have mortgage debt. Consumer debt (credit cards, personal loans, etc.) is also plaguing baby boomers, thanks to widespread, readily available access to credit cards, personal loans, bank lines of credit and payday loans.
One more area of senior debt that has grown significantly in recent decades is student loan debt. In order to remain relevant in the workplace or to finance new career training when old careers become obsolete, older Americans have gone back to school and taken out student loans to do it. Some are finding themselves unable to repay them in full by the time they reach age 65. Other seniors are stuck with student loan debt that isn’t even their own. Rather, with the intention of helping a child or grandchild obtain higher education, they’ve co-signed for a loan that the primary borrower (student) cannot pay back. The senior co-signer is then left “holding the bag,” however big that bag may be.
While Davis has confidence in current the state of the senior housing market, he admits that housing and healthcare costs aren’t going to be decreasing anytime soon. “Unfortunately, some baby boomers have been hit hard and are now having to make some tough financial decisions and rework their retirement plans.”
If anything, this should be a cautionary tale for the next generations. “Every person, regardless of their current age, should make saving for future medical care part of their retirement fund plan,” urges Davis. “This should also factor in a potential stay in assisted living and/or a skilled nursing care facility,” adding that Medicare cannot be relied on as a source of funding, should the need for skilled care arise in the golden years.
“Millennials are in the best position right now in terms of planning and saving,” Davis points out. “Most of this generation have entered their working years and are generating an income. They still have two to three decades to put money aside for retirement.” Even Gen Xers on the older end who haven’t saved anything thus far can still hope to retire comfortably if they begin an aggressive savings plan now.