It’s estimated that some 10,000 baby boomers retire every day. And reaching the age of retirement is often associated with financial security. The house is paid off, the kids are grown up and your 401k, Social Security benefits and other investments are right there waiting for you.
But financial security is a tricky thing for retirees. Social Security income averages just $1,249.55 per month, which equates to less than what a full-time worker would earn on federal minimum wage.
Investments and 401k’s don’t always grow in the way we anticipate. The cost of our children’s college tuition continues to rise. And although the house may be paid off, many retirees end up moving anyway to downsize, move closer to grandchildren or move into a retirement community.
You also can’t forget about health care costs, which only increase as you age.
Additionally, you don’t know how long you might live. Does your nest egg need to last for 10 years or 30 years? And don’t you wish to leave something behind as an inheritance?
When you add it all up, it’s easy to see how the financial picture can get a little blurry for baby boomers. But considering the fact that around 70 percent of the disposable income in the U.S. is controlled by the 75 million baby boomers, it’s important to try to get a clearer view of how and where all this money is being spent.
The Top 7 Ways Baby Boomers Spend Their Money
The above provides a glimpse of some of the financial demands of the baby boomer generation. But where exactly is their money going?
In 2015, the average student loan debt for borrowers over the age of 60 was more than $23,000, which is double the amount from only 10 years prior.
According to the Consumer Financial Protection Bureau, the percentage of homeowners age 65 and over with mortgage debt reached 30 percent in 2011, up from 22 percent just 10 years prior. And not only did the number of debt holders increase, but so did the average amount of debt, from $43,000 to $79,000.
- Health care
Baby boomers are expected to be a less healthy population than previous generations and for many, health care costs will be the biggest annual expense during retirement. Diabetes and obesity are at the forefront of the health issues facing baby boomers.
Additionally, even boomers who have Medicare health insurance end up paying high out-of-pocket costs for coverage.
- Adult children
The children may be grown up, but that doesn’t always mean they are out of the house. In fact, Americans ages 18-34 are now more likely to live with their parents than any other living situation, with 32 percent of that demographic still living at home. That presents an added financial burden on the baby boomers supporting them.
Baby boomers as a whole are spending upwards of $120 billion on leisure travel annually. So despite many of the financial restrictions faced by this generation, they are still finding ways to spend their golden years traveling the globe.
Of the more than $67 billion that Americans spent on their pets in 2015, baby boomers accounted for the largest share of that spending at 34.4 percent.
It’s actually a common misconception that younger people spend more money on retail items. People age 51 to 69 actually spend the most on retail because they simply have more disposable income thanks to years of working, saving and investing.
Where Are Boomers Wasting Money?
Now that we have an idea of where baby boomers are spending their money, in what areas do they feel like they are wasting it? A 2016 survey helped shed some light on this subject.1
- Eating out
Eating out was the number one money waster cited by baby boomers, with 52 percent of respondents saying they spend too much money at restaurants.
- Cable or digital TV
Over 27 percent of respondents reported wasting money on cable TV, a figure that coincides with the fact that the over-65 demographic watches the most television.
- Uneaten or expired food
Just slightly behind cable TV was uneaten or expired food, with over 26 percent of baby boomers citing it as a source of wasteful spending.
- Credit card interest
Just under 24 percent of baby boomers report credit card interest as an area of inefficient spending. Interestingly, those age 50 and over carry the best average credit scores along with the lowest rate of credit card use.
- Grocery items
Some 22 percent of baby boomers report spending too much money at the grocery store, a number that was lower than that of both Generation X and Millennials.
- Cell phone or cell phone bill
Nearly 18 percent of baby boomers say they waste money on their cell phone, which was somewhat consistent with younger generations.
Around 15 percent of respondents listed cigarettes as a wasteful expense. Those age 55 and older actually have the lowest percentage of smokers at just 17 percent.
- Bottled water
Buying bottled water is wasteful according to 14 percent of those surveyed. Bottled water recently replaced soda as Americans’ number one drink of choice.
- Convenience packaging
Convenience packaging refers to smaller or single-serving portions of food such as microwaveable dinners. But the convenience of these goods is not worth the cost for 14 percent of survey respondents.
Baby boomers make up 33 percent of the U.S. population but account for 45 percent of beer and 46 percent of wine sales. 13 percent of boomers in the survey decided those were wasteful expenses.
Learn more about staying healthy and financially secure as you age with these helpful resources: