44% of Boomers Say Their Financial Situation Is Worse This Holiday Season Compared to Last Year, Survey Finds
Written by
Jordan Rosenfeld
Edited by
Amber Barkley
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While baby boomers are often lauded as the generation that got to have it all financially, this year, according to a recent GOBankingRates survey, 44% of boomers reported that their financial situation is actually worse this holiday season, as compared to last year. This appears to be slightly more true for women — in all age groups — as 25.68% reported their finances to be “worse” than last year compared to men’s 19.23%, and 18.94% reported their finances as “significantly worse” vs. 18.75% of men who reported the same.
Here are six factors contributing to these typically financially stable folks’ financial decline.
Lack of Financial Literacy
Some of boomers’ financial success might just have been the luck and the timing of their coming of age in an era when life was simply cheaper — and not due to any financial acumen on their part.
According to a study done by the National Bureau of Economic Research (NBER), all boomers did not turn out to be financially literate. The authors wrote that half of their survey respondents didn’t know the difference in types of interest rates or the risks in not diversifying their investments. They wrote, “they again find that many boomers are unable to make simple economic calculations, in particular when it relates to interest compounding.”
Rising Interest Rates and Inflation
It is no surprise that the combination of inflation and rising interest rates have hurt boomers’ finances over the last year, according to Jay Zigmont, PhD, CFP, founder of Childfree Wealth. “While the rate of inflation is slowing, the total cost for many items is still up over last year,” Zigmont said.
At the same time, wages have not gone up enough to beat inflation.
“For boomers that have already retired and are on a fixed income, inflation and rising interest rates have eaten into any room they had in their budget,” Zigmont explained.
Market Fluctuation Impact
Another area that may be hurting boomers is how they’ve invested in the stock market. While doing so is one of the best ways to grow wealth over time, it’s also not a sure thing, especially if you don’t have a solid strategy. According to Michael Hurwitz, CEO of Careers in Government, “Boomers with investments in retirement accounts or stocks face exposure to the uncertainties of the market.”
Market volatility can diminish investment portfolios, impacting their overall financial health, Hurwitz explained.
“The repercussions of these market dynamics extend to their ability to afford holiday expenses, as financial setbacks in investments translate into reduced funds available for festive spending,” he said.
Many Boomers Are Still Working
Despite the idea that boomers are all either living it up in retirement or on the brink of it, the truth is that many more boomers are still working than their predecessors. Whether due to retirement savings losses incurred during the COVID-19 pandemic or even much earlier — in the recession of 2009 — 57% of boomers were still working as of 2019.
This is a significant increase from the 46% of borderline retirees that were still working two decades before, according to The New York Times. These economic hits wiped out many boomers’ retirement savings, forcing them to work longer. As a result, these boomers may still be struggling to make ends meet and save enough for retirement.
Not Investing Aggressively Enough
On the other end of the investment equation, according to Robert R. Johnson, PhD, CFA, CAIA, a professor of finance at Heider College of Business at Creighton University, some boomers may not be taking an aggressive enough approach to investing to produce the extra funds they need.
Johnson said this is likely the result of people “preparing for the recession that never came” by being too risk averse. He added that “[Many] market analysts have predicted a recession for years. Many investors have been de-risking their portfolios in anticipation of a recession.”
In other words, boomers have not taken the kinds of financial risks that pay off the most.
Many people have even exited the stock market altogether, he added, saying, “The opportunity cost of such a strategy is quite high.”
Healthcare Costs
Boomers are among the people most likely to need greater medical care, due to the increasing health problems that can come with age. Health insurance premiums and out-of-pocket healthcare costs, such as medications and medical supplies, have continued to rise, eating into retirement savings.
Skyler Fernandes, a seasoned advisor, founder and general partner of Venture University, an investor accelerator platform, explained, “As income thresholds for Medicare premiums remain stagnant, more boomers find themselves inadvertently slipping into higher premium brackets. It’s a silent tax on retirement income, nibbling away at resources that could have been earmarked for leisure or other essential expenses.”
Though the Biden Administration’s newly passed Inflation Reduction Act has provisions to help with these costs going forward, these expenses are expected to keep rising, nonetheless. The Centers for Medicare and Medicaid Services (CMS) estimates that out-of-pocket healthcare expenses are likely to increase by approximately 4.1% between 2025 and 2031.
Another related but hidden healthcare cost for boomers is caring for a sick spouse, whose expenses may be swelling above and beyond what they planned for.
These factors show that even the generation that may have had the easiest financial start is not immune from economic impacts.
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