How Baby Boomers Are Spending Their Money

By Larry Teren

The National Center for Policy Analysis (NCPA) had one of their staff analyze data from the Bureau of Labor Statistics’ Consumer Expenditure Survey, comparing the spending habits of 45- to 64-year-olds in 1990 and 2010. After carefully pouring over the statistics, she came to the conclusion that baby boomers stopped saving their money. Duh. As a member of the baby boomer generation, I can readily explain why but as a gentleman, I will let her announce each point and then I will offer my take:

1. Baby Boomers Are Spending More on Adult Children.
2. Baby Boomers Are Spending More on Mortgage Debt.
3. Baby Boomers Are Not Spending More on Entertainment.

1. You see, what happened is that their children couldn’t get jobs that would pay off their
student loans. Or they lost their jobs somewhere between 2005 and 2010 and came back home to
live with mommie and daddy. So now the parents are helping their kids in their late 20’s and
early 30’s pay off the freaking loans. (Not yet, but at some point I intend to scream ala’
Sam Kinnison. You are forewarned, so sit a little further back from the computer monitor. I
don’t want you to get a headache.)

2. We are finding that the equity value of our houses are not in synch with the amount of the
mortgage we have already paid off. Most of that has to do with the burst in the real estate
market. But that wasn’t the fault of the baby boomers.
That was caused by the Gen X-ers and Tweeners who had no business buying a place and should
have rented. They collectively took us down with them. Okay, you can argue that it was the
baby boomer real estate agents and mortgage brokers who pushed these over-leveraged deals. My
bad.

3. Who can afford it? Why should I go to a sporting event that costs a minimum of fifty bucks a
seat to watch millionaires play with, I mean, against each other? Why should I pay more
than ten smackers plus the cost of pop corn and a drink to watch a movie when I can watch it a
few weeks later on a website that illegally posted it there by a European sticking his or her
nose at our copyright laws? Besides, when you ai’t making any money, who wants to spend your
hard-earned savings on frivolity? The cost of gas just to go to the fun house coud cause one
to declare bankruptcy.

My throat is getting sore so I stopped shouting. You can move closer back to the monitor. The researcher at NCPA says that baby boomers along with the rest of Americans need to switch from spending to saving. She wants to see tax neutral policies on savings. (Here, here!) One proposal is to treat IRAs with the same respect as 401(k)s. I’m all for that since that’s all I can afford as a self-employed individual. IRAs are limited to $5,000, or $6,000 for those over the age of 50. An employer-sponsored 401(k) has an annual limit of $17,000 ,or $22,500 for those 50-plus. The idea is that the more you can defer paying taxes on until later when you will be making less money, the better off you are. Of course for those of us just scraping by, it would be nice
to have ANYTHING to put in our IRA. It would be nicer if maybe the government would say- hey, you don’t have to ever pay taxes on your IRA. But, then again- that just makes me a greedy baby boomer.

For the record, from 1990 until 2010:
Food purchases (including restaurant spending) fell 18 percent for 45 to 54 year olds and 20 percent for 55 to 64 year olds.
Household furnishings fell nearly one-third for 45 to 54 year olds and one-fourth for 55 to 64 year olds.
Clothing expenses showed the steepest decline, falling 42 percent for 45 to 54 year olds and 70 percent for 55 to 64 year olds.

You can access the NCPA report at http://www.ncpa.org/pdfs/st341.pdf

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