Baby boomers look richer than ever—but many are retiring with record levels of debt

As many Baby Boomers enjoy wealth like never before, a darker side emerges: a growing number enter retirement laden with debt. While they may possess substantial assets, the bills can quickly erode their financial security. Ashley Morgan, a bankruptcy and debt attorney in Northern Virginia, explains that "net worth and cash flow are two very different things."

For Boomers, retirement brings a shift from paying themselves to relying on Social Security and pensions, making debt a heavier burden. Since the 1980s, they have built remarkable wealth, owning over half of all household wealth by 2026, thanks to soaring home prices and stock markets. Yet, this wealth isn't evenly distributed; the richest 10% of Boomer households control 71% of the generation's wealth.

Moreover, nearly one-third of Americans aged 55 and older have no retirement savings. Debt becomes prevalent as people age, with half of households headed by someone 75 or older carrying debt in 2022, a rise from 41.3% a decade earlier. The average Boomer holds $92,619 in debt, primarily credit card balances. Home equity and retirement savings can create a false sense of financial stability, as appreciation doesn't translate to immediate income unless the home is sold or a loan taken against it.

HELOC balances, used to access this equity, have rebounded, with 57% of the 1.8 million HELOCs issued in 2023 and the first half of 2024 going to borrowers aged 50 and older. However, selling a home can lead to higher Medicare premiums due to capital gains, known as IRMAA. Rising home taxes and healthcare costs can strain retirees' budgets, even those who previously saved diligently.

Medicare premiums have outpaced both general inflation and Social Security's cost-adjustment, while long-term care costs have risen sharply. Some Boomers are forced to take on debt to support their families, using retirement savings or loans to pay for their children and grandchildren's college tuition, childcare, and other expenses. Working longer may become necessary due to financial strain.