Retirement & Financial Planning Report

One reason for the frequently reported shortfalls in retirement savings by those approaching retirement is that their spending habits differ from those of earlier age groups—that is, the portion of their disposable income that the spend is higher.

That’s the conclusion of a study by the National Center for Policy Analysis, a think tank that examined spending habits of two groups, those age 45 to 54 years old, and those age 55 to 64 years old.

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The study found that compared with past generations, children are a major additional expense. The cost of a college education has grown faster than income for decades and 40 percent of the nation’s student loan debt is now held by individuals over the age of 40. “Though some individuals choose to further their own education during midlife, it is likely that many baby boomers are helping their college-age children with college expenses and loan payments,” it said.

Similarly, of those in the studied age groups with children between age 18 and 39, 59 percent are providing financial support to children who are no longer in school—including for living expenses, transportation costs, medical expenses and general expenses, as well as paying off general debt.

Housing is another major cost. Over the last 20 years, the share of expenditures on housing for those age groups increased by 25 percent, with nearly half of the increase due to higher interest costs for home mortgages, reflecting higher housing prices. “It is estimated that 15 percent of all baby boomers will not get out of debt in their lifetimes,” the report said.

Meanwhile, “Contrary to some perceptions, baby boomers have not increased their spending on frills such as entertainment or dining out.” Spending rates on restaurants, household furnishings and clothing all have fallen over that period, it said.