MINNEAPOLIS–(BUSINESS WIRE), according generations apartSM* – a new study by Allianz Life Insurance Company of North America (Allianz Life®) on how baby boomers and Gen Xers are facing their financial future. Nearly half (48%) of both generations agree that credit cards now work as a survival tool and 43% agree that “a lot of smart, hard-working people who watch their spending also have a lot of credit card debt.” credit “. Alarmingly, this growing comfort with debt may have a greater effect on Gen X’s retirement plans. Twice as many Gen Xers (27% vs. 11% of Baby Boomers) say they don’t know when they plan to retire or don’t. intend to retire at all.
Allianz Life’s study of 2,000 Americans – including 1,000 baby boomers (ages 49-67) and 1,000 Gen Xers (ages 35-48) – examined financial attitudes and current finances of each generation, including total household debt. The study found that Gen Xers have 38% more mortgage debt (average $144,000 vs. $90,000 for baby boomers) and 45% more non-mortgage debt, made up of student loans ($12,000 average versus $5,000 for baby boomers) and credit cards. debt (average $8,000 versus $6,000 for baby boomers).
While one of the reasons Gen Xers have higher debt may be related to early credit card use — more than three-quarters (76%) of Gen Xers got their first credit card ages 18-24 vs. 68% of baby boomers – biggest concern is how they currently use credit to finance their lifestyle. Nearly half (46%) of Gen Xers said they roll over their credit card balances (paying only a portion each month), compared to just 32% of baby boomers. There is no doubt that this strategy has a negative effect on their ability to save for the future, as more Gen Xers (23% vs. 19% of Baby Boomers) said they thought “that you can’t save for retirement until you pay off the credit cards.”
“Over the past three decades there has been a collective shift in the way people think about debt – it is now seen as an integral part of a person’s financial experience and it has fundamentally changed the way people are spending and saving,” said Katie Libbe, vice president of Allianz Life. President of Consumer Insights. “If Gen Xers continue to put off saving for retirement until they are completely out of debt, their nest egg is clearly going to suffer. savings, better debt management, with a focus on credit card spending, should be the first issue they need to tackle to get back on track.
Dealing with Debt
Tackling debt is likely to be a significant challenge for many Gen Xers. More than a third (36%) of Gen Xers in the Allianz Life study said they currently have more than 5,000 $ in credit card debt and a quarter admitted to having more than $10,000. Additionally, 15% of Gen Xers said they also owe money to their parents. More than four in 10 Gen Xers (41%) say they are not comfortable with the amount of their debt, while only a quarter of baby boomers said they feel uncomfortable with their debt. debt.
The growing comfort/acceptance of living with debt makes Gen X behavior change unlikely in the near future, meaning many Gen Xers will have less money available to save and will miss decades compound interest. In addition to having more credit card debt and debt in general, more and more Gen Xers see debt as a necessary way of life. One in five Gen Xers think taking on debt to manage day-to-day purchases is “just a fact of life,” compared to just 14% of baby boomers.
These attitudes are also evident in how each generation approaches long-term financial planning. When asked which financial philosophy they prefer, half of Gen Xers said “enjoy and live for today,” compared to just 39% of baby boomers, with the majority of baby boomers (61% ) choosing “save and plan for tomorrow”. As a result, nearly three-quarters (73%) of baby boomers said they are clear about how much money they will need in retirement, compared to just 52% of Gen Xers.
“While many Gen Xers face an uphill battle when it comes to saving for retirement, the good news is that they still have time to change their bad debt habits” , added Libbe. “By taking a few simple steps like regularly tracking spending and avoiding new debt, overburdened Gen Xers can take an important step toward building a more prosperous financial future.”
Learn more about the Generations Apart study
For more information on the Allianz Generations Apart study, including what each generation thinks of their prospects for a comfortable retirement, go to www.generationsapart.com. In the coming months, Allianz Life will release additional data from the Generations Apart study. Topics will include, among others:
Lingering Effects of the 2008 Crash – understand how the 2008 crash had a significant effect on how both generations currently manage their finances.
New Financial Planning Preferences – exploring the different expectations of Baby Boomers and Gen Xers when it comes to getting help with financial planning.
About Allianz Life Assurance Company of North America
Allianz Life Assurance Company of North America, one of FORTUNE’s 100 Best Companies to Work For in 2015, has been delivering on its promises since 1896. Today, it continues that tradition, helping Americans achieve their retirement income and protection goals through a variety of annuities and life insurance products. As a leading provider of fixed index annuities, Allianz Life is part of Allianz SE, a global leader in the financial services industry with 147,000 employees worldwide. More than 85 million retail and business customers rely on Allianz’s knowledge, global reach and capital strength to help them make the most of financial opportunities.
*The Allianz Generations Apart study was conducted by Larson Research + Strategy via online interviews in November 2014 with 2,000 US adults ages 35-67 with a minimum household income of $30,000 and was commissioned by Allianz Life.