Baby boomers hold more wealth than any generation in American history, but for many retirees, a high net worth does not necessarily translate into enough money to cover monthly expenses.
A new report from Fortune highlights a growing disconnect between the assets older Americans have accumulated and the cash they have available as they enter retirement.
Boomers have benefited from decades of rising home values and stock markets, helping the generation amass nearly $90 trillion in wealth. Yet that prosperity is far from evenly distributed and many older Americans are carrying significant debt into retirement, the report shows.
“Someone’s net worth and cash flow are two very different things,” Ashley Morgan, a Northern Virginia bankruptcy and debt attorney, told Fortune.
That distinction is becoming increasingly important as retirees lose regular paychecks and depend on Social Security, pensions and savings while continuing to make payments on credit cards, auto loans and other obligations.
Fortune reported that the average boomer carries $92,619 in debt, while more than half of households headed by someone 75 or older had debt in 2022.
“We’re seeing more and more people carrying high-interest debt later in life, which becomes a much bigger problem for them when they retire, and their income is fixed,” Michael McAuliffe, president of the nonprofit Family Credit Management, told Fortune.
Rising healthcare costs, property taxes and long-term care expenses are adding to the pressure. Some retirees are also taking on debt to support children and grandchildren, or remaining in the workforce longer than planned because retirement is financially out of reach, according to the report.
For older homeowners with substantial equity but limited monthly income, a reverse mortgage is one potential path to improve cash flow without immediately selling their home.
Unlike a traditional mortgage, a reverse mortgage can allow eligible homeowners to convert a portion of their home equity into proceeds while generally remaining in the property, provided they continue to meet loan requirements, including maintaining the home, paying property taxes and insurance, and using the residence as their primary home.
The strategy may be particularly useful for retirees whose wealth is concentrated in real estate but are struggling with everyday expenses or high-interest debt.
A reverse mortgage, however, is not a one-size-fits-all solution. Experts caution that upfront costs, interest accumulation, and the eventual impact on home equity and inheritance should be carefully considered.
This article was generated using HousingWire Automation and reviewed by a HousingWire editor before publication.
