Fortune: Gen-Xers Take the Cake for Indebtedness

Thursday, 28 Aug 2014 06:16 PM

By Michelle Smith

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Generation X  is a small group sitting on a mountain of debt, says Fortune.

According to Time, Gen-Xers are the most glum generation after the recession, and perhaps with good cause. Compared to millennials and baby-boomers, Generation X has a gloomier financial situation. 

Gen-Xers have taken on more debt than any other generation. And 44-year olds are the most indebted people of all, owing an average of $142,077, most of which is mortgage debt, revealed a new study by Federal Reserve Bank of St. Louis economists William Emmons and Bryan Noeth.

Editor’s Note: Retire 10 Years Earlier With These 4 Stocks

By comparison, the average household debt of the 1956 baby-boomer cohort was $88,553, adjusted for inflation, in
the first quarter of 2000, (when they would also have been age 44), Fortune says the economists noted. 

To their credit, Generation X has made some progress paying off its debts, reducing what they owe by between 10% and 15% since 2008. But they are reducing their debt slower than other generations.

Generation Y has aggressively paid down over 25% of what they owed in 2008.

Generation X's debt issues may be partly attributed to their income, as they are not making much more than their elders. Average real household income of the 1970 cohort was only about 5 percent higher than that of the 1956 cohort, the economists noted.  

Gen-X came of age during the 1990s, a period of prosperity, and the Great Recession struck right in the middle of their lives. 

To experience a recession at that time in a life course can be difficult,” explained Diana Elliott, research manager for financial security and mobility at Pew Charitable Trust.

They are critical years in a career, and many were at the age to be first-time home buyers — so many bought during the bubble, or were just about to purchase a home when the bubble burst,” she told Fox Business.

According to Pew, Generation X suffered the severest effects of the Great Recession.

We found that between 2007 and 2010, they lost 45% of their wealth — and they already had the lowest amount of wealth prior to the recession. But their median net worth dropped from $75,000 to $42,000, so many have experienced economic shock,” Elliott said.

Gen-Xers  have about six times more debt than their predecessors,” she added. “There is just a lot more debt and it makes it hard to prepare for retirement.”

People ages 36 to 49 are the least likely to say they have recovered from the financial crisis. They are most likely to say they will have a harder time reaching financial security than their parents.  And Gen X also is far more likely to strongly believe that Social Security will not be there for them leaving them to rely on their own resources, Time says the latest Transamerica Retirement Survey found. 

Editor’s Note: Retire 10 Years Earlier With These 4 Stocks

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