NU Online News Service, April 25, 2003, 5:59 p.m. EDT – Mortgage debt could hurt the efforts of many members of Generation X to save for retirement, according to data gathered by the U.S. General Accounting Office.
The GAO prepared a report for the House Employer-Employee Relations Subcommittee that compares the current and future well-being of households headed by members of the “pre-baby boom” generation born between 1925 and 1945; the “baby boom” generation” born between 1946 and 1964; and the “Generation X” generation born between 1965 and 1976.
The researchers tried to “compare apples with apples” by looking at data for each generation in years when the heads were between the ages of 25 and 34. The researchers tried to account for inflation by expressing all dollar values in terms of 1998 dollars.
The results show that “overall debt levels increase across the generations,” writes Barbara Bovbjerg, the GAO director who led the team that produced the report. “Those households that go into debt are going into debt more deeply with each generation.”
For households headed by members of Generation X, the increase in debt levels “was due largely to increases in housing debt,” Bovbjerg writes.
GAO researchers found that 46% of Generation X households with heads between the ages of 25 and 34 had retirement assets in 1998, compared with only 3.1% of pre-boom households in 1962 and 20% of boomer households in 1983.
The GenX households with retirement accounts had about $5,000 in retirement assets, more than twice as much as the comparable pre-boom and boomer households.
The researchers also found that 46% of GenX households owned homes in 1998, and those homes had a median value of about $83,000.
Thirty-nine percent of the pre-boom households studied owned homes in 1962, and those homes had a median value of about $73,000.
Forty-five percent of the boomer households owned homes in 1983, and those homes had a median value of about $79,000.
Meanwhile, half the GenXers who had home mortgages in 1998 carried more than $70,000 in mortgage debt, up from a median value of about $52,000 in mortgage debt for the pre-boom mortgage holders and $45,000 in mortgage debt for the boomer mortgage holders.
Thanks to mortgage debt and other forms of debt, 22% of the GenX households had a negative net worth in 1998, and half of the GenXers were more than $7,500 in the hole.
More than one-quarter of pre-boom households had a negative net worth in 1962, but the typical pre-boom household with a negative net worth was less than $2,500 in the red.
Only 12% of baby boom households were in the red in 1983, and half of those households were less than $2,500 in the red.
The full text of the GAO report is available at http://www.gao.gov/cgi-bin/getrpt?GAO-03-429