No demographic is recession-proof — not even the seemingly untouchable Baby Boomers, defined by the US Census Bureau (the Bureau) as the generation born between 1946 and 1964, are immune to the vicissitudes of the Great Recession.  As the latter half of the Baby-Boom generation struggles under mounting debt, they are being forced to postpone what was once considered their birthright: retirement at 55. [For more information on Baby Boomers and their effect on the economic recovery, see the July 2010 first tuesday article, Boomers retire, and California trembles.]

The lure of accumulation during the Millennium Boom proved too great for the Generation Jones — the latter half of the Baby Boomers, born from 1954 to 1964, so named for their desire to “keep up with the Joneses.” Even before the Great Recession technically began, the Joneses were sinking deeper in debt. From 2000 to 2008, median debt for households led by someone 55 years of age or older almost doubled to $66,000.

Likewise, in the years before the fall, the number of older bankruptcy filers also soared. From 1991 to 2007, bankruptcy filings among people 65 years of age and older swelled by 150%. Bankruptcy filings for those between the ages 75 to 84 increased by a staggering 433%.

But why are so many seniors going bust? The credit card debt amassed by many during the fat times of the Millennium Boom still needs to be paid off. Older bankruptcy filers have 50% more credit card debt on average than Generation X-ers, the age group around age 30 to 40 today. The median credit card debt for seniors in 2007 was $22,562, compared to $13,615 for younger bankruptcy filers.

Many Boomers are also adding to their total debt as they continue to care for their adult children who have been socially and economically stunted by the Great Recession. Not only is there a greater number of young adults moving back in with their parents after unexpected job losses, but more college graduates who cannot find suitable employment straight out of college are trading in their new-found independence for the financial stability of their childhood home.

Medical bills are an issue for any aging population, but for those suffering under the constraints of a flagging economy, unexpected health problems are leading to bankruptcy court. 39.1% of senior bankruptcy filers said a medical problem was the reason for their filing and 32.5% directly attributed medical bills to the cause of their bankruptcy.

Perhaps the single greatest reason Baby Boomers have to defer their dreams of retirement: job loss. In September 2010, the unemployment rate for Americans 55 and older was 7.2%, a notable increase from the 2.6% unemployment rate for seniors in September 2006.

first tuesday take: A deferred retirement for Baby Boomers is an unfortunate economic necessity in this recovery period. The U.S. economy has been riding the wave of the post World War II boom — the success and stability of the Baby Boomers is providing a much needed safety net for those in Generation Y who are struggling to leave the nest and begin creating their own economic vitality.

Unfortunately, the struggles of the Baby Boomers will have a residual effect on the stressed California real estate market. Rather than purchasing vacation homes and renting beach-front condos, Boomers will continue to financially recoil, either filing for bankruptcy or simply squirreling their savings away while waiting for Junior to finally move out. Additionally, these Boomers are staying on the job longer in order to supplement their ravished nest eggs, in the process remaining in their homes and delaying the move to a more senior-friendly environment typically associated with retirement.

The standard of living has been compromised for all demographics as of late, but there is a silver lining which bodes very well for the future of California. As jobs remain scarce, Generation Y is acquiring more education and training than ever before. Baby Boomers are forced to make a greater investment in the future of their children, the Ys, than was previously required throughout history — especially during the post-war heyday of the proverbial self-starter.

This investment will soon pay off as younger generations put their substantial education and training to work in order to lead the way to a brighter economic future. The issue then becomes, where they will choose to live (read: rent and buy homes).  [For more information on the ability of Generation Y to invigorate California’s real estate market within the decade, see the October 2010 first tuesday article, The demographics forging California’s real estate market: a study of forthcoming trends and opportunities.]

Re: For many over 55, debt defers dreams” from USA Today