With retirement still at risk, baby boomers are spending less on frills

Baby boomers are spending less on frills than the prior generation but more on education, their adult children, and mortgage debt, putting their retirement at risk. That’s the conclusion of a study, How Are Baby Boomers Spending Their Money?” by Pamela Villarreal at the National Center for Policy Analysis. She parsed data from the Bureau of Labor Statistics’ Consumer Expenditure Survey, comparing the spending habits of 45- to 64-year-olds in 1990 and 2010.

While Villarreal recognizes that the onus is on individuals to make the switch from spending to saving, she uses her findings to call for tax neutral policies on savings. One proposal: allowing folks to make the same annual contribution to an individual retirement account (now limited to $5,000, or $6,000 for those 50-plus) as is allowed to an employer-sponsored 401(k), which has a current annual limit of $17,000 or $22,500 for those 50-plus). Spend less; sock away more.

While real income for today’s pre-retirees and those from 20 years ago has not changed much, the portion of disposable income spent on certain things is changing, Villarreal found. Surprisingly, baby boomers are not spending more on frills. Food purchases, including eating out, household furnishings, and clothing expenditures all fell. Even transportation expenditures fell (gas went up as a share of transportation expenses but was offset by less spending on new cars and maintenance).

Read more at Forbes.com.

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