The Most Debt Ridden Generation

It is no secret that the United States has a debt problem.  According to the CIA World Factbook, the United States government leads all debtor nations with over 12 billion dollars of debt.  And, an even more disturbing figure comes from Federal Reserve Bank of San Francisco (FRBSF).  According to the FRBSF, the United States personal debt rose to 133% of income in 2007 up from 65% in the 1980's.  This means that today, the citizens of the United States are spending 33% more than they actually earn.  The major reasons given by FRBSF for such an increase in debt stem from real estate speculation and consumer spending.

To make matters worse and to no one's surprise, the savings rate has also dropped considerably in recent years.  According to a McKinsey Global Institute study published in June of 2008, the Boomers savings rate has reduced dramatically compared to the previous generation of Americans.  The Silent Generation, born from 1925 to 1944 savings peaked at about 30% while the early Boomers born from 1945 to 1954 only peaked at 20%.  The later born Boomers born from 1955 to 1964 saving rate only peaked at 10%.  Based on their study, McKinsey concluded the following:"Our analysis shows that the Boomers' missing savings peak accounts for most of the collapse in the U.S. household savings rate from its peak of over 10 percent in the mid 1980's to around 2% today." 

An even more daunting statistic regarding savings comes from the Hoover Institution at Stanford University.  In 2005, the savings rate in the United States went into negative numbers.  Now, this is not unprecedented.  In 1933, the United States also had a negative savings rate.  The difference is that in 2005, the United States was in the middle of a great "Boom" and in 1933, the United States was in the worst part of the Great Depression. 

With the lowest savings rate since 1933 and the highest personal debt ratio in U.S. history, it seems pretty obvious that the Baby Boom generation is not only the most debt ridden generation ever but financially incompetent as well.  With no foresight to save during a boom and no preparation for retirement, the Baby Boom generation has placed the United States in a very precarious position.  With Boomers having no money to live off of, how will the country afford to take care of the older Boomer generation?