While the G.I. generation (those that fought in World War II) avoided debt and saved the majority of their incomes, today's retiring baby boomers are hardly approaching retirement in the manner of their parents. According to several recent studies and polls, it seems that despite vanishing pensions, low 401(K) balances and threats to social security and other welfare programs, many retiring baby boomers have no desire to give up their current lifestyles.

This new trend of carrying debts into retirement could be the new normal, as poor planning, unforeseen emergencies and zero desire to downsize takes precedent in the boomer's retirement plans. Overall, the trend could be seen as alarming and serve as a wake-up call for modern financial planning.

Credit Card, Student Loans and Mortgage Debt
Many financial pundits and retirement experts worry that the baby boomers - better known for spending than for saving - could be facing an economic train wreck when it comes to retirement. However, don't count the boomers out just yet. Many are planning to keep that spending up - even if it means going into debt to carry on their current lifestyles.

According to a new poll commissioned by Canadian bank CIBC, about one-quarter of retiring baby boomers surveyed expect to carry some debt into their retirement. More importantly, roughly 80% of those surveyed indicated that they have no plans to pay off their debt anytime soon and would stay in debt throughout their retirement. While the study focused on Canadian participants, a similar trend is occurring here in the United States.

In generations past, conventional wisdom was to pay off your large debts prior to retirement. That way, retirement savings and portfolios - mainly consisting of fixed income investments - would not be encumbered by large payments, such as mortgages, credit cards or student loan debt. However, many U.S. boomers are taking another route.

Using U.S. government data, Washington-based Employee Benefit Research Institute (EBRI) shows that between 1992 and 2007, the percentage of households of people in their mid-50s and older, with housing and consumer debt, rose from 53.8% to 63%. The group found that for the key baby boomers ages 55 to 64, almost 82% is carrying debt. What's more important is the level of debt. According to EBRI, the average overall debt for these 55-and-older households more than doubled (to $70,370) during that period.

While some of this debt could be attributed to rising healthcare costs and student/education debt held over from their children, a growing number of analysts peg some of the debt woes on boomers keeping their lifestyles current. The rising consumer and mortgage debt suggests that boomers believe their retirement incomes will be sufficient to support their desired lifestyle as well as service outstanding debts over a long period of time. Secondly, the idea of "Letting My Heirs Deal With The Aftermath," is also gaining prevalence.

A Smarter Strategy
Those baby boomers entering their golden years with large debts are truly doing a disservice to retirements. While it may seem like a good idea to keep the boat and push its cost down the road, the truth is that's a pretty poor idea. A debt-free start to retirement is the right strategy.

Retiring with minimal or no debt is one of the most effective ways to make your retirement savings go further. Minimizing or eliminating debt repayment in retirement reduces interest costs and immediately increases cash flow. Likewise, downsizing to a smaller home or apartment is a great way to reduce mortgage costs and utility bills.

The Bottom Line
Use the years leading up to retirement to your advantage. There's a growing trend of retiring baby boomers staying in debt in order to maintain their current lifestyles. However, paying off debt and boosting contributions to savings will help you to continue enjoying your current lifestyle better than paying a creditor each month for the privilege. While emergencies do happen, careful planning and saving is still the best way to stay out retirement debt-trap.

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