More Retirees Dealing With More Mortgage Debt

Studies Outline the Increasing Mortgage Debt Burden

More Retirees Dealing With More Mortgage Debt
May 30, 2016

It is the classic American Dream. You spend the early working years saving up to buy a home and the primary working years paying off that home. As your retirement years approach, you have a fully paid-off home as an asset and can focus on pouring as much income as possible into your retirement funds. This rosy scenario is becoming less likely in recent years as more Americans carry mortgage debt into their retirement years.

A recent survey released by LIMRA shows how rapidly the situation has changed. Data from LIMRA's Secure Retirement Institute shows that as recently as 1989, 11% of homeowners in the earlier years of retirement (ages 65 to 74) carried mortgage debt with an average balance of $29,000. By 2013, 43% of that same demographic carried a mortgage and the average debt had risen to $135,900.

The situation is equally grim for older retirees. Only 5% of homeowners aged 75 and older had mortgage debt in 1989, compared to 20% in 2013. The average 2013 debt for homeowners in this demographic was $84,900. Given that the vast majority of retirees own homes (90% of those with at least $100,000 in assets and 70% of those with lesser assets), these trends show a disturbing level of collective mortgage debt among retirees.

How about those approaching retirement age? The story is similar. Just under half of homeowners aged 55 to 64 carried mortgage debt in 2013 compared to 21% in 1989. The average debt in this demographic for 2013 was $152,200.

LIMRA's findings are in line with the results of a 2014 report from the Consumer Financial Protection Bureau (CFPB). In addition to producing similar numbers for the rise of retiree mortgage debt, the CFPB found that retirees owed more on the mortgages relative to the value of their home. The debt-to-value ratio for homeowners aged 65 and older rose from 30% in 2001 to 46% in 2011.

The Great Recession was particularly brutal to retired homeowners with mortgages. From the beginning of the recession in 2007 to 2011, homeowners aged 65 or older who were seriously delinquent with mortgage payments (meaning at least ninety days late or in foreclosure proceedings) increased by a factor of five. Just under 5% of mortgage holders aged 65 to 74 were in this category, joined by almost 5.9% of those aged 75 and older. Foreclosure rates increased as a result, and while foreclosure is difficult on anybody, it is extremely difficult for retirees to recover from such a loss.

Why is retiree mortgage debt increasing? A change in mindset is part of the reason — older generations were generally more determined to clear debts prior to retirement than the boomers that are entering retirement. Current tendencies toward larger, more expensive homes and increased use of home equity to fund other expenses aggravate the issue.

If you find yourself carrying mortgage debt into retirement or your later working years, it is important to take steps to deal with your debt. If you do not plan to leave your house to your heirs and have a sufficient level of equity, you can live off your existing home equity with a reverse mortgage — assuming you do not outlive your equity.

Otherwise, lay out a plan to reduce expenses and pay off the mortgage faster. It is far more difficult to enjoy your retirement with mortgage debt hanging over your head, and retirement should be all about enjoying yourself. That's why you worked hard for all those years.

If you want to settle outstanding debts for less than what you owe, try our debt settlement tool.

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Steffanie | 05.30.16 @ 20:02
Sadly, this doesn't surprise me. We are a society that often lives outside of our means and see debt as a way of life. Hopefully it can be changed with newer generations.
Kamie | 05.30.16 @ 20:05
If I plan to purchase another house, I am going to make sure that there is no kind of mortgage set out on it, that the only thing that is left to pay is just regular taxes. I do not want my kids, or grandkids to have to worry about he debt, let alone myself as a retiring age, it will be hard enough to live off of retirement with how the cost of living is getting worse.
Carla | 05.30.16 @ 20:07
We will still be paying on our home when/if we get to retire. Circumstances have not been in our favor but I hope we find a way. Budgeting is helping so far. Thanks for the tips.
Sarah | 05.30.16 @ 20:13
it's a sad statement on life that so many have so much debt to worry with their entire lives just to have the "basics" like a home
Brittany | 05.30.16 @ 20:15
My grandparents are dealing with a similar issue currently, now that my grandfather retired. It's really sad..
Kailie | 05.30.16 @ 20:17
It's really sad to say, but things like this don't surprise me given the current state of things.
Kyle | 05.30.16 @ 20:19
This is really sad, but however it doesn't surprise me. My grandmother just recently retired and she's really feeling the negative affects of such.
Nancy | 05.30.16 @ 20:31
By myself, my Mortgage Debt has extended longer than most. Mainly because I did not buy my first home until I was in my forties.
$commenter.renderDisplayableName() | 11.24.20 @ 05:54