Seniors Now Carrying More Housing Debt than Ever Before

Recently, I discussed the stunning amount of education-related debt that seniors are now bringing with them into retirement. While education debt as a significant component of a retiree’s debt profile is new, housing-related debt is not…but just because it has been a mainstay of many seniors’ money picture for some time, it doesn’t mean that the news there is ho-hum; as it turns out, the number of homeowners age 65 and older carrying a mortgage is steadily on the rise, with 30 percent of that group paying a mortgage in 2013, according to the Consumer Financial Protection Bureau. That number is up noticeably from 22 percent in 2001, and, according to the Federal Reserve, the number of homeowners age 75 and older lugging a mortgage around is now 21 percent – a figure that was just 8 percent back in 2001.

A related source of concern is the size of the mortgages seniors are now holding; that figure has doubled since 2001, from $43,400 to $88,000 according to the CFPB.

There are many reasons why a significant number of older Americans are carrying mortgages nowadays; like so many of us, some were simply hurt by the global economic crisis of 2008 that saw real estate values as the principal casualty. Others did what too many folks have done with their houses over the last couple of decades – use them as ATM machines on the back of values that were steadily rising for years. The bigger issue, however, seems to be this idea that carrying debt is supposed to be a part of life, regardless of how old one gets. Debt, and that which debt can buy, is now so thoroughly ingrained in our national psyche that it seems unusual not to carry any debt.

Part of this, too, has to do with how the aging population has changed, in terms of historical perspective. Someone who is 70 years old today was only 40 in 1985, when the heavy emphasis on consuming was coming into full bloom. By contrast, a 70-year-old in 1985 would have been 40 in 1955, when the role of debt in personal finance was viewed differently. In other words, today’s 70-year-olds are in no way the same as 70-year-olds from decades ago, and it shows.

Unfortunately, the way you can tell that one is the “right” perspective and the other is “wrong” is the fact that this debt is not benefiting, but is more poorly serving, the people carrying it. The foreclosure rates of seniors are way up, and savings rates are among the lowest they’ve ever been.

There are lessons here, of course. For one thing, we are again reminded that debt is generally not your friend. The various industries that thrive on us going well into debt would disagree, of course, but to the extent that you can carry no debt at all, do so. Also, be happy with what you have. This doesn’t mean that you can’t want more and better, but unless you can buy it with lots of room to spare, skip it – it’s just not worth it.

The good news is that it seems as though a lot of people are now backing away from the lifestyles they found so compelling just a relative handful of years ago, and, perhaps, there is another cultural shift at play here, wherein more folks go back to keeping things simple, and look forward to “the little things.” We’ll see. That said, none of this may do much to help those seniors heavily burdened by debt woes, presently, and that is a distinct shame.

The information contained here is for general information purposes only. The Financial Writer blog and Bob Yetman disclaim responsibility for any liability or loss incurred as a consequence of the use or application, either directly or indirectly, of any information presented herein. Nothing contained in this article, or any other article featured at this blog, should be construed as a solicitation or recommendation to engage in any financial transaction. You should seek the advice of a qualified professional before making any changes to your personal financial profile.

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