The news continues to be bad about folks who are close to retirement age and their debts. It seems that some boomers are just slow to understand that the more they borrow now, the longer they will have to work to pay it off, if they can keep working. I don’t get it. Maybe some of you can explain it to me, after considering the recent statistics.
< According to a recent article from the Wall Street Journal, 40% of households headed by a person aged 60-64 have a first mortgage. This is an increase from just over 20% of similar households in 1974. Although the percentages have flattened out since 2008, that’s of little consolation for those who are getting older but not less in debt.
But the bad news about pre-retirees and mortgage debt doesn’t end there. The average balances on the mortgages owed by older boomers has also increased over the years. Amazingly, 20% of these same folks had second mortgages or home equity loans with balances!
What is going on?
The personal anecdotes reported in the story are revealing. One couple is sacrificing their retirement saving so that they can continue to live in the same expensive neighborhood. In fact, when they could no longer rent the home they were in, they bought another one instead! At the same time, they almost completely stopped contributing to their retirement plans. Supposedly, they are doing this for their son. I suspect that a stubborn refusal to accept reality is also a factor. I wonder what the son will think when Mom and Dad are 70 – and broke.
There are ways other than negative cash flow to get trapped by a mortgage. Loss of freedom to move or downsize can occur if that mortgage balance exceeds the value of your home. This is an all too common occurrence in today’s economy. You can no longer assume that the home you bought in 2005 will be worth more in 2015.
People really struggle to break free from the debt-driven consumption habits they were taught by banks, retailers, and credit card companies over the past three decades. At age 60, reason needs to take over. Don’t you think?
Here is a link to the WSJ article. You may need to be a subscriber to read the entire piece. (I read it in paper form.)