Why Mortgage Debt Threatens Boomers’ Retirements

A new study finds that, by many measures, debt levels among Americans age 55 and older continue to climb, putting millions of families—and their homes—at risk.

The report, “Debt of the Elderly and Near Elderly, 1992-2013,” comes from the Employee Benefit Research Institute in Washington, D.C. On the positive side, total debt payments as a percentage of income within this group fell to 10% in 2013, from 11.4% in 2010. At the same time, average debt decreased, to $73,211 from $80,465.

Overall, though, more older Americans find themselves in debt. The percentage of American households where the head of household was age 55 or older that had financial liabilities increased to 65.4% in 2013 from 63.4% in 2010. In 1992, the level was 53.8%.

What’s more, the percentage of these families with debt payments greater than 40% of income—a traditional signal of excessive liability—increased to 9.2% in 2013 from 8.5% in 2010.

The upshot: The “percentages of families whose debt payments are excessive relative to their incomes are at or near their highest levels since 1992,” the report states. “Consequently, even more near-elderly and elderly families are likely to find themselves at risk for severe changes in lifestyle after retirement than past generations.”

The biggest factor in pushing debt levels higher is housing obligations—that is, mortgages or home equity debt, as opposed to credit-card debt. In 2013, almost four in 10 families (39%) where the head of the household was age 55 or older had housing debt—up from 24% in 1992.

Most worrisome, fully 42% of households age 65 to 74 had housing debt in 2013, compared with just 18% in 1992. Among households age 75 and older, 20% had housing debt in 2013, up from 10% in 1992.

For many families, those numbers could translate into “either a forced sale [of a primary residence] or limited ability to use any housing equity for funding retirement,” the study states.

By contrast, the percentages of older families with credit-card debt has grown relatively slowly in the past two decades: from 31% in 1992 to 35% in 2013.

Looking ahead, the financial challenges for large numbers of households age 55 and older remain considerable, the report concludes. “This level of debt, along with asset values still recovering from the 2008 recession, will add to the difficulty for many people of this age to save for a retirement that will not run short of money.”

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