The 41.4 million people older than 65 in the U.S. create one of the most indebted generations ever, living with increasingly large mortgage debts.
According to a report released by the Consumer Financial Protection Bureau (CFPB) in May, 65 percent of people in the age group 65-74 have debt, and more than 40 percent of this debt is from mortgages. Also, Federal Reserve data show that the percentage of consumers age 75 and older with mortgage debt more than doubled from 8.4 to 21.2 percent in the last decade. But absolute figures are scarier: The median amount older homeowners owe on mortgages has increased 82 percent since 2001, from $43,400 to $79,000, CFPB data shows.
Paying up for mortgages at the age of 70 is not quite the same as paying when one is 35. At 75, mortgages have to be paid over and above the other basic monthly expenses, and income is more or less fixed. Chances that income will grow manifold after a certain age are bleak. The report suggests that older homeowners with a mortgage spent a median amount of $1,257 a month on housing alone, whereas home owners with no mortgages spent $434 per month, a difference of about 290 percent.
Yet another pitfall of a prolonged debt burden after retirement is lower home equity, which is the market value of the property less the remaining mortgage payments. Lower home equity implies reduced net worth of retired individuals. In 2011, the median net worth of older consumers dropped from $170,516 to $27,322 when home equity was excluded, the report showed.
In order to pay off mortgages, retirees are increasingly either delaying their retirement or choosing to continue working part time. About 22 percent of senior retirees choose to stay longer in the work force, according to an AARP Public Policy Institute report.