With More Debt During Retirement…
It’s troubling to see that the debt that continues to trouble baby boomers as they enter their retirement is showing no signs of slowing down.
In fact, according to an article published in the New York Times, the Consumer Financial Protection Bureau estimates that “30% of all homeowners 70 and older have mortgages to pay off. In 2001, just 8% carried mortgage debt into retirement.
This is an increase of 22% in just over a decade.
Most of this debt can be attributed to the Recession of 2007-2009. As home values plummeted, homeowners owed more than the value of their home, leaving them exposed to extravagant mortgage payment on a property that wasn’t even worth half what they were paying.
Presently, even as home values continue to rise, the cost of living also has, while previously well-known government programs are depleting slowly, leaving many retirees up the creek with out a paddle, and with much more debt than they could have ever imagined.
Add this to the fact that baby boomers are living longer than preceding generations and you have yourself a recipe for disaster.
One solution many baby boomers are considering is continuing to work during their “retirement.” In fact, many have chosen not to retire at all until their debt has been repaid. In addition, some have chosen to go back into the work force after many years of absence as their debt rises yearly.
Personally, I don’t think there is any clear cut solution to the growing debt problem. Many would say just work longer, but that doesn’t seem to be doing the trick either if retirees as old as 80 are still carrying bigger debt balances well into their retirement.
According to the article, Christopher J. Mayer, a real estate professor at Columbia Business School, suggests the increase in debt will lead to a spike in demand for reverse mortgages. Previously thought as a “last resort” for many seniors, the reverse mortgage might be the answer many future retirees are looking for as they plan for their retirement.
As the struggle to pay off mortgage debt, property taxes, homeowners insurance, health-care bills, etc. mounts, retirees may have to reconsider their retirement plans. In the past, many would leave their home equity to their heirs but that has quickly become a luxury many will be unable to afford in the future.
According to the Center for Retirement Research at Boston College, many new retiree as carrying at least $70,000 in mortgage debt as of 2010. The amount may have increased in the past three years.
The changes to the reverse mortgage program, which were implemented on September 30, have made the program safer for borrowers as well as FHA. As more retirees become aware of the situation, they may consider alternatives to traditional forms of retirement income. It seems like it will be the best, and only, way to stay ahead of the curve.
Interested in a reverse mortgage? Give PS Financial Services a call at (888) 845-6630 or sending us an email at info@PSReverseMortgage.com. We do not pressure those who inquire. We are simply here to help.