NCPA - National Center for Policy Analysis

Debt Hobbles Older Americans

September 8, 2011

Most people used to pay off their debts before retiring.  But as wages have barely kept up with rising prices over the past 35 years Americans have pushed debt higher, living beyond their means.  Now, people are postponing retirement, cutting living standards or both, says the Wall Street Journal.

All kinds of debt held by this age group have risen, but the big problem is mortgages.

  • Thirty-nine percent of households with heads aged 60 through 64 had primary mortgages in 2010 and 20 percent had secondary mortgages, according to research group Strategic Business Insights' MacroMonitor.
  • That was up from just 22 percent and 12 percent, respectively, in 1994.

Debt isn't the only issue clouding retirement prospects.  People aren't saving enough either. 

  • As calculated in a Wall Street Journal article earlier this year, the typical American household nearing retirement with a 401(k) retirement account has less than one-quarter of what it needs in that account to maintain its standard of living in retirement.
  • Four out of five households with heads in their early 60s and with mortgages had too little savings in 2008 to pay off debts without dipping into retirement accounts, according to Boston College economist Anthony Webb.

Debt levels of older Americans have been rising for more than two decades.  Indeed, of households with heads aged 62 through 69 and with mortgages, the median amount of mortgage debt hit $71,000 in 2007, five times the 1987 inflation-adjusted median, according to a study by William Apgar, then at Harvard's Joint Center for Housing Studies.

Source: E.S. Browning, "Debt Hobbles Older Americans," September 7, 2011.

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