Housing Debt Is Invading Retirement

Research from LIMRA Secure Retirement Institute finds more Americans are entering and living in retirement with a mortgage representing their biggest source of debt.

Home ownership remains widespread among retirees, according to the latest installment of the LIMRA Secure Retirement Institute Industry Trends series, and so does mortgage indebtedness.

Among retirees with $100,000 or more in assets, nine out of 10 own a primary residence, LIMRA finds, dropping to seven in 10 among retirees with fewer assets. “At one time, few people retired with mortgage debt,” LIMRA explains, “but that has changed in recent years.”

In 1989, just 11% of homeowners ages 65 to 74 were still paying the bank back for their home equity, averaging $29,000 of mortgage debt at retirement. By 2013, 43% of these households carried a mortgage, with the average debt rising significantly to $136,000.

Even retirees age 75 and older are carrying more debt burden, according to LIMRA Secure Retirement Institute. As of 2013, 2.7 million households, or 20% of the 75-plus group, had mortgage debt. Looking at the same population segment in 1989, only 5% still carried a mortgage.

“Institute research finds people carry debt into retirement for many reasons, such as using their home’s equity to fund health care, education, consolidating other loans and other expenses,” LIMRA explains. “Even with low interest rates, mortgage debt represents a cash outflow that can eat away at retirement income. In the best circumstances, a couple’s collective retirement income will allow them to stay on top of their living expenses and debts.”

Unfortunately, the research also shows “very few plan for the inevitability of meeting all these obligations when one of them dies. For this reason, an adviser’s best counsel is to encourage both spouses to be actively involved in their financial decisions as the surviving spouse typically lives for an extended period of time.”

The LIMRA Secure Retirement Institute Industry Trends Series is archived here.