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More Boomers Bearing Mortgage Debt Into Retirement

September 9, 2015

Baby boomers are increasingly entering retirement still paying off mortgages and even credit-card debt, and that can leave them in a precarious situation, The Washington Post writes. Despite the potential tax advantages available through interest-rate deductions, advisors tell the paper that it’s best to dip into savings, cut expenses or even continue working to pay off all debt before retiring.

Unlike the Greatest Generation before them, who would make a show of burning the mortgage papers before they retired, baby boomers are content to carry debt into retirement at an increasing pace. According to a Consumer Financial Protection Bureau report cited by The Washington Post, 30% of homeowners 65 and over had mortgage debt in 2011, compared to 22% in 2001. And the rate has jumped from 8.4% to 21.2% for those 75 years and older. That debt has also grown in size: The median has jumped from $43,400 to $79,000, reveals the report. Home loans are not the only debt baby boomers carry into retirement: The CFPB reports that older Americans are also taking more credit-card debt and even student loans into retirement.

That debt, because it’s a fixed expense, can keep retirees from having fun and spending it on travel and entertainment, Mark Hebner, president of Index Fund Advisors, tells the paper. A much bigger concern is the possibility of that fixed expense becoming unbearable as a result of the economy going sour or a market crash, says Ken Moraif, senior advisor at Money Matters, to the Post.

Advisors are urging clients approaching retirement to pay off that debt by cutting expenses or using some of their retirement savings, and focusing on the higher-interest credit-card debt before tackling the home mortgage, the paper writes. Some advisors also encourage clients to continue working, at least part-time, past retirement. “You will spend the rest of your life with no debt. It’s worth it,” Moraif says to the newspaper.

By Alex Padalka
  • To read the Washington Post article cited in this story, click here.