Of all the financial threats facing Americans of retirement age—outliving savings, falling for scams, paying for long-term care—housing isn’t supposed to be one of them. But as The Associated Press reports, after a home-price collapse, the worst recession since the 1930s and some calamitous decisions to turn homes into cash machines, millions of older Americans are straining to make house payments.
The consequences can be severe. Retirees who use retirement money to pay housing costs can face disaster if their health deteriorates or their savings run short. They’re more likely to need help from the government, charities or their children. Or they must keep working deep into retirement.
Even without housing woes, the baby boom generation already was facing a retirement crunch: Over the past two decades, employers largely have eliminated traditional pensions, forcing workers to manage their retirement savings. Many boomers didn’t save enough, invested badly or raided their retirement accounts.
The Consumer Financial Protection Bureau’s Office for Older Americans says 30% of homeowners 65 and older (6.5 million people) were paying a mortgage in 2013, up from 22% in 2001. Federal Reserve numbers show the share of people 75 and older carrying home loans jumped from 8% in 2001 to 21% in 2011.
What’s more, the median mortgage held by Americans 65 and older has more than doubled since 2001—to $88,000 from $43,400, the financial protection bureau says.
In markets hit hardest by the housing bust, a substantial share of older Americans are stuck with mortgages that exceed their home’s value. In Atlanta, it’s 23% of homeowners 50 and older, according to the real estate research firm Zillow. In Las Vegas, it’s 26%. In the worst cases, hundreds of thousands of older Americans have lost homes to foreclosure. A 2012 study by AARP found 1.5 million Americans 50 and older lost homes from 2007 to 2011.
