OF all the financial threats facing Americans of retirement age—outliving savings, falling for scams, paying for long-term elderly care—housing isn’t supposed to be a major concern. However, following a home-price collapse, the worst recession since the 1930s, and some calamitous decisions to turn homes into cash machines, millions of retired Americans are struggling with household debt.
The consequences of debt can be severe. Retirees who use their retirement to pay housing costs can face disaster if their health deteriorates or their own savings run short, making them more likely to need help from the government, charities, or their children. Otherwise, they must keep working deep into retirement.
“It’s a big problem coming off the housing bubble,” said Cary Sternberg, who advises seniors on housing issues in The Villages, a Florida-based retirement community. “A growing number of senior citizens are struggling with what to do about their home and their mortgage and their retirement.”
The baby boom generation was already facing a retirement crunch: over the past two decades, employers have largely eliminated traditional pensions, forcing workers to manage their retirement savings. Many baby boomers didn’t save enough, invested badly, or raided their retirement accounts.
“I’ll live on the streets, I guess,” said Janet Snyder, struggling with a financial burden left by her late husband and facing possible eviction and homelessness at age 74.
The Consumer Financial Protection Bureau’s Office for Older Americans says 30 percent of homeowners 65 and older (6.5 million people) were paying a mortgage in 2013, up from 22 percent in 2001. Federal Reserve numbers show the share of people 75 and older carrying home loans jumped from 8 percent in 2001 to 21 percent 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 homes’ value. In Atlanta, 23 percent of older homeowners are stuck with high mortgages, according to the real-estate research firm Zillow.
In the worst cases, hundreds of thousands of older Americans have lost their homes to foreclosure. A 2012 study by the AARP found that 1.5 million Americans 50 and older lost homes between 2007 and 2011. The numbers are probably higher now, says Lori Trawinski, a director at the AARP’s Public Policy Institute. Among homeowners 50 and older, foreclosure rates are highest for those 75 and up.
Foreclosures help explain why homeownership among those 50 to 64 dropped 5 percentage points to 75 percent from 2005 to 2013, according to Harvard University’s Joint Center for Housing Studies. (With reports from Associated Press)
(LA Midweek June 3 – June 5, 2015 Sec. B pg.1)
