Many retirees still paying mortgages
By Thomas A. Fogarty
USA Today
Retirement-age homeowners are more likely than ever to be carrying mortgage debt.
A USA Today analysis of census data shows that 28.3 percent of homeowners age 65 or older owe on their homes. That's up from 20.7 percent in 1990, and 18.9 percent in 1980. The trend probably has intensified since data were collected in 2000, says Freddie Mac chief economist Frank Nothaft.
Seniors are still the group most likely to own homes outright. Their growing reliance on mortgage debt is part of a broader trend. Overall, 70 percent of homeowners owe against their homes, up from about 65 percent in both 1980 and 1990.
But the trend among seniors reflects erosion in a long-held financial goal and safety cushion for Depression-era Americans — owning a home free and clear in retirement. "It's just another nail in the coffin," says financial planner Bill Raddatz of Tampa, Fla.
Others view the trend benignly. Nothaft says seniors typically carry low-balance debt, often taken as a tax-efficient way to support consumer spending.
"These aren't $500,000 mortgages," he says. "The nature and uses of mortgages are very different for a homeowner who's 65 than for one who's 30."
Driving the trend:
Necessity. Today's seniors have delayed saving, says economist Christian Weller, partly the result of rearing a generation with more college graduates than any other. Education costs have drained finances and prolonged mortgage repayment periods, says Weller, of the Economic Policy Institute, a Washington think tank. Higher home prices don't help. Nationally, they're up 80 percent since 1990, and the median sales price has topped $170,000.
Attitudes. As the Great Depression fades, so do the anti-debt views of those who survived it. Boston College retirement researcher Steve Sass calls the trend "a reflection of less caution we have toward debt."
Like many retirees, Andy Carter, 59, of Elkhart, Ind., is at ease with monthly house payments. In 10 moves during his corporate career, Carter says he aimed to keep his home equity at 20 percent of value, freeing cash for other purposes. "I expect to carry a mortgage until I die," Carter says.
Opportunity. A 1986 tax law drove many borrowers to mortgages by eliminating the tax deduction for interest paid on nonhouse debt. More recently, mortgages have become attractive because of low interest rates.
But for retiree Phil Reeder, 66, of San Diego, the inducements aren't enough. Two years ago, he paid off his mortgage rather than fattening his portfolio. His reason: "Peace of mind now and in the future."
