The Share of Retirees with a Mortgage Is Soaring

Retirees are carrying more debt than ever, and a rising chunk of it is the mortgage on the house they live in, new research shows. This not only threatens their retirement lifestyle but also leads to a growing percentage of elders eventually tapping out and filing for personal bankruptcy.

The financial crisis plays a big role in this new reality, having forced millions to borrow more and for longer than they expected in order to make ends meet. But also to blame are some dicey consumer practices that came into vogue before the downturn: small down payments, home equity lines of credit to fund basic expenses, and cash-out mortgage refinancing to pay for cars and vacations otherwise out of reach.

Americans past the age of 65 have the highest home ownership rate of any group; roughly 80% own their house. But while that rate has remained constant the past decade the share with a mortgage has risen dramatically, according to a report from the Consumer Financial Protection Bureau.

Among homeowners 65 and older, 30% had mortgage debt in 2011, vs. just 22% with mortgage debt in 2001, the CFPB found. The trend is more extreme among those 75 or older, where 21.2% had mortgage debt in 2011, vs. just 8.4% a decade earlier. The numbers have come down only marginally since 2011. Meanwhile, the typical amount of retiree mortgage debt has soared 82% to $79,000 from $43,300.

Don’t look for the trend to ease much in the years ahead. Other research shows that pre-retirees also are carrying more debt than at any time in history. This will push them to work longer. But it’s unlikely the vast majority of the next generation of retirees will be anywhere near debt free, or even mortgage free, when they call it quits for good.

The fallout can be found in delinquency and bankruptcy data. The bankruptcy rate of those past age 65 is the fastest-growing segment, jumping from 2% in 1991 to more than 6% in 2007. Mortgage delinquency and foreclosure rates among those aged 64 to 75 jumped five-fold since the recession.

Once upon a time, most homeowners didn’t retire until their mortgage and other biggest debts were paid off. Then again, they rarely put down less than 20% or used the equity in their home like an ATM. We’ll be paying for our bad habits for years to come.