Trips to the golf course, afternoons with grandkids, and leisure travel are supposed to be the hallmarks of retirement. Instead, millions of seniors are finding they must work well beyond the traditional retirement age and are struggling to keep up with debt payments.
The statistics are sobering. The Consumer Financial Protection Bureau estimates that 21% of seniors over the age of 75 are still paying a mortgage, with the median balance of $88,000. The numbers are up to about a third of seniors over the age of 65 still carrying housing debt. Another 1.5 million seniors lost their homes due to inability to keep up payments between 2007 and 2011, according to an AARP study.
Ongoing debt places seniors in a precarious situation with not enough savings and too much debt to fund retirement.
Why Are Seniors Still Struggling with Mortgage Payments?
- Housing Crisis. Many seniors were relying on their home values to help pay for retirement When the housing market crashed in 2008, the equity in their homes evaporated quickly leaving millions owing more than the home was worth. Recovery is coming but has been slow. For many, even if they were able to downsize, they may not have enough equity to pay cash for a smaller home.
- Low Down Payment Requirements have allowed millions to get into homes without the traditional 20% down payment requirement. While this has increased home ownership, it has also left many with larger mortgage payments over a longer period than previous generations.
- Trading Up to bigger homes also means bigger mortgages and home purchases at older ages. Rather than buying one home and living in it for 30 years, it is now common to move several times during one's Work relocation or buying up due to greater financial success are both common reasons for upgrading the home. The result is multiple housing purchases, all beginning 30 more years of payments.
- Debt and Easy Credit. The Baby Boomer generation got caught in the enticements of easy lending which goes beyond housing, resulting in more debt overall and higher debt payments. With disposable income earmarked to pay down debt, there are no longer enough money to invest for retirement or pay off the mortgage.
- Mortgages Expansion. Whether it was refinancing, equity lines, or extending mortgage terms back out to 30 years, the Baby Boomer generation made a habit of using home equity as a cash machine to fund spending. The long-standing low-interest rate environment and easy credit approvals encouraged refinancing and equity lines of credit.
Now millions of seniors are facing the hard reality that they do not have enough money to pay for retirement, partly due to current debt payments. While it starts with mortgages, credit card and student loan debt are also concerns as seniors figure out how to fund a retirement on limited savings.
What Happens When the Money Runs Out?
The Social Security Administration estimates that nearly 75% of seniors rely on social security payments for most or all of their retirement income. With the average payment for 2016 only $1,341 per month, it is hardly enough to include housing and other debt payments.
Here’s an Action Plan if Housing Debt is Hurting You
Know Your Financial Health. Even if it is on life support, know what you own and what you owe, and use that as a starting point. From there, review spending patterns and potential ways to cut costs. In the end, it is all about cash flow. There must be enough coming in, to at least enough to cover what goes out. Income begins to come from various sources including social security, pensions, and retirement savings. The sooner you understand your financial picture, the more options you will have to address problems.
Do Not Take On More Debt. When income and your ability to earn is declining, becoming overextended is a recipe for disaster. Disregard credit card offers, or better yet, get off the mailing lists. The FTC offers a service to control unsolicited mail and phone calls. Near retirement is not the time to try and buy your way out of debt. Debt consolidation may help reduce interest rates if you qualify, however, taking on new debt will exasperate the problem.
Ask for Help. Pride can prevent seniors from seeking the help you need, even though early assistance will provide a lot more options. Reaching out before the first payment is late will produce better results than after you have received an eviction notice. Professional counselors can walk you through options and make appropriate recommendations based on your specific needs.
Reduce Costs, which may translate into cutting back on spending or downsizing your home. A move might be necessary if spending has already been addressed. You may find you no longer need the same square footage of living space, or you can explore more cost effective housing options. Reducing the size of your home may not only reduce or eliminate the mortgage but can also cut other costs like upkeep and utilities.
Reach Out to Family Members. You never want to be a burden on your children, yet suffering in silence is not a good solution either. More families are finding success with multi-generational living, and that might work for you as well. Charities and government agencies also offer senior services which you might have access to with a little investigation.
Continue Working or Re-Enter the Workforce. If you love your job and career, this one might be easy. For those already in retirement, options may be more limited. Part-time work can be fulfilling both financially and socially. It will help improve your finances and allow you to pay down debt while you are still in good health.
High debt levels among seniors is no longer an anomaly. Credit card debt, student loans, and mortgages are part of the reality for millions entering retirement. The risk is that the more debt you take into retirement, the more likely you are to run out of funds before your health fails. Life expectancy is rising, resulting in more years to fund in retirement, not less. While debt may have become commonplace among seniors, it does not need to define your retirement years.
If you are burdened with high amounts of credit card debt and are struggling to make your payments, or you’re just not seeing your balances go down, call Timberline Financial today for a FREE financial analysis. Our team of highly skilled professionals will evaluate your current situation to see if you may qualify for one of our debt relief programs. You don’t have to struggle with high interest credit card debt any longer. Call (855) 250-8329 or get in touch with us by sending a message through our website here http://timberlinefinancial.com/contact-us/