It’s hard to call retirement outcomes successful in retirees don’t have a home.
American households are entering retirement owing far more money on their homes than previous generations and need to be wary of the consequences, like the inability to meet mortgage payments.
According to a white paper from Prudential Financial, the added housing debt could create problems down the road for retirees, including the forced sale of their home when the first spouse dies.
The white paper, “Planning for Retirement: The Implications of Carrying Higher Housing Debt into Retirement,” is based on research conducted by the Center for Retirement Research at Boston College.
Americans nearing, or in, retirement experienced an extraordinary increase in housing debt between 1989 and 2013, far outpacing the increase in home values, according to the Federal Reserve.
For those ages 65 to 74, the median home value increased 76 percent, while housing debt increased by 393 percent.
“It is a different world today for retirees,” Jill Perlin, vice president of Advanced Marketing with Prudential Individual Life Insurance, said in a statement. “Americans are now carrying far more debt into retirement, particularly housing debt, and need to protect their families.”
She added that higher level of debt is due in part to low interest rates, easy access to home equity credit lines and mortgage refinancing activity.
Things have changed on the income side of the equation as well, with many households increasingly relying on dual incomes and workers taking on the burden of funding their own pensions and retiree healthcare coverage. With dual incomes, many couples enter retirement with both able to collect Social Security benefits based on their own work record.
“But the increased debt means the monthly payments will eat away at their Social Security checks and the situation for many could become especially difficult for couples when one of them passes away,” she said. “Many people also will see their monthly pension reduced or eliminated when their spouse dies.”