Bloomberg Business week recently reported (September 8, 2014 pp. 17-18) that 30 percent of Americans 65 and older were still paying off a mortgage rose in 2011. This is an increase from 22 percent of retirement age households with a mortgage in 2001. Bloomberg found this data in a report issued by the Consumer Financial Protection Bureau in May 2014. The CFPB also reported that loan balances also increased by nearly double, from a median of $43,400 to $79,000 over the decade.

The Beer and Peanuts response to this is: Holy Cow! Are you serious? Let’s think about the potential causes and ramifications:

Potential Cause #1: Unplanned retirement. While the CFPB doesn’t offer a detailed analysis of the causes of more and bigger mortgages among those over 65, it seems likely that the recession of 2008-2009 caused many people to retire sooner than they intended. Leaving the workforce before a mortgage is paid off means that not only is there still a mortgage, there is likely less free cash flow to pay it down ahead of schedule.

Potential Cause #2: Buying more house than you should have. This might sound like I’m blaming the victim. Sorry. But we all know people who moved up to a bigger house, or bought “investment” real estate at the peak of the market. As home prices contracted in the wake of the financial contraction in 2008, millions of people found themselves the owners of property worth less than the mortgage. If the investment strategy for real estate is to buy with debt during a period of rapid price expansion, then sell later before the prices cool down, that means you bought more house than you should have. In January 2005 I picked up the local newspaper in West Palm Beach, Florida. The main story on page one was a report from the county assessor that property values increased 45% in a single year! Well, next time we’ll know better, right?

Potential Cause #3: Using home equity as a substitute for savings. Bloomberg quotes John Gist, a research professor at George Washington University’s Institute of Public Policy. Gist indicates that older Americans have the highest rates of refinancing and that they “… also tapped their home equity more often than younger generations.” It is easy to guess that some of the refinancing done by seniors over the past 10 years was for the purpose of accessing some cash for trips, home repairs, and other living expenses. Borrowing money for living expenses isn’t usually wise; lenders want their money back! Solomon wrote that, “The borrower is slave to the lender.”

Potential Ramification #1: Significantly reduced lifestyle in retirement. Carrying a mortgage means there may be hundreds or thousands of dollars each month going to service debt. This is money that can’t be spent on visits to grandchildren, travel, entertainment, or other important lifestyle needs.

Potential Ramification #2: Loss of home.

Potential Ramification #3: Dependency on children or others.

Beer and Peanuts Solution: Keep working

At least part time. If you have a choice to continue working while you have a mortgage, do it. Put every spare nickel you can on the principal of the mortgage. Knock it out before you retire.

Of course, we know that sometimes you have a choice about retiring. Health, layoffs, downsizing and other factors cause people to retire before they would otherwise. In that case, we recommend part-time work. It could be retail, service, or substitute teaching. Drive a school bus and have the middle of the day free. You can also consider seasonal work: work at a mall between Halloween and Christmas. Work for a tax preparer during tax season. Get a job as a ranger or at the pro shop of a golf course during the summer. You might get some free golf as well! Or be more entrepreneurial and consult back to the industry you left. Mow lawns or do maintenance for your working neighbors.

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