Over the last decade, retirees over the age of 75 experienced astronomical growth in the amount of debt they carry.
This debt expansion hit this group particularly hard, growing from 31.2% in 2007 to more than 50% in 2019, according to the Employee Benefit Research Institute.
The pandemic’s impact is also increasing the financial burden of individuals over the age of 75, raising concerns among families on what retirement life will look like in the coming years.
Individuals in this group have a median income of just about $20,000 while the average debt reached $44,828 in 2019. This is up from $32,294 about nine years ago.
Retirees are using more of their income than ever before to pay down debt, dwindling their limited resources. They are paying about 7% of their income toward debt, which is up from 4.5% share in 2007. Sadly, about 5% of individuals in this position have debt payments that exceed 40% of their income.
Money management skills can play a positive role as retirees find a way out of debt, but it’s most effective during the years of employment. Building up assets and monitoring 401(k)s are some of the learned habits retirees are now benefiting from, even as others see their debt and other financial obligations increase.
Short-term solutions, such as attacking credit card debt, can also alleviate the pain of paying for future debt and the attached interest.
As more retirees find it more difficult to save and plan for the immediate future, especially in a difficult year, they may be looking for alternative solutions.
Thankfully, they do have options. Retirees over the age of 62 can turn to a home equity conversion mortgage to increase their financial resources during this challenging time.
The conversion mortgage can eliminate their monthly mortgage payments. As a result, retirees boost their retirement income without having to move or sell their home. They can also retain the option to sell the home or pass remaining equity onto heirs while also stabilizing their financial means.
To learn more about how you can navigate today’s financial realities as you plan and organize life as a retiree, please contact us to learn more about how a home equity conversion loan can work for you.
*(1) at the conclusion of a reverse mortgage, the borrower must repay the loan and may have to sell the home or repay the loan from other proceeds; (2) charges will be assessed with the loan, including an origination fee, closing costs, mortgage insurance premiums and servicing fees; (3) the loan balance grows over time and interest is charged on the outstanding balance; (4) the borrower remains responsible for property taxes, hazard insurance and home maintenance, and failure to pay these amounts may result in the loss of the home; and (5) interest on a reverse mortgage is not tax deductible until the borrower makes partial or full repayment. This material is not from HUD or FHA and has not been approved by HUD or any government agency.