Older Americans are Delaying Retirement to Pay Off Mortgages

Older Americans who have debt typically put off retirement, find researchers out of Boston College’s Center for Retirement Research, but may need to turn to a reverse mortgage eventually if their age and health preclude them from working while they still owe money on a mortgage or credit card. 

“Americans’ indebtedness has increased dramatically since the 1980s—a trend likely to have important implications for retirement security,” write Barbara Butrica and Nadia Karamcheva. “…Not only does the presence of debt influence older adults’ behavior, but so do the amount and type of debt—particularly outstanding mortgages.”

The share of adults in the 62-69 age range with debt increased from 48% to 62% from 1998 to 2010, with the median value of outstanding debt for those in debt standing at $32,100 per person in 2010. 

“Indebtedness could affect older adults in two different ways,” the research summary says. “[D]ebt might compel older individuals to continue working and delay Social Security benefit claiming into their mid-sixtes and beyond so they can pay off their financial obligations. On the other hand, indebted adults who are cash-strapped and unable to service their debt because they are not working or because they do not earn much might claim their benefits as soon as they are eligible to obtain the necessary cash to make their loan payments.” 


Retirement security is increasingly depending on having enough income and assets to pay for basic living expenses and to maintain debt payments, the researchers say. 

Older adults with outstanding mortgage debt are more likely to delay fully retiring from the labor force and to postpone claiming Social Security benefits, says the report, and nearly 65% of homeowners with mortgages are still working at age 64, compared to only 54% of those without mortgages.

While delaying retirement and claiming benefits as long as possible can help increase financial security in retirement, especially for those with debt, at some point age and health prevent most people from working, Butrica and Karamcheva note. 

“When that time comes, how will those with debt manage their monthly mortgage and credit card payments?” they write. “Possibilities include selling their homes, buying reverse mortgages, or declaring bankruptcy.” 

Access the Center for Retirement Research’s paper, “Does Household Debt Influence the Labor Supply and Benefit Claiming Decisions of Older Americans?”

Written by Alyssa Gerace

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