The demographic projections for the baby boomer generation are staggering. By 2029, when all boomers will be age 65 and over, they will account for more than 20% of the U.S. population, according to a U.S. Census Bureau report in May.
Baby boomers may likely be the first generation to take advantage of reverse mortgages on a large scale, said Albuquerque-based Frost Mortgage Banking Group Founder Greg Frost in the Bloomberg article.
“No mortgage payment for the rest of your life—it’s a beautiful thing,” said Frost, who added that he plans to take out a reverse mortgage on his two-story adobe home in about two years.
But even as this group drives growth at the older ages of the population, a large growing proportion are reaching retirement age still owing money on their mortgages.
The share of Americans age 65 and older with mortgage debt rose to 30% in 2011, up from 22% in 2001, according to a May analysis by the Consumer Financial Protection Bureau cited by Bloomberg. Loan balances also increased during that time, with the median amount owed rising to $79,000 from $43,400 after adjusting for inflation.
While historically it may have been an accepted belief to pay off one’s house before retirement, there has been an attitude shift among many boomers today carrying mortgage debt as they get older.
However, owing more on one’s house also means seniors will draw smaller benefits from reverse mortgages, Bloomberg writes, adding that this type of borrowing adds to debt loads that will diminish how much wealth transfers to the new generation.
“There were old-fashioned beliefs probably 30 years ago [that included] you should pay off your house before you retire,” said Olivia Mitchell, executive director of the Pension Research Council at the University of Pennsylvania’s Wharton School in Philadelphia. “This is no longer the case.”
Read more at Bloomberg.
Written by Jason Oliva