Approximately 30% to over 40% of older American homeowners carry mortgage debt into retirement, with 27.6% of those aged 75 and older still paying a mortgage in 2022, up from 11.6% in 1998. Over 10 million homeowners aged 65 and older have a mortgage, reflecting a significant trend of carrying debt later in life.
Over the past three decades, the share of homeowners ages 65 to 79 with a mortgage rose from 24% to 41%. More older adults are entering retirement in debt — including mortgage debt.
In particular, only 37% of retirees do not have any debt, according to an Employee Benefit Research Institute (EBRI) study. 1 While that is not always a bad thing—some debt, like a low-interest mortgage, can be financially advantageous—that still leaves many people struggling in retirement.
The study showed that 97.1% of Americans aged 66 to 71 have debts that are not mortgages. The most recent Federal Reserve Study of Consumer Finances was in 2022, and that showed that the average debt for older adults is between $95,000 and $172,000.
As of recent studies, the average age at which most Americans become mortgage-free hovers around 62 years old. However, this is a moving target, influenced by broader economic trends, personal financial planning, and the changing landscape of homeownership in the U.S.
You might not want to pay off your mortgage early if …
You need to catch up on retirement savings: If you completed a retirement plan and discovered that you aren't contributing enough to your 401(k), IRA, or other retirement accounts, increasing those contributions should probably be your top priority.
The median amount of home equity for adults age 65 and older is $250,000, up 47% from pre-pandemic levels. Housing wealth is many retirees' main asset. Almost one in three homeowners age 75 and older now carries a mortgage, triple the rate from 1998. The median mortgage debt is about $107,000 for that age group.
Federal Reserve data shows that about 23% of Americans have no debt.
For those nearing retirement age, though, Orman offers different advice: If you're in your forever home, pay off your mortgage by the time you retire. Considering that baby boomers own 38% of America's housing stock—and more than half plan to never sell—is an important caveat.
About 40 percent of all U.S. households where the head of the household is between 35 and 64 are expected to run short of money in retirement, according to a 2019 report by the Employee Benefit Research Institute.
How Much Does the Average 70-Year-Old Have in Savings? According to data from the Federal Reserve's most recent Survey of Consumer Finances, the average 65 to 74-year-old has a little over $426,000 saved. That's money that's specifically set aside in retirement accounts, including 401(k) plans and IRAs.
The conventional wisdom is that you should pay off your mortgage before you retire. Yet many in their senior years do not, choosing instead to retire with a mortgage. Indeed, over 10 million homeowners paying off their mortgage are 65 and older, according to a study by mortgage broker LendingTree.
Owning a home comes with many upsides, including fixed monthly costs, stability and an opportunity to build equity. However, there are also good reasons to rent in retirement, including less maintenance and fewer surprise costs, the freedom to move, and the ability to invest more money.
Only a small fraction of retirees, around 3.2%, have $1 million or more in retirement savings, according to recent Federal Reserve data, making it a rare achievement despite many people believing it's necessary for comfort. The majority have significantly less; the median savings for households aged 65-74 is much lower, around $200,000, highlighting a large gap between the goal and reality, though high-income households fare better.
You generally need a credit score of at least 620 to qualify for a conventional mortgage, though every lender is different. FHA loans, which are backed by the federal government, may be an option for individuals with credit scores as low as 500.