According to a 2019 report from Harvard's Joint Center for Housing Studies, 46% of homeowners ages 65 to 79 have yet to pay off their home mortgages. Thirty years ago, that figure was just 24%. There are several smart ways to retire without a mortgage.
Many Retired People Don't Expect to Pay Off Mortgages
The survey, "Retirement and Mortgages," by national mortgage banker American Financing, found 44 percent of Americans between the ages of 60 and 70 have a mortgage when they retire, and as many as 17 percent of those surveyed say they may never pay it off.
We found across these 50 metros that an average of nearly 19% of homeowners who are 65 and older still have a mortgage. Beyond that, we also found that homes owned by people in this age group tend to be less valuable than those owned by the general population — and that their monthly housing costs tend to be lower.
Average Retirement Debt: The Numbers
Three in 10 devote more than 40% of their monthly income to debt and a quarter have a mortgage with more than 20 years remaining on it. More than half say they intend to enter retirement debt free, but only one-quarter of retired Boomers actually are debt free.
According to the Survey of Consumer Finances, the percentage of households headed by an adult aged 65 or older with any debt increased from 41.5% in 1992 to 51.9% in 2010 to 60% in 2016. Median total debt for older adult households with debt was $31,300 in 2016 – more than 2.5 times what it was in 2001.
Debt Before Retirement
“The key thing that we tell our clients is that when you retire, so should your debt be retired,” Ken Moraif, senior advisor of Retirement Planners of America, recently told Yahoo Finance Live. “We really encourage people to be debt-free.” That means no car loans, credit cards, or mortgages.
While you should steer clear of high-interest credit card debt, it's OK to use debt intentionally, including taking on a mortgage, using loans to pay for school or financing a car to get you to and from work. As for the ideal age to debt-free, don't get too caught up in the comparison game, says Sanborn Lawrence.
According to a 2019 report from Harvard's Joint Center for Housing Studies, 46% of homeowners ages 65 to 79 have yet to pay off their home mortgages. Thirty years ago, that figure was just 24%. There are several smart ways to retire without a mortgage.
But if you can supplement your retirement income with other savings or sources of income, then $6,000 a month could be a good starting point for a comfortable retirement.
You should aim to have everything paid off, from student loans to credit card debt, by age 45, O'Leary says. “The reason I say 45 is the turning point, or in your 40s, is because think about a career: Most careers start in early 20s and end in the mid-60s,” O'Leary says.
Paying off a mortgage can be smart for retirees or those just about to retire who are in a lower-income bracket, have a high-interest mortgage, and don't benefit from tax-deductible interest. It's generally not a good idea to pay off a mortgage at the expense of funding a retirement account.
According to U.S. Census Bureau data, the median average retirement income for retirees 65 and older is $47,357. The average mean retirement income is $73,228. These numbers are broken down into median and mean to more fully understand the average retirement income.
If you're wondering what's a normal amount of retirement savings, you're probably one of the 64% of Americans who either don't think their savings are on track or aren't sure, according to the Federal Reserve's “Report on the Economic Well-Being of U.S. Households in 2020.” Among all adults, median retirement savings ...
So how much non-mortgage debt do Americans have? According to Northwestern Mutual's 2021 Planning & Progress Study, U.S. adults aged 18 and over who carry debt hold an average of $23,325 outside of their mortgages.
Maintaining enough cash on hand to cover recurring bills with interest is harder on a fixed income and adds another obstacle to the challenge of living comfortably. And yet, 46% of all Americans expect to retire in debt, according to a survey by personal finance site MagnifyMoney.
Mortgages are the largest debt owned by many Americans, but paying them off before reaching retirement age isn't feasible for everyone. In fact, across the country, nearly 10 million homeowners who are still paying off their mortgage are 65 and older.
Can you get a 30-year home loan as a senior? First, if you have the means, no age is too old to buy or refinance a house. The Equal Credit Opportunity Act prohibits lenders from blocking or discouraging anyone from a mortgage based on age.
While mortgage rates are currently low, they're still higher than interest rates on most types of bonds—including municipal bonds. In this situation, you'd be better off paying down the mortgage. You prioritize peace of mind: Paying off a mortgage can create one less worry and increase flexibility in retirement.
Take a step back and think: “Could my money be doing more for me?” If you spend all your hard-earned cash paying off your mortgage, you won't have it to invest in other places—which, of course, limits your potential for a cash return.
According to a 2020 Experian study, the average American carries $92,727 in consumer debt. Consumer debt includes a variety of personal credit accounts, such as credit cards, auto loans, mortgages, personal loans, and student loans.
How Much Debt Can You Afford? The 28/36 Rule. 28%—An industry rule of thumb suggests that no more than 28 percent of your pretax household income should go to servicing home debt (principal, interest, taxes, and insurance).
Seek Employers Who Offer Pension
If you're wondering how to retire at 50 with no money, find a position with a company that offers a pension. With a little extra thought and planning, working for 10 or 15 years at a company with a pension could make a positive impact on your retirement savings.
Here's how to tell if you're ready to retire: You are financially prepared. You have eliminated debt. You have a plan to cope with emergencies.