Retirement Is No Holiday From Debt

 

Once upon a time, people who retired had paid off the mortgage and if they had debt, it was probably a car payment.  But no more.  According got the Wall Street Journal

Gone are the days when most Americans went into retirement with little credit-card debt and without a mortgage. Now, for a growing number of seniors, high levels of debt are threatening their retirement dreams.

At any age, debt troubles are a major challenge and can take a heavy emotional toll. But for retirees with limited ability to boost their income and greater likelihood of big medical bills, it’s even more of an uphill battle. …

Back in 1992, one quarter of Americans families ages 65 to 74 had debt tied to their home. In 2010, that stood at 41%, including homeowners who are tapping the equity in their homes via reverse mortgages. Meanwhile, for those 75 and older, the percentage with a mortgage or other housing loan was 24%, up from 7% in 1992.

Part of a retirement plan is to either have no major debts or have the income to cover debt payments during retirement until the debt is paid off.  From time to time we meet people who are within a few years of retirement who have a large mortgage and minimal savings but assume they will be able to retire in a few years.  It’s a challenge to explain to them that their plans are unrealistic.  The most valuable asset that young people have is time because that allows the power of compound interest to work its magic.

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