Boomers’ Mortgage Debt Predicament

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You’re not going to like this, baby boomers.

You have more debt than the two generations born during the early Depression and World War II, much of it compliments of the mortgage bubble that financed your larger, more expensive houses. The housing bubble popped in 2008, but the mortgage on the new house or perhaps a second mortgage continues to plague many.

It should be no big surprise that a new study finds the “substantial” debts taken on specifically by those born in the late 1940s and early 1950s will gobble up more of their not-always plentiful retirement income.

“The evidence clearly shows that many Americans” on the cusp of retiring “continue to be burdened by debt and to be financially vulnerable,” the researchers said.

The lead researcher, Annamaria Lusardi at the George Washington University School of Business, is a national expert in financial literacy. As part of her study, she also wanted to understand how these early boomers manage their debts.  It turns out that people overburdened with debt more often have lower levels of financial literacy. However, debt is also an issue among older workers in poorer health or those who’ve seen their incomes decline, which is fairly common over 50.

This study dovetails with one finding by the Center for Retirement Research (CRR), which sponsors this blog.  The share of all U.S. workers on a path to a lower standard of living when they retire would be only 44 percent, rather than the current 52 percent – had they not taken on the extra mortgage debt in the early and mid-2000s.

One piece of good news in Lusardi’s study is that boomers also have more savings than older people.  But half of the boomers are still worried about running out of money – an odd corollary to that, many don’t know how much they should have saved.

The evidence mounts. Baby boomers who either can work longer or somehow reduce their debt before retiring should do so. If not, they’re taking a big step into the unknown.

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I’m a mid-range boomer (circa 1953), and our retirement planning began when payroll deduction was allowed for an IRA (early 1980s). This was a new concept, to plan for retirement 30+ years away. I recall that many coworkers were reluctant to participate, citing many excuses as the rules will change, it’s not worth it, I can’t afford it, etc., not taking to heart Einstein’s quote on compound interest being the 8th wonder of the world and the most powerful force in the universe.


I’m also a 1953 model, born 8-30-53, and I readily recall the early 1980s, when I touted a “live below your means and invest your savings” lifestyle and my boomer colleagues would say things like, “I couldn’t live like that.” I responded: “Yeah, but unless you start saving, you might have to at age 60.” I’ve stayed in touch with enough of them through the years to know my prediction came true.


When my husband and I bought our first house in 1984 interest rates where 12.5 percent. As interest rates fell, you either refinanced your existing home or moved to something bigger. When we accepted a job transfer, we of course took on another 30 year mortgage, which of course was bigger than the last. In 2003, when interest rates dropped again, you refinanced for cash flow to help your kids go to college in a period of declining real wages. It became a never ending cycle as declining rates improved your cash flow more than sub par wage increases. Refinancing became a necessary choice especially if you still tried to maintain retirement deposits as well as tuition payments. Now as we approach retirement in aging homes in need of major upgrades, the elimination of HELOC deductions may force near retirees or retirees to refinance again to make needed stay-in-place repairs instead of tapping liquid assets.

John Gilmartin

Boomers is a good name for us, we’re blowing up.


This boomer lived within the family’s means and invested to augment retirement income from pensions. If you have sufficient assets to cover living costs, then a mortgage at a rate of under 4% may be a good option that frees up funds for investment.


Reverse mortgage is a solution.

Keith Gumbinger

Boomers with more debt? Not unexpected, and waves of cash-out refinancing in the last decade followed by home price declines left many boomers underwater or with little equity. That said, things have changed most appreciably; for most borrowers, equity has returned in full force, with more than 62 percent of the nation’s 100 largest metro areas at or above (sometimes substantially so) previous boom-time price peaks.

While carrying a lot of debt is certainly a hindrance to a successful or comfortable retirement, what’s perhaps more important than the amount of debt is the amount of cash flow it absorbs. Overall household debt service as a percentage of disposable income has rarely been lower, at least according to the Fed, so that’s a general bit of good news, even if there isn’t a breakout by demographic bucket.

Although a bit older (2016), some interesting demographic data and discussion of who is carrying what kind of debts can be seen here.

Of course, it may be that today’s uncomfortable debts being held by boomers are more or less a self-inflicted wound. A paper at the St. Louis Fed points to a likely cause of the boomer’s debt plight, noting that, “the financial crisis of 2007-2009 might have been a demonstration of a tipping point caused by unsustainable spending over many years,” with rising debt facilitating excess consumption — and that, “the long accumulation of unsustainable spending, particularly clear in the Baby Boomer analysis, suggests that the problem was excessive consumption relative to household resources and not a one-off shock.”

Here’s hoping that home equity keeps rising, mortgage debts remain both manageable and falling, and that the ship will come to a more even keel over time.

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