Tags: mortgage | debt | trouble | retirees

WaPost's Brooks: Mortgage Debt Causing Trouble for Retirees

WaPost's Brooks: Mortgage Debt Causing Trouble for Retirees
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By    |   Wednesday, 09 September 2015 06:00 AM

As if retirees didn't already have enough financial woes, more and more of them now aren't paying off their mortgages before they retire.

And that's a problem, writes Washington Post columnist Rodney Brooks. "While there are pluses to that (the interest rate deduction for some), many financial planners now advise their clients to pay off the mortgage," he writes.

The portion of homeowners 65 and older with mortgage debt soared to 30 percent in 2011 from 22 percent in 2001, according to the Consumer Financial Protection Bureau. The median debt level for them jumped to $79,000 from $43,400.

The CFPB said in a 2014 report that mortgage debt is “threatening the retirement security of millions of older Americans."

Financial planners are worried. “My philosophy with regard to debt is when you retire, your debt should be retired,” Ken Moraif, senior adviser at Money Matters in North Dallas, Tex., told Brooks.

On the bright side for seniors with mortgage debt, at least the value of many of their homes are rising. The S&P/Case-Shiller 20-city home-price index rose 5 percent in the 12 months through June.

Elsewhere on the housing front, it might seem counterintuitive, but residential real estate stands as a strong hedge against drops in the stock market, notes columnist Mark Hulbert in Barron's.

"In 14 of the 15 previous U.S. equity bear markets, going back to 1956, the home-price index rose," he writes. "And in that lone bear market prior to 2007 in which home prices did fall, they did so by just 0.4 percent."

Of course, the home price decline during the 2007-2009 bear market for stocks represents a marked exception.

The key question for investors, then, is whether that home price drop was an aberration. Hulbert asked that question to Nobel laureate economist Robert Shiller, a housing expert.

“To some extent, it must be," the Yale professor said. "Overall there just isn’t much correlation of home prices with the stock market. So it [what happened in 2007-2009] looks like just chance.”

It's not easy to invest directly in home prices, but you can buy the stocks of homebuyers or buy apartment REITs.

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As if retirees didn't already have enough financial woes, more and more of them now aren't paying off their mortgages before they retire. And that's a problem, writes Washington Post columnist Rodney Brooks.
mortgage, debt, trouble, retirees
357
2015-00-09
Wednesday, 09 September 2015 06:00 AM
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