Forget about that time-honored delight of burning your mortgage - nearly four in 10 heads of households in the 60-64 age range still had primary mortgages in 2010 and two in 10 had secondary mortgages, almost double the numbers in 1994. The huge drop in property values is largely responsible, along with a pattern of irresponsible spending. But placing blame is almost besides the point - what matters now is how these folks can pay off their sizable debts, and eventually retire. From the WSJ:
Debt isn't the only issue clouding retirement prospects. People aren't saving enough either. As calculated in a Wall Street Journal article earlier this year, the typical American household nearing retirement with a 401(k) retirement account has less than one-quarter of what it needs in that account to maintain its standard of living in retirement. Four out of five households with heads in their early 60s and with mortgages had too little savings in 2008 to pay off debts without dipping into retirement accounts, according to Boston College economist Anthony Webb. Instead of boosting their savings as they approach retirement, a period when people usually make their largest retirement contributions, some older people are stopping contributions in order to service debts. Some who had already retired are going back to work because they can't make the financial numbers add up.
Most people make their biggest salaries in their 50s and 60s, which should permit them to make their biggest retirement-savings contributions. But partly because of debt payments, many are missing out on the end-of-career push that is supposed to boost retirement savings to where they need to be. Fidelity Investments, one of the largest managers of 401(k) retirement accounts, says participants aged 55 to 60 contributed a median 8% of salary in the first quarter of this year, down from 10% in the same quarter of 2006. Some cut contributions to zero. Even the 8% level is well below the double-digit contribution rate financial planners recommend for older workers.
Here's another serious issue that's getting little attention in Washington or anywhere else - another problem that's not part of the "conversation" (can we please ban that godawful term!!)