If the biggest obstacle between you and your retirement is your mortgage payment, consider easing the burden on yourself with our proven financial strategies.
Pay Down Your Mortgage Before You Retire:
Time was when many Americans retired debt free or, if not debt free, certainly without a mortgage. That's no longer the case. The average debt per household increased 45% to $58,700 in 2005, from $40,600 in 1995, with the largest increases occurring among older Americans according to a just-released Principal Financial white paper.
Not surprisingly, that increased debt level is leading to more and more bankruptcies among older Americans. In fact, the rate of bankruptcy filings among those aged 65 and older has more than doubled since 1991, and the average age for filing bankruptcy has increased, according to a recent AARP research report.
To be sure, not every person who retires with a mortgage will declare bankruptcy or eat cat food in retirement. And, to be fair, four in five homeowners in one study said they don't plan to tap the equity in their home as a source of retirement income.
But when push comes to shove and homeowners are faced with the possibility of lowering their standard of living or tapping the equity in their home, it's likely their house will look more and more like a bank account.
Boston College's Center for Retirement Research noted in a recent study that one in three pre-retirees who extracted the equity in their home during the 2000-2007 housing boom and "consumed" all of that money are likely to be worse off in retirement than those who didn't take on more debt to fund a false standard of living.
What's more, retiring with debt leaves little, if any, margin for error. A catastrophic illness or an unexpected home repair while living on a fixed income would leave retirees with few options to raise money, short of selling their home or declaring bankruptcy. For its part, Principal says those who own long-term care and other types of insurance reduce the risk of uninsured medical expenses and the possibility of selling a house to raise cash.
by Robert Powell 