Substantial Mortgage Debt Persists into Retirement

The idea that retirees should pay off their mortgages before retirement has long been considered conventional wisdom. However, Federal Reserve data reveals that many Americans don't reach this goal, with substantial housing debt extending well into later life.

According to the Survey of Consumer Finances, the percentage of households carrying mortgage or home-equity debt generally declines as households get older, but significant numbers still carry that debt well into their later years. The sharpest decline occurs around traditional retirement age, from 47% among those ages 55 to 64 to 29% for ages 65 to 74.

Even in the oldest age group analyzed, ages 85 to 94, nearly one in five households still owes money on their home. The median loan balances remain above $100,000 through age 84, and even among households ages 85 to 94, the median is still $80,000.

A mortgage adds a recurring expense to a monthly budget that often becomes tighter once paychecks stop. Even a few hundred dollars less in fixed costs each month can make it easier to handle an unexpected bill or a downturn in the markets. However, retirees carrying substantial debt should understand how the payment fits into their income plan and how they would cover it if their finances changed.