Baby-Boomer Blues

It’s every homeowners dream: making that 360th payment and finally getting to burn the mortgage. But in the years leading up to the recession, many Americans treated their homes like bottomless piggy banks. And as baby boomers now approach retirement, many are facing a harsh reality: the Grim Reaper could come calling before they ever pay off their mortgage. “A lot of them were seeing equity in their home and felt comfortable not putting money into retirement,” says Dean Baker, the codirector of the Center for Economic and Policy Research in Washington. “They’ve been completely wiped out.”

Since 1989, the percentage of Americans ages 55 to 64 who still have a mortgage has risen from 49 to 63 percent, according to Harvard’s Joint Center for Housing Studies. During that same period, the median balance owed by this group has nearly tripled, to $85,000.

The trend isn’t unique to the U.S. In the United Kingdom—where similarly lax lending standards and tax policies also helped create a housing bubble—a quarter of people ages 55 to 64 are still making mortgage payments, according to Aviva, the insurance giant.

Of course, many Americans have refinanced responsibly and are using the money they’re saving on interest to pay off their mortgages in, say, 15 years. But with so many 50-somethings saddled with first mortgages, along with large home-equity loans, many may never be able to rebuild their nest eggs. In other words, when it comes to retirement, 75 may become the new 65.