We know that America was hit by the recession, and sadly, that also includes the senior citizens—a demographic that should be preparing for retirement. Instead, many 50+ homeowners are in foreclosure and are losing one of their biggest financial investments—their homes.
Retirement and old age is typically associated with stability and relaxation. Americans in their golden years should be enjoying life’s pleasures, such as golfing, bridge, grand kids and ladies’ luncheons, right? Sadly, there’s much more stress involved in many senior American’s lives’, these days. In fact, according to an AARP study, a staggering amount of older homeowners, aged 50 and older, have taken a tremendous hit from the recession and foreclosures. The study indicates that there were 1.5 million more foreclosures in 2011 among this “older” population with many Americans in the 75+ age group losing their homes.
“Perhaps most disturbing, homeowners age 75 and older showed the fastest rise in this kind of debt, which can crumple fixed-income retirement budgets,” AARP writes. “Likewise, they had a higher foreclosure rate (3.2 percent) than younger members of the 50-plus group.”
And why is this happening to such a vulnerable group who should be thinking about retirement (if not already retired) and long-term care and medical expenses? The answer is not quite clear. According to AARP, it looks like some of the debt resulted from refinancing, taking out new mortgages or problems with rises in adjustable rate loans. But some debt also accrued from higher living costs, fixed incomes and lost stocks.
“The Great Recession has been brutal for many older Americans,” said Debra Whitman, AARP’s policy chief. “This shows that home ownership doesn’t guarantee financial security later in life.”
When an economic collapse coincides with a nation’s population aging in record numbers, there’s a problem. Many Americans are defaulting on loans against their retirements to try to make ends meet, creating an unprecedented financial hardship when they should have nest eggs primed for long-term care and medical expenses.
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Overall, the study found that about 3.5 million loans (16%) held by people age 50 or older were underwater, 600,000 were in foreclosure, and another 625,000 were 90 or more days delinquent. That’s in addition to the 1.5 million older Americans who lost their homes during these five years. Many of the seniors who were dealt this financial blow were retirees living in epicenters of the collapse—Arizona, Nevada and Florida, for example.
People are living longer, these days, which makes for an uncertain future. The Administration on Aging estimates that by 2050, 20% of the U.S. population will be over the age of 65. Health care costs are at a record high and it is estimated that there will not be enough senior housing for America’s geriatric future.
There are options here. If you find that you or a loved one’s finances were negatively affected by the recession, it may be a good idea to seek counsel from either a financial planner or a lawyer as they have insight into options/programs that most of us are unaware of. There are also government programs available to assist struggling homeowners, if you have someone to help you uncover the best one for your situation. Reverse mortgages, while not ideal for everyone, are also an option. And don’t forget about beloved family members; sometimes living with a family member turns out to be a blessing in disguise.
If you’re anticipating elder care costs for your parents read Elder Care Costs Comparison.