Dept SignpostA recent report from the New York Federal Reserve, as reported in the Wall Street Journal,  pointed out that older Americans are holding more debt than previous generations.

According to the report, the average Baby Boomer over 65 has 47% more mortgage debt and 29% more auto debt than a 65-year-old had in 2003 (after adjusting for inflation).

In 2003 many seniors had no debt at all. A married couple who had lived in the same home for over 30 years was proud they had no mortgage, owned their own cars and were living a comfortably in retirement.

But there are number of lifestyle factors at work.

First, there are many more 65-year-olds today than there were in 2003. The Baby Boom generation is growing exponentially, so the range of potential lifestyles has changed significantly.

Eliminating a mortgage, and its tax deduction, may not be in their best interest. Borrowing money from your home at historically low interest rates (3%) to fund an investment that makes 5%, is not necessarily a bad thing. It’s all about cash flow as the MBA types would say.

While our parent’s generation did not have to fund our undergraduate education, many do so willingly now, hoping to alleviate student debt and get their children started off on an even financial footing.

Many seniors, who have more resources, are allowed to take on more debt because traditionally they have been able to pay off their loans.

The figures that are available indicate seniors have more debt but have not defaulted at a higher rate than in the past and are able to manage their debt more successfully – at least according to their credit scores.

Noreen Murphy Law can help with your estate planning , elder law or Veterans benefits needs. Please give her a call.

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