One of the worst things to have to carry into retirement is debt, which may explain why annuity leads often come from people who are about to leave the workforce. But as a new analysis indicates, older Americans are falling deeper into debt, making the cost of living that much more difficult to manage.
According to a group of researchers from the Center for Retirement Research at Boston College, who presented their findings at an August meeting, in 1998, approximately half of all people in their 60s had some type of debt load. Twelve years later in 2010, that share has jumped to 66 percent. Meanwhile, from a share of assets perspective, debt has risen from 10 percent to 18 percent over that same time span.
While there are a variety of reasons for why more retirees have hefty debt burdens, the researchers say that one of the main ones relates to what they owe in mortgage payments. In other words, compared to previous years, more people in their 60s not only have a mortgage but they're paying them off more slowly than they did in the past, despite lending rates being in favorable territory.
"One possible explanation for these trends is that many homeowners traded up during the housing boom and took on larger mortgages," the report stated. "An unrelated study estimates that 17 percent of mortgage borrowers who are close to retirement age owe more than their house is worth."
Ultimately, the researchers indicate that this type of debt is having an influence on whether individuals will retire and if they do, at what time. Some are opting to stay in the workforce longer than they intended to in order to pay off their expenses.
Investing in an annuity is one of the ways in which agents can help their retirement-age customers better manage their debt. They may also want to suggest refinancing to a lower rate on their mortgage, as real estate experts say that lending rates are expected to rise in the weeks ahead.