Seniors Whacked by the Mortgage Crisis

As the number of Americans in the "baby boomer" demographic peaks, seniors and retirees face the brunt of the mortgage crisis at a time when they're most vulnerable. According to the AARP, older people across the U.S. may suffer the most from the nation's current economic strife.

Seniors account for 30 percent of the population of the U.S., and the first " baby boomers" turned 60 in 2006, representing the largest-ever segment of American retirees in history. (Boomers are defined as people born between 1945 and 1964.)  According to the AARP, there are now 78 million of these over-50 seniors living in America. But in the wake of recent economic adversities, the AARP also reports that many of these people may have to stay on the job longer than their parents did and not actually retire, because their "spend now, save later" lifestyles have prevented them from having enough money to retire.

Seniors, the wealthy demographic?

In 2006, the year when the boomer generation officially hit retiree age, boomers were truly golden. Based on data from the National Association of Realtors and the AARP, boomers that year earned more than $2 trillion. They controlled 80 percent of personal wealth deposited in financial institutions, and half of all discretionary income-two and a half times the national average. Nearly 80 percent owned a home, and about 25 percent owned a second one, as well.

Until the real estate market bubble burst, these seniors were the wealthiest demographic.  But now, just two short years later, the situation looks much bleaker. These newly-turned seniors have lost considerable wealth, and continue to do so, as the value of their homes, stocks, and pension plans plummet, and the mortgage crisis continues.

Mortgage crisis and retirees

According to a study just released by the Consumer Bankruptcy Project, bankruptcy rates have soared among seniors. Retirees are more than twice as likely than younger Americans to file for bankruptcy, and filings have quadrupled amongst seniors 75 and older. The AARP's Public Policy Institute reported last week that 684,000 50-plus Americans were either in foreclosure, or delinquent in mortgage payments.

If the Treasury's rescue sparks inflation, retirees on fixed incomes will be hurt again. But without the plan, their assets will dramatically deteriorate even further. The rescue plan involves about $700 billion, for instance, but delay of the plan's passage cost more than a trillion dollars in one day, as the stock market tumbled.

The best news may be from legendary investor Warren Buffett, the richest man in the U.S. and a senior citizen himself.  Speaking on television in an October 2008 interview, he indicated that while the economy will suffer in the short term, taxpayers might eventually earn back all the Treasury money invested to bolster the markets. It's encouraging to retirees to know that Buffett thinks the economy will be healthier over time once we get through this current crisis and address the mortgage problem. His outlook should give seniors and other Americans some degree of comfort and hope.