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Mortgages Snare Bigger Share of Boomers' Earnings


Remember how our parents paid off their homes and then retired? Fewer of us are doing that today. What's more, our house payments are taking a bigger chunk of our earnings than they did a decade ago, according to an AARP report.

Older, middle-income families spent 30 percent or more of their income on housing, up from 20 percent in 2000, the report finds. The median monthly cost: $1,460, up from $1,277 in 2000.

Sure, the recession set many families back financially. Our net worth tanked along with the housing and financial markets. No one escaped the wreckage, and here's proof: Of the 50-plus borrowers in foreclosure in 2011, 53 percent were from middle-income households.

Among other findings from AARP's analysis of 2011 Census Bureau data involving middle-income households age 50 and older:

  • 29 percent of households spent 30 percent or more of their income on housing in 2009, up from 20 percent in 2000.
  • 36 percent of homeowners own their houses free and clear, down from 40 percent in the past decade.
  • $174,500 was the average household net worth for homeowners in 2010, down from $246,000 in 2007.

The report also found that African American and Latino households were particularly hard hit during the recession: They lost more than half of their net worth between 2005 and 2009.

Though the economy is slowly improving and companies are reporting strong profits, that upswing is not reflected in our paychecks. In fact, our wages have remained stagnant for years.

According to a New York Times report, wages as a share of the Gross Domestic Product have fallen to 43.5 percent, a record low. They typically accounted for more than 50 percent of the GDP since 1975. Since 2001, however, the wage share has taken a sharp turn downward, the report said.

So while we're bringing home pretty much the same paycheck since 2001 or earlier, we're still shelling out more for health care, food, transportation, utilities, clothes and most other expenses.

Which brings me to  another report. It says that if you're thinking about downsizing to a smaller home to reduce costs and beef up your retirement savings, beware. Many people don't realize the savings they'd envisioned, thanks to closing costs and even new expenses such as a steep monthly condo fee.

Accountant Sally Herigstad tells that unless you can cut total expenses by 25 percent or more, "Don't bother."

"By the time you factor in selling costs, including commissions, moving expenses, and the costs of buying or renting a new home and buying furniture to go with it, you won't be ahead," she says. "If you realize less from the sale of your old home, you might even be farther behind."

Financial experts are increasingly recommending that older adults with shaky finances consider renting rather than buying a home as a cheaper alternative.

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