Thursday, July 26, 2007

Shouldn't the Baby Boomers Be Paying Down Their Debts?

I was under the presumption that as you approach retirement, you not only store up enough cashiola to float you through to your death, but that you also pay down your debts. Alas, this does not seem to be happening;


And it concerns me a little bit because I see people older than me not only cashing out all the equity in their homes, but more and more people using the reverse amortization mortgage as a means to bleed out all the equity in their homes as they retire. Effectively leaving their children with a fully leveraged house. My question is what will happen to the value of these inherited properties when Gen X sells them, because we already have our own homes and don't need them? The flood of properties will lower the price below the amount owed on it and we'll have ourselves a nice little debt problem.

Alas it seems a generation is unknowingly committing the perfect crime, racking up debt, only to die before they pay for it...then again, I don't know how this materially differs from social security.

8 comments:

Anonymous said...

Ok why should my death be a lottery win for my children?
If I am house rich but cash poor and want to have a certain lifestyle and can do so with a reverse mortgage when why not?
So the kids can fight over after I'm dead?
When did bringing them into the world, raising them, helping them out financially until they stand on their own become not enough as a parent and that I have to provide for them after I die?

Anonymous said...

Here we go again with moral and humanity. I think the Captain has something to say about this...

Anon-

So you wanna enjoy living without working, huh? It's like the drunk college students who mess everything up and someone else has to clean up after they are gone. There is a nice saying in German for this behaviour, it's Nach mir die Sintflut. Too bad I couldn't find a meaningful translation.

Anonymous said...

Has the Captain become a collectivist? Now that he's posted a chart showing the aggregate debt across society, perhaps he'll show us some charts showing the decline of incomes and relative differences in earnings between the classes. Then he can tell us how we need to redistribute our wealth in a more equitable fashion.

First a post in favor of income tax and now this. Captain, you're becoming so progressive as you mature.

Zabrina said...

Interesting, that first comment by anonymous. I guess that's just the kind of attitude that is "informing" the people who go into debt instead of pay down their debt as they age. So I learned something. The more responsible people who care for other things besides themselves (the welfare of loved ones, the welfare of the community and country) are the ones who do and can pay down their debt. As usual, the mature and responsible people have to clean up after the heedless, ill-raised, selfish perpetual kids.

Captain Capitalism said...

Anon - You mean income distribution like this?

http://captaincapitalism.blogspot.com/2006/11/rich-and-poor.html

Where everybody is getting richer, including the poor?

Captain Capitalism said...

Dtrum, I have choice words, but I have a feeling most people will do the talking for me. Normally I wouldn't post his comment, but it highlights exactly what I've suspected.

Anonymous said...

My baby boom generation is such a treat. Over three quarters of my co-workers have cashed in their 401K for one reason or another. They have zero saved for retirement, and several polls have about one third of Americans in this boat. Another third have not saved enough, but I'm sure the time spent on the fishing boat will be worth it.

I don't have a chart, but it would be interesting to see what size of a welfare program this might turn out to be.

(I'm a poet, but didn't know it)

Captain Capitalism said...

Hey, Anon 1, does this sound like you?

http://crr.bc.edu/images/stories/Press%20Releases/pr_2006_06_06.pdf