Mortgage Payments Make It Harder For Americans To Save For Retirement

The largest purchase that most people ever make – a house – prevents many of them from saving more money for retirement.

A survey of U.S. homeowners released this week by Bankrate found that 77 percent say their mortgage “negatively impacts their ability save money for retirement.” Of that total, 31 percent say it has a major negative impact, and 46 percent say it has a minor impact.

The remaining 23 percent say their mortgage has no negative impact.

“Big mortgage payments take a bite out of your monthly income but are also a major obstacle to saving for retirement, emergencies, or other financial goals,” says Greg McBride, CFA, Bankrate chief financial analyst. “Homebuyers, beware of biting off more than you can comfortably chew and locking yourself into payments that make it difficult to save.”

The survey also found:

  • 39 percent have more equity in their home than money in retirement accounts.
  • 28 percent of respondents say their retirement account balances exceed their home equity.
  • 12 percent say their home equity is equal to their retirement account balances.
  • 20 percent don’t know which is greater.

The survey found that the results were nearly the same whether the homeowner had a mortgage on the property or owned the home outright.

Nor did income level impact whether their mortgage negatively impacts homeowners’ ability to save for retirement:

  • About 80 percent of those making less than $30,000 reported a negative effect
  • Around 79 percent of those making between $30,000 and $49,999 reported a negative effect
  • Some 80 percent of those making between $50,000 and $79,999 reported a negative effect
  • About 76 percent of those making more than $80,000 reported a negative effect

As for age, the survey found:

  • 78 percent of those 24-39 reported a negative impact on retirement savings.
  • 82 percent in the 40-55 age group reported a negative effect.
  • 72 percent of homeowners in the 56-74 age group said it is harder to save for retirement.
  • Of the 75 and older group, almost 68 percent reported a negative effect

Read the full report here.