An entire generation is now suffering the consequences of too many home equity line of credit withdrawals. During the housing boom, many in the 50+ crowd took out HELOCs and spent the money on home improvement projects, college tuition for the kids, and shopping sprees.

The Center for Retirement Research at Boston College director recently explained the problem to the Chicago Tribune:

“Older households [generally] gain more from price increases, so they can be expected to access their home equity more aggressively than younger households. Homeowners aged 50-62 extracted $380 billion from their primary residences and spent $149 billion..

For people approaching retirement, aged 50-62, we found that their net worth was 14 percent lower than it would have been without the housing boom. And it’s all happening at a bad time because financial markets are also not performing well, and the powerful tool of staying in the labor force longer is also not easy to use when the economy’s weak.”

In essence, home values went up but retirement savings went down. Hopefully, future generations will remember that the lessons we are all learning now.

See Also:

How a HELOC Works

Home Equity Lines Hurt Retirement Plans 

Tags | Heloc, home equity line of credit, mortgage crisis, retirement