Foreclosures and Retirement Savings

[ferco]

I don't have the exact figures, but there are probably somewhere north of 3 million foreclosures in the US since the crisis began. Can I assume that individuals / families exhaust all financial means before having their homes foreclosed, that is regular savings, 401k's, mattress money etc. Therefore, can we safely assume that at least 3 million Americans have NO retirement savings (or any savings) at this time.....and whatever they did have left has been eroded to "zero" by the market.

The only people I meet nowadays who aren't sweating are the seniors who are already retired (and of course those on this site who are FIRE'd). Businessmen/women are 2nd mortgaging their homes to pay the monthly business expenses.

I'd be interested in the communities observations in their locales.

Where is Joe Dominguez when we need him ??

 

[FUEGO]

Savvy folks would keep their 401ks and probably IRA's since they are typically shielded from creditors during bankrupcty (and outside BK many times). In certain states like CA, purchase money first mortgages are non-recourse against the borrower, so there is no chance for deficiency judgments.

So the rare few who had substantial retirement assets but walked away from their underwater houses actually did the financially "correct" thing.

 

[ziggy29]

So the rare few who had substantial retirement assets but walked away from their underwater houses actually did the financially "correct" thing.

Legally, yes, as long as they didn't need another loan in the next 7-10 years. Morally, IMO, if they have the capacity to pay off the loan and they stick the lenders (and taxpayers, probably) with the bill for an underwater home, then I think it's wrong along the same lines as intentionally depleting assets in order to have Medicaid pick up the bill for long term care.

 

[FIREd]

I agree with FUEGO. Foreclosure and bankrupcy "victims" do not necessarily lose their retirement savings (unless they make the "mistake" to use their retirement savings to try and save their house or stave bankrupcy). If they played their cards "right" they might only have suffered a bruised ego and a dinged credit score.

Quite frankly, I do not really see much of a recession where I live. Last year, there was a period of time when we had quite a few foreclosures but I haven't seen one of these "auction" signs for months. Houses seem to be selling quicker. Stores and malls seem to be as busy as ever. The only stores going out of business are the national chains (Circuit City, Linen and Things, Compusa, S&K men warehouse, etc...). So I can't really judge what people are seeing across the country.

 

[W2R]

I don't have the exact figures, but there are probably somewhere north of 3 million foreclosures in the US since the crisis began. Can I assume that individuals / families exhaust all financial means before having their homes foreclosed, that is regular savings, 401k's, mattress money etc. Therefore, can we safely assume that at least 3 million Americans have NO retirement savings (or any savings) at this time.....and whatever they did have left has been eroded to "zero" by the market.

They probably didn't have much of any retirement or other savings anyway, if they were cutting it that close.
Lots of younger people don't have much of any retirement savings (yet).
Lots of low income people who didn't buy a house, and rent, still don't have much of any retirement savings.

The only people I meet nowadays who aren't sweating are the seniors who are already retired (and of course those on this site who are FIRE'd). Businessmen/women are 2nd mortgaging their homes to pay the monthly business expenses.

I'd be interested in the communities observations in their locales.

Where is Joe Dominguez when we need him ??

I don't know anyone at my work who is "sweating it" and not making their mortgage payments. But then, most of my co-workers are mathematically literate and perfectly capable of figuring out how much home they can afford. Many of them are not contributing, or not contributing much, to the TSP. But then, that was true before the economic crisis as well. I keep telling them...