The typical 54- to 64-year-old with a 401(k) or IRA owns a median portfolio worth about $135,000 and more than a quarter of workers don’t have retirement savings accounts (mainly because their employer doesn’t offer one). Is it any surprise older Americans worry their quality of life could deteriorate during retirement?
On the other hand, the homeownership rate for households age 65 and older has risen to 81% and their median home equity is $143,500, according to the Harvard Joint Center for Housing Studies.
“Many of these older Americans can — and will have to — rely on home equity to supplement their Social Security benefits.”
All of this raises two key questions: Could tapping that home equity through a reverse mortgage help older Americans attain a financially secure retirement while remaining in their homes? And, if so, given today’s low interest rates, is this a good time to get one?
“For many retirees, home equity represents a significant portion of their wealth,” Shai Akabas, director of economic policy at the Bipartisan Policy Center think tank, said at a Senate Health, Education, Labor and Pensions Committee hearing last spring. “Many of these older Americans can — and will have to — rely on home equity to supplement their Social Security benefits.”
Experts Turning Favorable About Reverse Mortgages
Little wonder that many retirement-research scholars and growing numbers of financial planners like the idea of some homeowners 62 and older using reverse mortgages to turn home equity into income (62 is the minimum age the U.S. government allows).
Yet fewer than 1% of eligible households have taken out a reverse mortgage, according to a Brookings Institution report. Common knocks against these loans: high fees and the notion that only desperate older Americans turn to reverse mortgages, as a last resort.
But given the current quest for greater economic security in retirement, it seems to me that reverse mortgages should be more than a niche product. That’s why I filed away a webinar headline from late last March with the title: “Highly respected economist changes his view of reverse mortgages.”