Reverse Mortgage Information came across a study from Boston College that asked retirees if they are planning on taping their homes equity to pay for living expenses. Below is a quick snapshot from the post.
The purpose of this study is to determine if attitudes among soon-to-be-retired babyboomers are any different with regards to using home equity for retirement. After all, the home is now the major form of savings for most households, fewer babyboomers can count on the security of a defined benefit pension and the majority of households recognize they have not saved adequately for retirement.
Nonetheless, nearly three-quarters of the survey respondents said “no” they do not plan to use accumulated home equity for ordinary living expenses in retirement. Only six percent had plans to use their home equity and twenty-two percent were not sure. The study identifies three characteristics as important factors in explaining the “yes” responses:
- people having expectations of an inadequate retirement income were more likely to expect to use home equity;
- interestingly, people having an outstanding mortgage (i.e. not “paid-off”) were more likely to expect to use home equity for retirement living; and,
- type of pension plan: respondents with less secure “defined contribution plans” (as opposed to guaranteed “defined benefit” pensions) are more likely to expect to tap their home equity in retirement.
The study also asked about how people who expect to use their home equity in retirement will actually access the resource. Overall, 15% expect to do so via reverse mortgage. Surprisingly, as the following table from the study shows, older respondents are less likely to use the reverse mortgage vehicle.
To read a full copy of the article click the link below.