A new segment from ABC News covers how the housing is forcing americans to alter their retirement plans and what they can do to bounce back. During the feature, financial correspondent Mellody Hobson took to the road to answer questions from people in an active living community in Arizona.
One of the residents asks Hobson whether a reverse mortgage ever makes sense. “They absolutely do make sense sometimes”, said Hobson. She recommended that consumers be very careful about who you work with to ensure they’re working with a reputable provider. See video below (starts around the 1:37 mark).
While a reverse mortgage might be a solution for the woman in the video, many are looking at years before their homes are worth more than their mortgages,” says Stefan Bruckmeier, a financial planner in Denver, Colo. “That means home equity won’t be a reliable retirement option for years.”
About one in six people with a mortgage now owe the bank more than their homes are worth, according to a report by Moody’s. Most of them are property owners who purchased their homes within the past few years, or refinanced their properties and siphoned off too much equity.
Financial planners say Americans in this situation should consider exploring options other than relying on home equity as a back-up plan for retirement. Among the best options, experts say, are downsizing their homes, selling assets, postponing retirement by working longer and signing up for a reverse mortgage.