As data show how many Americans lack sufficient retirement savings, seniors should consider a reverse mortgage to turn housing equity into cash and remain in the home, says research nonprofit The Brookings Institution.
“Many retirees don’t have access to or knowledge of retirement financial products to provide security,” writes Benjamin H. Harris in a recent The Brookings Institution opinion post. “While reverse mortgages showed signs of life through the Home Equity Conversion Mortgage program, which originated 400,000 reverse mortgages between the inception of the program in 1989 and 2007, the market remains plagued by reports of improper lending behavior and misunderstanding among borrowers.”
And those past mistakes have made an impact on Americans’ perception of reverse mortgages. Today, roughly 10% of reverse mortgage borrowers are in default because they can’t afford to pay property taxes, insurance or maintenance fees.
However, recent legislation has put in greater protections for elderly reverse mortgage borrowers.
Other financial retirement tools, such as Social Security, Medicare, insurance-like products and annuities should also be considered when retirement planning, he says.
The reasons for why workers on the cusp of retirement don’t opt for these products is referred to as the “retirement puzzle,” Harris says, adding that low-interest rates and increased health spending are factors.
In fact, data show that a typical married couple on the eve of retirement needed to save roughly $250,000 to have a 90% chance of paying their medical bills.
“Americans are not perfect savers, but retirement security requires much more than just a high personal saving rate,” he says. “Contrary to public sentiment, America has a retirement spending problem, not just a saving one.”
Read the article here.
Written by Cassandra Dowell