Retirement security in the 21st century means working longer, saving more and considering alternative financial products like reverse mortgages — even if it means potentially passing on fewer assets to heirs.
Such are the recommendations of longtime retirement researcher, top economist and former official in the Clinton administration Alicia Munnell, whose 23rd book “Falling Short: The Coming Retirement Crisis and What to Do About It” will be released Dec. 12.
Munnell, director of Boston College’s Center for Retirement Research, concludes in the book — co-authored by Charles Ellis, an investment specialist, and Andrew Eschtruth, associate director of the research center — that the golden age of retirement is over and Americans must adjust their practices and expectations, writes the Boston Globe in a recent article.
The book serves as a clarion call for new thinking and policies on retirement, including making it easier for workers to save, shoring up Social Security and considering unconventional financial products such as reverse mortgages.
Munnell, who has advocated for reverse mortgages for several years and is an investor in reverse mortgage lender Longbridge Financial, says using the product would allow seniors to take equity from their homes to pay for retirement.
And for retirees who have enough savings to cover homeowners’ insurance premiums and property taxes, reverse mortgages may be a good option, she said.
But Jack VanDerhei, research director at the Employee Benefit Research Institute, a think tank in Washington, said Munnell’s book doesn’t thoroughly consider the most appropriate steps for people based on their income and how long they might live.
For example, the costs of retirement are so high that reverse mortgages don’t always make a significant difference, he said. The number of middle income retirees who will avoid running short of money increases by just 6% to 8% by tapping home equity, according to the institute.
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Written by Emily Study