As Baby Boomers age, they will challenge the nation in several ways, from housing to health care delivery. But this group also faces challenges of its own, especially when it comes to retirement and having enough wealth and resources to live comfortably during their non-working years.
Although Boomers have accumulated more wealth than their parents’ generation, rising costs of living and high mortgage debt are two obstacles that may have Boomers looking for additional wealth building strategies. And for many, that could mean tapping into home equity with a reverse mortgage, suggests a recent article published by Nasdaq.
Baby Boomer households had roughly $253,000 of assets in 2013, according to a J.P. Morgan study on Boomers’ balance sheets. Of those median assets, the study revealed about $187,000 are non-financial and primarily in residential property.
Boomers, however, have been much more “active users of debt,” with equity in the median Boomer’s primary residence only about 60%, said Ben Mandel, an executive director and global strategist of multi-asset solutions at J.P. Morgan.
“I was surprised to see so much mortgage debt for boomers,” Mandel said in the article. “That may make it more difficult to tap their home equity, perhaps limiting their use of reverse mortgages.”
The J.P. Morgan study also found that Boomers’ expected annual income ranges between $34,000-$40,000, yet the median Boomer household spends nearly $56,000 per year.
“If boomers’ want to maintain that lifestyle, more cash will have to come from somewhere, and the most likely source of that cash will be liquidating home equity,” Nasdaq writes.
Keeping that in mind, the article recommends financial advisors become more familiar with aspects of residential real estate, from downsizing to relocation to reverse mortgages.
Read the Nasdaq article.
Written by Jason Oliva