Only 11% of Retirees Report Tapping Into Home Equity

Of more than 2,000 American retirees, only 11% report using home equity as a current source of retirement income according to a recent survey from Transamerica Center for Retirement Studies.

The majority, or 89% of retirees over the age of 60 most frequently cite social security as a current source of retirement, while retirees in their 50s most frequently cite other savings and investments as sources of income, the survey states.

“Today’s retirees are facing formidable challenges in ensuring that they have adequate income to last their lifetimes. As Baby Boomers retire, Social Security and other benefit programs will likely be under even greater strain,” said Catherine Collinson, president of Transamerica Institute and Transamerica Center for Retirement Studies.

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As people age, the survey found the likelihood of utilizing home equity as a source of retirement income increases.

When broken down by age group, 15% of retirees over the age of 70 reported they are currently using home equity as a current source of retirement income, while only seven percent of retirees ages 65-69 reported utilizing home equity for their current retirement income.

The Current State of Retirement survey was conducted in July 2015 and included 2,012 U.S. residents, age 50 and older, who consider themselves fully or semi-retired.

Among those surveyed, more than half, or 54% shared that they do have a retirement strategy, but only 10% have it in writing. For those with a retirement plan in place, 88% consider Social Security and Medicare benefits as the cornerstone of their current strategy.

“As a society, we frequently speak of the need for workers to save and prepare for retirement. Unfortunately, the conversation often ends once people stop working and retire, which is when it becomes even more critical for them to have a financial plan that can last their lifetimes,” Collinson said.

The Transamerica results are in line with other recent survey data indicating  the majority of retirees and pre-retirees do not seriously consider home equity use in retirement.

Written by Alana Stramowski

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  • And none of these studies take retirement income seriously. What income is there from a principal residence unless a portion is being rented out or used as part of a business activity?

    Many people mistake the net proceeds from the sale of their home as their gain or loss but that is nonsense. If a homeowner sells a home for $500,000 but bought the home for $625,000, there is a loss from the sale whether there was no mortgage on the home or a $400,000 mortgage. Gain or loss from the sale of a personal residence is based on different information than the net cash proceeds coming to the seller at close.

    I have heard taxpayers for years tell me that they sold their home in the middle of the year and made $500,000 on the sale of the home only to find out that the gain was $100,000, $1,200,000 or some other amount depending on the purchase and sale prices of the home while the closing escrow documents generally show the cash due to the seller as very close to $500,000. But none of that is income.

    Cash is an asset. Income is not. Many people easily become confused over the difference between the two so why not just use the correct words to begin with?

  • Only 11%, this sure means we have a lot of potential business out there, doesn’t it?

    If I looked at this 11% and said that this takes into account seniors that are in the homes they have owned for some time. Why is this, why are not more realizing the benefit of the HECM as a retirement tool or even a hedging tool against other investment they have?

    Are we as an industry not targeting properly, are we not educating the professional like the financial planner and advisor. How about the small community banker and the attorney. This bank of professionals hold as clients many of seniors with a great deal of equity in their homes.

    These people need a reverse mortgage in their retirement planning tool kit to improve their quality of life. We have a deep well to dive into and plenty of opportunity out there!

    John A. Smaldone
    http://www.hanover-financial.com

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