While the majority of Americans wish to age in place, an overwhelming number either don’t understand or haven’t considered using a reverse mortgage in retirement.
Of those who are nearing, or in retirement, 83% want to stay in their home as long as possible, according to the Home Equity and Retirement Income Planning Survey by The American College of Financial Services. The study also found that almost no homeowners had the desire to rent in retirement.
“We saw more uncertainty between the ages of 55 and 62,” says Jamie Hopkins, professor of retirement income planning and co-director of The American College New York Life Center for Retirement Income Planning. “But once we started getting past 62 and you start moving into retirement, we saw that these individuals really don’t expect or want to leave their homes.”
About half of those who want to stay in their homes as they age said that they would consider using home equity during retirement, but only 25% revealed that they feel comfortable spending it as a source of income, according to the survey.
Even with the large number of retirees who want to stay in their home, surprisingly, the majority of retirees don’t understand reverse mortgages, the survey found. Just 30% of those surveyed earned a passing grade on a quiz about basic reverse mortgage knowledge.
Even more shocking, 10% of the respondents incorrectly answered all ten of the questions on the quiz.
The number one reason people said they didn’t apply for a reverse mortgage was because they didn’t need the extra income. Following that reason, in order, was they were “too young”, “not ready” and it was “too risky”.
Overall, the respondents from the survey were misinformed about reverse mortgages and also thought they were more knowledgeable than they actually were about the topic.
“Hopefully that’s the biggest takeaway from the survey,” Hopkins says. “Advisors and consumers need to start thinking about home equity, including reverse mortgages, as part of the retirement income planning process.”
Written by Alana Stramowski