Housing costs are taking up more of older adults’ incomes than anything else, however, borrowing against established home equity can help retirees manage their housing assets in retirement, according to a recent article from Financial Planning.
“On average, the value of housing equity is about 35% higher than the total value of all financial assets such as savings, brokerage accounts and retirement accounts,” the article states.
Housing dominates the asset side of the balance sheet, the article explains. Financial planners can go two different paths when assisting clients in managing this asset. One is for clients who have sufficient equity in their home and the other is for those who don’t.
For those with home equity they can tap into, establishing either a home equity line of credit or looking into a reverse mortgage with current low interest rates are the two suggested options, the article says.
“Reverse mortgages, in particular, continue to evolve and are gaining more acceptance as prudent strategies for the right candidates,” the article states. “They now offer greater safety via federal insurance and pre-screening of applicants.”
It is made clear however, that this option is not for everyone and that financial planners should ask themselves if it is a financially suitable option for someone to strive to pay off their mortgage in the first place.
“Housing is the largest source of wealth for Americans over 65, according to a 2010 Boston College Center for Retirement Research, Using your home for Income in Retirement,” the article states.
Read the full Financial Planning article.
Written by Alana Stramowski