Harvard: Reverse Mortgages Offer Realistic Solution to U.S. Aging in Place Crisis

With the incoming influx of baby boomers entering retirement age, the number of older homeowners will soar in the near future. While many will prefer to age in place, certain challenges will prevent these desires from becoming reality. But here is where a reverse mortgage can be a financially realistic option to help older homeowners alleviate cost burdens and comfortably age in place, according to a new report from Harvard University.

More than one in five people in America will be aged 65 or older by 2035. Furthermore, one in three households will be headed by someone 65 or older, according to the report released Tuesday by the Joint Center for Housing Studies of Harvard University.

Additionally, the number of homeowners 65 and older will be over 38 million by 2035 and renters will expand by 80% to 11.5 million.

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Government-affiliated programs, such as Support and Services at Home (SASH) and Community Aging in Place—Advancing Better Living for Elders (CAPABLE), assist older adults with affording adequate housing.

But during an era that will see vast quantities of older people with low incomes and high housing costs, reverse mortgages—if used strategically—could provide another solution for helping older homeowners facing cost burdens.

“For those [homeowners] with mortgages they cannot afford but who still have substantial home equity, reverse mortgages may make it more financially feasible to age in place,” the Harvard report states.

Though tapping into home equity can be a welcomed solution to financial hardship, the number of homeowners using it is still fairly low, the report adds.

“There are a fair number of older adults who have the financial resources to keep up in retirement, but there are more adults with moderate to low funds,” Jen Molinsky, senior research associate at the Harvard Joint Center for Housing Studies and lead author of the report, told Reverse Mortgage Daily.

Yet given that over 17 million older adults may face housing cost burdens by 2035, according to the report, ensuring that all can afford an adequate home in an era that will see millions more with low incomes and high housing costs will require new policies and additional funding solutions to help older adults successfully age in place.

Perhaps the most important form of assistance, Harvard researchers suggest, will be greater emphasis placed on educational programs aimed at teaching adults in pre-retirement years how to avoid cost burdens in retirement, either by prioritizing the reduction of mortgage debt during their working years or raising awareness of the application of reverse mortgages in modern day retirement planning.

“Housing wealth can provide a valuable safety net for older households who have exhausted other financial reserves, through second mortgages, reverse mortgages, or home sales,” the report states. “However, survey evidence indicates the use of home equity to finance retirement is seldom an explicit plan.”

View the full Harvard Joint Center for Housing Studies report.

Written by Alana Stramowski

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