For many American workers today, the road to a comfortable retirement is paved with many challenges, both within and outside of retirees’ control. Not the least of these issues is the fact that a shortfall in savings will force retirees to consider non-traditional retirement funding solutions, particularly home equity and reverse mortgages, said one official from a Washington, D.C.-based think tank this week.
“Home equity, we think, is underutilized in retirement planning,” said G. William Hoagland, senior vice president of the Bipartisan Policy Center, a Washington, D.C.-based non-profit organization that aims to promote health, security and opportunity for all Americans.
Hoagland, who helps direct and manage fiscal, health and economic policy analyses for the BPC, presented on the retirement security and personal savings challenges facing today’s Americans at a policy forum hosted by the Employee Benefit Research Institute and the Education and Research Fund on Thursday.
Citing that Americans own an aggregate $12 trillion in home equity, and that for many retirees home equity represents a significant portion of their assets, Hoagland suggested reverse mortgages will become an even more popular retirement solution.
“Fifty percent of all homeowners age 62 are home-rich and cash-poor in the sense that more than half of their net worth is held in home equity,” he said. “The reverse mortgage market is small and the product carries some risk, but nonetheless we [BPC] think it could be a valuable tool for retirees with significant home equity.”
Two years ago, the BPC launched the Commission on Retirement Security and Personal Savings with the aim of addressing some of the most important financial issues faced by all Americans. Since then, the Commission has extensively analyzed certain challenges and has developed a bipartisan package of solutions, the final report of which the BPC plans to release June 9.
Such challenges addressed in the forthcoming report include ways to expand access to “well-designed” workplace retirement plans, facilitate personal savings for short-term needs as well as retirement, and strategies to preserve and strengthen Social Security for current and future generations of American workers.
Reverse mortgage policy recommendations will also be included in the final report, Hoagland said, though he did not expound on the finer details of what these proposals might entail.
Written by Jason Oliva