Middle-Income Baby Boomers Are ‘Over Invested’ in Their Homes

Middle-income Boomers may be “over invested in their homes,” a new study suggests.

More than half (56%) of home owners reported home equity of $100,000 or more, according to a new study commissioned by Bankers Life Center for a Secure Retirement. 

The study—The Middle-Income Boomer Retirement Gap: Savings, Education and Advice—surveyed 1,000 Americans aged 50 to 68 with annual household income between $25,000 and $100,000. Of the respondents, 45% were already retired.

The reported value of home equity exceeds many boomers’ investable assets.

The median home equity value reported by survey participants was $100,000 to $250,000, whereas the median investable assets is $25,000 to $100,000, data show.

“Home ownership and home equity are positive elements to building personal wealth and financial security,” the report says. “Yet middle-income boomers may be challenged to access their home equity as an asset given that nearly all (91%) of them prefer to age in place.”

While 65 has traditionally been the magic age for retirement, the majority of Baby Boomers plan to work past the age of 65.

Of those still working, more expect to retire after age 65 (43%) than before age 65 (16%). And just two in 10 (19%) expect to retire at age 65, data show.

And although boomers are optimistic about retirement — 94% have plans to retire one day — many are concerned about meeting their financial needs in retirement.

While one-third (38%) feel very or extremely confident about their retirement savings, two-thirds (62%) express some doubts, with a quarter (25%) being not too confident or not at all confident, data show.

Investable assets 

Lower investable assets may be one variable contributing to a delayed retirement for some boomers.

Middle-income boomers view a half-million dollars in investable assets as the financial threshold for retirement security.

Two-thirds (66%) of those with investable assets between $500,000 and $1 million, and nearly nine in 10 (86%) of those with investable assets greater than $1 million, are very confident their money will last throughout their retirement, the study finds. Yet most middle-income boomers have not achieved this level of asset attainment.

Only one in 10 (13%) boomers had investable assets of $500,000 or more, data show.

“Even more concerning,” the study notes, is that more than half (54%) have less than $100,000 and one-third (34%) reported investable assets of less than $25,000.

“One explanation for lower investable assets may be that boomers are heavily invested in their homes,” the report says. “While the median investable assets are $25,000 to $100,000, the median home equity value reported by survey participants was $100,000 to $250,000.”

Health care costs

In addition, middle-income boomers are unprepared for the cost of long-term care, their expectations regarding cost reveal.

Middle-income boomers estimated the cost of one year of nursing home care at $46,890, yet the true cost is nearly double at $90,520 on average, data show.

The life expectancy of a 65-year-old has grown by 37% since 1950,  according to the National Center for Health Statistics. 

“As a result, the amount of money needed to fund a secure retirement – especially health care – has grown as well,” the report notes.

Sixty-five percent don’t have a current health care power of attorney, 64% lack an up-to-date living will and 63% do not have a current last will and testament, data show.

View the study here

Written by Cassandra Dowell


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