An estimated 10,000 Baby Boomers are expected to enter retirement every day until 2030, but data reveals that an alarming number are financially unprepared for retirement.
As Baby Boomers search for ways to bolster their retirement savings, will accessing their home equity be the answer?
The Center for Retirement Research at Boston College estimated that the typical Baby Boomer with a 401(k) has saved around $135,000 in 401(k) and IRA accounts, equating to an income of only $600 month.
Allianz Life’s Chasing Retirement Study discovered that while 90% of active retirement savers believe accumulating enough savings is essential to their ability to enjoy retirement, they are already too far behind to reach their savings goals.
This lack of financial preparedness has become the No. 1 cause of concern among Baby Boomers aged 54 to 63, according to Bank Rate.
“Among those Americans actively saving for retirement, our study finds a dramatic difference between those who feel on track and those who feel behind, with this subset wishing for ways to catch up but without taking on too much risk,” Vice President of Consumer Insights for Allianz Life Paul Kelash said.
“While it’s a positive that they are actively saving for retirement, the level of anxiety is concerning, and many are simply not aware of potential solutions to help them catch up," he added.
However, there is a solution, and they might be living in it. Baby Boomers and the Silent Generation are sitting on a whopping $13.5 trillion in home equity.
Aware of this fact, reverse mortgage lenders are digging in their heels, confident in the product’s promise despite persistent regulatory uncertainty. The last several months has also seen a wave of private reverse mortgage products hit the market as lenders try to cater to retirees with higher home values looking for equity access.
And, we’ve seen a number of other innovations on the equity release front. Unison, for example, offers seniors the chance to partner with them in order to access their equity without incurring debt. And sale-leaseback companies like Irene and EasyKnock will buy your house and let you live there.
It seems everyone has become acutely aware of the looming retirement crisis in this country, and companies are popping up around the country to help solve it.
Will there come a time when one solution becomes the mainstream answer for America’s seniors?
Alicia Munnell, director of the Center for Retirement Research, thinks so.
“I’ve always thought that people would get to retirement, and couples would go out to dinner and they’d say to one another, ‘So where did you get your reverse mortgage?’ and it would be just so automatic,” said Munnell. “But we haven’t gotten there yet.”
Still, Munnell said she remains certain that the house is the solution.
“I am really committed to this notion that the house has to be part of the answer to the retirement security challenge,” she said.