Retirement Living

The current economic environment is putting pressure on older homeowners to find new sources of retirement income and stretch their savings. A new report from MetLife’s Mature Market Institute, in collaboration with the National Council on Aging, recommends that boomers become more educated in the use of home equity and reverse mortgages to support their financial needs in retirement. Growing numbers are starting to tap their housing wealth. However, with little guidance, they are unsure about how to include this asset as an integral part of their financial strategy, rather than as a last resort. 

“There is no doubt that Americans should be more strategic about using home equity,” said Sandra Timmermann, Ed.D, director of the MetLife Mature Market Institute in Westport, Conn. “Retirees need a new framework for thinking about how home equity can help assure their financial security and enable them to age in place without fear of running out of money.” 

The study, titled Tapping Home Equity in Retirement: The MetLife Study on the Changing Role of Home Equity and Reverse Mortgages, highlights different options for using home equity that are not part of the current national conversation. These include: 

• “The use of reverse mortgages to delay the age at which one might begin to collect Social Security, thus increasing the amount of one’s ultimate monthly Social Security income. 
• Reverse mortgages as a stopgap measure to consolidate credit card debt, to cover investment losses or defer mortgage payments. 
• Periodic distributions that would tap home equity to help people meet expenses if they outlive their savings/retirement income. 
• Programs that combine public benefits with modest amounts drawn from home equity to help seniors stay at home. 
• Home equity lines of credit for emergency spending, such as home maintenance, without which many homes decay and lose value. 
• Reverse mortgages with a line of credit option for borrows to pay out-of-pocket health and home care expenses. Borrowers only pay the amount they use from the loan. 

“Our research on baby boomers indicates that they are more open than previous generations to tapping home equity and considering reverse mortgages to help fund their retirement,” said Timmermann. “With the right guidance and policy protection, reverse mortgages can be an important financial option for boomers who do not have adequate savings.”