Home Equity Is Key to Solving the Country's Looming Retirement Crisis

Home equity could be the answer to many American retirees' financial woes, and some experts are advising the preservation of reverse mortgages, reports HousingWire . "It's very clear that for most middle-income people, their house is their largest asset," says Alicia Munnell with Boston College's Center for Retirement Research. "In the past, they really haven't touched this asset in retirement, but we are in an environment where Social Security is providing lower replacement rates, and 401(k) plans have modest balances, and the time will come when the only way people will be able to maintain their standard of living will be to tap their home equity." The Urban Institute's Laurie Goodman concurs, noting almost 37 percent of older homeowners are concerned about their finances post-retirement, while many are sitting on over $3 trillion in housing equity. She also cites an Urban Institute study estimating that 920,580 U.S. households headed by someone older than 65 have an annual income at or below $20,000 and a liquid net worth at or below $50,000, while also having at least $100,000 in home equity. "All together, these less than 1 million households have $208 billion in home equity they could be using," Goodman concludes. Mainstreaming reverse mortgages requires overcoming consumer misconceptions and the loan's high cost and complexity.