June 1st, 2017
Joining the chorus of popular media outlets that have covered home equity’s role in retirement, USA Today ran a lengthy piece this week about ways homeowners can tap into their wealth — including with a Home Equity Conversion Mortgage.
Quoting experts such as reverse mortgage researcher Wade Pfau and wealth advisor Randy Bruns, the national newspaper provided an uncritical forum for a high-level discussion of the HECM program and its potential benefits for seniors.
“Reverse mortgages have become a critical component of retirement planning,” Bruns told the paper. “A reverse mortgage line of credit can greatly reduce sequence of return risk by providing timely access to cash so you won’t have to sell investments until after markets have recovered,” he continued, explaining an increasingly popular pitch for the HECM: Use your home equity in down markets so you don’t have to deplete your nest egg just to cover basic living expenses.
“The hope is that a reverse mortgage line of credit can act as a standby source of liquidity in the kinds of instances that would otherwise lead to financial ruin for your portfolio,” Bruns told USA Today.
The paper built its story around a recent brief from the Employee Benefit Research Institute — which RMD covered last month — showing that the vast majority of the average American’s retirement war chest lies in home equity.
EBRI senior researcher Craig Copeland looked at households’ retirement investments relative to their overall wealth, including home equity, and determined that built-up home value accounted for pretty much all of what the average American will have to fund his or her retirement.
“Consequently, when measuring families’ financial asset holdings at retirement, it is overwhelmingly the case that just [retirement account] assets plus home equity represent almost all of what families have for retirement outside of Social Security and defined benefit pension plans,” Copeland wrote in his brief for EBRI.
In addition to reverse mortgages, USA Today’s piece suggests that workers start funneling money into an employer-sponsored 401(k) or a private IRA as soon as possible, and also consider purchasing a home if possible — with the goal of paying down the mortgage quickly to build equity rapidly.
“It might seem obvious, even simplistic,” USA Today writer Robert Powell notes. “But having home equity and retirement accounts are key to most families’ financial assets and — by extension — retirement security.”
Read Powell’s full piece at USA Today.