The approach of retirement raises all sorts of considerations, including where a person will live.
The American College of Financial Services reported this week that 88% of respondents in a survey had thought about their retirement residence, and 83% wanted to remain in their current home.
Fifty-eight percent expected to stay in their home for more than 10 years, and 21% expected to remain there more than 20 years.
At the same time, only 19% said it was extremely important to leave their home as a legacy asset for their children or other heirs, while for 45%, this was not an important consideration.
The survey also explored how respondents planned to use home equity in retirement.
It showed that many people moving into retirement with some home equity did not fully understand reverse mortgages, including those who had reviewed reverse mortgages as a potential income source.
Greenwald & Associates conducted the online poll of 537 men and 466 women between the ages of 55 and 75 (60% over age 62), with at least $100,000 in investable assets and $100,000 in home equity. Among the respondents, 60% used a financial advisor, and 44% reported having a comprehensive written retirement plan.
Reverse Mortgage Basics
The survey’s author, Jamie Hopkins, co-director of the ACFS retirement income program, noted that a reverse mortgage, although not the right solution for every retiree, can diversify home equity, build in a non-market correlated source of income to help offset market and sequence of returns risk, be used to improve cash flow by turning off payments to a traditional mortgage and be used for tax efficiency purposes during retirement.
However, the survey showed that respondents had misapprehensions about many aspects of reverse mortgages. Researchers asked them true/false questions about basic aspects of reverse mortgages. The questions were created by ACFS professors and reviewed by industry experts to ensure accuracy.
About 70% of respondents failed the test.