The reality of lack of savings is forcing more younger boomers to turn to untapped equity in their homes to pay their bills.
According to a new report by MetLife, a larger percentage of boomers 62 to 64 are looking into reverse mortgages than in the last AARP survey in 2006.
A study of those expressing interest in reverse mortgages in 2010 showed that 21 percent were in the 62 to 64 bracket, compared to 6 percent in 2006.
In 2006 the largest group checking out reverse mortgages was the 75 to 79 at 26 percent, which dropped in 2010 to 16 percent.
It is easy to see why the dramatic shift from 2006 to 2010:
Boomers losing their jobs
Low return on bonds and CDs
Losses in the stock market
Plummeting home prices
And, lack of funds in savings accounts.
Data show that many workers nearing retirement age have saved nowhere near the amount they need, and many have very little savings. More than half of all workers, 56%, say they have less than $25,000 in savings, according to a survey by the Employee Benefit Research Institute,” said USA Today in December.
“And the strain is already starting to show up as more American actually retire. More than half of retirees, 54%, report they have less than $25,000 saved. That’s up dramatically from 2006, when 42% said they had less than that.
“For many Americans approaching retirement age, the increasing gap in savings is eroding confidence that retirement is even possible. Nearly 30% of workers of all ages surveyed aren’t confident they’ll have enough to retire, the highest level in the 21 years that EBRI has tracked the statistic. That means 36% of workers now expect to have to keep working after age 65, up from 20% in 2001.”
“The average age for taking out reverse mortgages has been around 71,” Sandy Timmerman, director of the MetLife Market Institute who conducted the survey with the National Council on Aging, explained to CNBC.
“But with job losses, higher debt and living costs, more and more of the ‘younger’ seniors are looking at reverse mortgages as a way to pay their bills and keep their homes,” Timmerman adds. “It shows the devastation some seniors have gone through since the financial downturn.”
“Reverse mortgages—which allow homeowners to borrow against the value of their homes—have been around since the early 1960′s, but have grown in popularity. TV commercials with celebrities like Henry Winkler, Robert Wagner and Fred Thompson promoting reverse mortgages, are rampant during weekends and late night viewing hours.”
Before taking out a reverse mortgage make sure you discuss with a trusted financial adviser who understands your complete financial and health picture. There are high closing costs and critical differences between different reverse mortgage policies. They also come with strict conditions. Much more complicated than a conventional mortgage.
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