This is important because public understanding is less than adequate. Davison, PhD, CFP, a respected researcher and a member of the Funding Longevity Task Force, which focuses on proper usage of reverse mortgages, concludes that “ironically the New York Time’s author also includes a quote about older adults, ‘They’ve been through so much, so they do more due diligence than the younger generation.’ Hopefully reading the New York Times is not key to their due diligence.” Until public policy has improved, media outlets will continue to be a significant source of information, or misinformation, on the Home Equity Conversion Mortgage. With media treatment like the New York Times article, Thomas C.B. Furthermore, the report advocates for improved collaboration among government agencies to work toward a coherent policy for housing use in retirement.
Recognizing that retirees are dependent on lender ads and/or media coverage for information, the Commission calls for greater outreach from FHA to help retirees understand how best to use this asset. For instance, in 2016, the Bipartisan Policy Center Commission on Retirement Security and Personal Savings recommended facilitation of home equity use in retirement. Home equity is just too important for Americans, and reverse mortgages can be an effective way to improve a retiree’s overall retirement security, and not inconsequentially, their peace of mind.įinancial advisors, policy makers, and academics are slowly starting to embrace the importance of home equity and reverse mortgages in retirement planning.
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Anything short of at least considering how to use home equity as a retirement asset is a failure in planning. Clearly, Americans need to include home equity and consider reverse mortgages as part of their retirement income strategy. The remaining $92,238 is in non-equity assets, including IRAs, other savings, and personal property. Of this amount, $192,552 is in home equity. More specifically, the median net worth for married couples age 65 and older is $284,790. For the average retiring American couple, home equity represents about two-thirds of their total net assets, according to 2011 U.S. One thing that the New York Times article did get correct is that for many Americans, their home equity is their life savings.
Not only is the New York Time’s statement wrong, it also perpetuates a harmful and damaging common misconception about reverse mortgages. At no time does the bank “own the home.” Additionally, the bank does not automatically take the home upon death. Reverse mortgages in the United States are mostly FHA-insured Home Equity Conversion Mortgages (HECMs), which are home equity loans, true, but just like any mortgage, the program requires that the borrower own the home and maintain title up until death or sale. The New York Times article “ Would You Trust Tom Selleck With Your Life Savings?” focused on the role of celebrities endorsing financial products (using AAG’s reverse mortgage ads with Tom Selleck as the backdrop), but lamentably began the article by describing reverse mortgages as “a type of home equity loan (one in which the bank gives you money and takes your house when you die).” This statement is false on its face.
A recent New York Times article on reverse mortgages published a common error that feeds into negative misconceptions that continue to hinder using home equity as a strategic retirement income source.
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