Study: Reverse Mortgages and Home Equity Critical Component Of Retirement

The Center for Retirement Research(CRR) at Boston College released a new survey that showed more than 60 percent of households are “at risk” of being financially unprepared for retirement.  The latest analysis of the National Retirement Risk Index (NRRI) examines how not taking full advantage of housing equity affects the share of U.S. households ‘at risk’ of being un-able to maintain their pre-retirement standard of living in retirement.

According to the brief, not tapping home equity through a reverse mortgage increases the percent of those ‘at risk’ by about 10 percentage points, raising the NRRI in 2009 from 51 percent to 61 percent said the CRR.



Chart Courtesy Center for Retirement Research

The study says that “Financial services firms need to acknowledge that existing reverse mortgages are often complicated and expensive and that the industry needs to develop innovative approaches to ensure that retirees have easy and efficient access to their equity.”


“Even after the bursting of the housing bubble, our research shows that home equity remains a major financial asset and can significantly impact retirement security,” said Center Director Alicia H. Munnell. “The impact of home equity on the percent of households ‘at risk’ is greater than that of the recent stock market crash. How baby boomers and future generations decide to use their home equity could determine how well many fare in retirement.”

Fact Sheet: “The NRRI and the House”