Raising Home Values Boost Senior Home Equity to $6.3 Trillion in Q1 2017

June 22, 2017

Housing Wealth for Homeowners 62 and Older Grew 3.1% in First Quarter

WASHINGTON (June 22, 2017) – The National Reverse Mortgage Lenders Association reports today that homeowners age 62 and older saw their home equity increase by a combined 3.1 percent to $6.3 trillion in the first quarter of 2017 from $6.13 trillion in Q4 2016.

According to the NRMLA/RiskSpan Reverse Mortgage Market Index, the growth in housing wealth for retirement-aged homeowners was driven by an estimated 2.6 percent, or $199.3 billion, improvement in senior home values, and offset by a 0.6 percent increase of senior-held mortgage debt that equaled $9.2 billion. The RMMI, a quarterly measurement of home equity held by older homeowners, rose to 227.07 in Q1 2017, another all-time high since the index was first published in 2000.

“Older adults who want to stay in their own homes as they age, and we know a majority do, may find that the house that was perfect for raising a family lacks the features to support aging in place. But, instead of moving out, various modifications, such as stairless entryways and wider bathroom doorframes, can be made to accommodate new mobility and accessibility needs,” said NRMLA President and CEO Peter Bell. “The housing wealth our seniors have built up in their homes over the years, their home equity, can be used to update the family house into a space for living comfortably and independently for years to come.”

“Aging in an Age Friendly Home: Managing the Costs of Home Modifications with Home Equity,” a recorded NRMLA sponsored webinar for the American Society on Aging, features presentations by Louis Tenenbaum, one of the nation’s leading authorities on aging in place; Todd Brickhouse, an expert on mobility modifications; and Craig Barnes, a Certified Reverse Mortgage Professional who explains how homeowners 62 and older can tap home equity with a reverse mortgage to pay for projects.

To help explain home equity and its uses, NRMLA recently released its “Learn About Home Equity” infographic, and the three-part article, “An Introduction to Housing Wealth: What is home equity and how can it be used?,” which are available on NRMLA’s consumer education website www.reversemortgage.org/HomeEquity.

Prepared by RiskSpan, Inc.
Data Sources: American Community Survey, Census, FHFA, Federal Reserve

Prepared by RiskSpan, Inc.
Data Sources: American Community Survey, Census, FHFA, Federal Reserve Z.1 Release

About Reverse MortgagesReverse mortgages are available to homeowners age 62 and older with significant home equity. They are a versatile financial tool seniors can use to borrow against the equity in their home without having to make monthly principal or interest payments as with a traditional “forward” mortgage or a home equity loan. Under a reverse mortgage, funds are advanced to the borrower and interest accrues, but the outstanding balance is not due until the last borrower leaves the home, sells or passes away.

To date, 1,035,486 households have utilized an FHA-insured reverse mortgage to help meet their financial needs. For more information, please visitwww.ReverseMortgage.org

About the National Reverse Mortgage Lenders AssociationThe National Reverse Mortgage Lenders Association (NRMLA) is the national voice for the industry and represents the lenders, loan servicers, and housing counseling agencies responsible for more than 90 percent of reverse mortgage transactions in the United States. All NRMLA member companies commit themselves to a Code of Ethics & Professional Responsibility. Learn more at www.nrmlaonline.org.  

About RiskSpan, Inc.RiskSpan offers end-to-end solutions for data management, risk management analytics, and visualization on a highly secure, fast, and fully scalable platform that has earned the trust of the industry’s largest firms. Combining the strength of subject matter experts, quantitative analysts, and technologists, the RiskSpan platform integrates a range of data-sets–including both structured and unstructured–and off-the-shelf analytical tools to provide you with powerful insights and a competitive advantage. Learn more at www.riskspan.com.

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9 Essential Ways to Fund Retirement

9 Essential Ways to Fund Retirement

Even if you're behind on your retirement savings, there are various ways you can save for and fund retirement. Here are nine ways you can do both.

Social Security: Benefits are based on the highest 35 years of earnings. Every year a person delays claiming, benefits increase by approximately 7% (delaying from age 62 to age 70 results in a cumulative 76% increase). Couples would be wise to explore claiming strategies.

Pension: If eligible to receive a pension, speak to human resources about potential benefits, including if there is an option for a survivor benefit.

401(k) Plans (and similar workplace retirement plans): Up to $18,000 per year plus an additional $6,000 catch-up contribution for those age 50 or older can be contributed annually. If an employer match is available, try to contribute enough to maximize it if unable to save the maximum $18,000/$24,000.

IRAs: Dollars contributed to a traditional individual retirement account are tax-deductible. Mandatory withdrawals (RMDs) start at age 70 1/2, and all withdrawals are taxed at ordinary income rates.

Roth IRA's:  Contributions are made with after-tax dollars, but withdrawals are not taxed. Plus, no withdrawals are required for the account owner.

Health Savings Accounts: Like Roth IRAs, contributions are made with after-tax dollars, but withdrawals are not required for the account owner. Withdrawals are tax-free if used to pay for qualified medical expenses.

Housing: Downsizing and/or moving to a less-expensive area frees up cash and reduces expenses. The first $500,000 in capital gains on the sale of a married couple's home is not taxed as long as basic requirements are met. If you plan to stay in your existing house, a reverse mortgage can provide a stream of income.

Work Longer: Postponing retirement gives you more years to save, creates more time for your savings to grow and reduces the amount of time your savings have to last. Once in retirement, working part-time can provide supplemental income even if it means that more of your Social Security benefits are taxed.

                                                                                                                       

Taxable Accounts: Money saved in bank accounts and traditional brokerage accounts counts as part of your cumulative wealth. Even if you have it mentally budgeted to pay for other things, these savings should not be ignored when it comes to funding retirement expenses.

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Want Financial Security? Home Equity and Retirement Accounts are Key

It might seem obvious, even simplistic. But having home equity and retirement accounts are key to most families’ financial assets and — by extension — retirement security.

According to new research from the nonpartisan Employee Benefit Research Institute (EBRI), home equity and retirement accounts — 401(k)-type plans and IRAs — account for nearly all the assets that many families have to depend on in retirement outside of Social Security and traditional pension plans.

In its research, EBRI looked at the level of assets held by families with a working family head ages 25‒64 in so-called “individual account” retirement plans and compared those levels with all of their financial assets, as well as equity in their homes.

And what EBRI discovered was this: Families with individual account retirement plans and home equity will have something to draw from for retirement expenses, outside of Social Security, while those families without retirement plans won’t.

So, what might those saving for or living in retirement do or not do given EBRI’s findings?

For those saving for retirement. Sterling Raskie, a certified financial planner with Blankenship Financial Planning recommends that you start saving for retirement as early as possible using either an employer-sponsored plan such as a 401(k) or an individual plan such as an IRA.

And don’t worry if you’re not socking away as much as possible in your retirement accounts when you’re in your late 20s, early 30s. The EBRI research seems to suggest that you’ll build your nest egg over time. In fact, in the EBRI research, assets in retirement accounts represented 47.1% of all financial assets held in families with a working head of household ages 55-64.

Buy a house. Consider buying a house if you don’t own one, paying down your mortgage as fast as possible. Why? “Home equity is a very important asset for American retirees, and so it is important to think about how to make best use of home equity in retirement planning,” says Wade Pfau, professor of retirement income at The American College of Financial Services and author of Reverse Mortgages: How to use Reverse Mortgages to Secure Your Retirement.

Others also say home equity is an important part of a sound retirement plan. “Social Security and home equity are major pieces of the retirement puzzle,” says Randy Bruns, a private wealth adviser with HighPoint Planning Partners.“But for most individuals, the primary focus is all too often how much has been saved in their retirement accounts.If you ask me, that’s one of the biggest flaws I see in retirement planning. “

Raskie also says homeowners who pay down their mortgage faster can boost the chances of a better retirement outlook. Paying down the principal on your mortgage will increase the value of your home equity. “This can be considered a guaranteed rate of return with no risk,” he says.

Also, homeowners might evaluate what effect upgrading homes over the years might have on the value of their home equity. “Understand the impact upgrading homes during a career or taking out a mortgage just before or in retirement can have on long-term financial goals,” says Raskie.

For those in retirement. Retirees who are concerned about cash flow – about having enough income to cover their expenses – might consider downsizing their homes if they don't need as much space, says Raksie.

There are tax benefits to selling one’s house worth noting as well. According to the IRS, if you sell your home at a significant profit (gain), some or all of that gain could be taxable. However, in most cases, if the home you sold counts as your main home, the first $250,000 of gain isn’t taxable—$500,000 if you are married and filing jointly. Read Publication 523, Selling Your Home.  

“Additionally, those with high amounts of home equity can consider using a reverse mortgage to insulate their retirement portfolio withdrawals and decrease the chances of portfolio failure,” says Raskie.

Randy Bruns, a private wealth adviser with HighPoint Planning Partners, also says a reverse

mortgage is an important tool in the retirement-income toolbox. “Reverse mortgages have

become a critical component of retirement planning,” he says. “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. 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.”

Consider if and when debt useful. For those saving for and living in retirement, Raskie recommends “carefully considering if and when any debt is necessary.” The EBRI research seems to suggest that those who prioritized savings versus debt, are in a much better position for retirement.

Read EBRI’s report, Importance of Individual Account Retirement Plans and Home Equity in Family Total Wealth.

Consider a balanced approach to retirement planning. “The risks you’ll face in retirement are unlike any you faced during your working years,” says Bruns.“The more flexibility you build into your cash flow, the more likely you’ll be to manage those risks.That’s why a balanced approach using financial assets, home equity, and the optimal Social Security claiming decision deserves considerable attention as you transition into retirement.”