Can a Reverse Mortgage Help Retirees with their “Fundedness”?

June 20th, 2017 by

In Tools for Retirement Planning, Tom Davison wrote this about Steven Sass, a research economist at the Center for Retirement Research at Boston College who coined the phrase “Fundedness” as related to preparedness for retirement.

In his recent research brief “Is Home Equity an Underutilized Retirement Asset?” Steven Sass observed that while “retirement planning generally focuses on the use of financial assets,” he finds that “home equity is the largest store of savings for most households entering retirement.” And indeed, “for many households, particularly those with less wealth, home equity is larger than financial assets.”

He defined the concept of how adequately funded a homeowner is for retirement and called it “Fundedness”. Fundedness reflects how well a family’s has funded their goals for the future and how their financial resources match those retirement needs and desires.

To gain a better understanding of Fundedness, Mr. Sass analyzed home equity and financial wealth across households ages 65-69 for 2012 and expressed it in thousands of 2015 dollars.

He divided the universe into 3 segments:  Well Funded, Constrained and Underfunded.  If you look at the graph below, you can see how Mr. Sass broke out his segments.

Can a Reverse Mortgage Help Retirees with their “Fundedness”?

No real surprises in the findings – typically, more affluent people fund their retirement more fully and for those homeowners that haven’t been able to, Sass felt that these Fundedness factors can help define how these homeowners might use the equity in their homes to live a more fulfilling life by using a reverse mortgage.

Fundedness factors

According to Sass, the value reverse mortgages could bring to the aging US population starts with the breadth of users and what they would be using the reverse mortgage to fund.

The challenge would be for financial professionals, and the reverse mortgage industry to find good matches between an individual homeowner’s situation and their highest and best use of a reverse mortgage.

For mortgage companies looking to contact reverse mortgage prospects or get a listing of actual HECM loan holders for refinancing, contact Dataman Group Direct at 800.771.3282 or email the Dataman Group Team.

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