The baby-boom generation—adults born between 1946 and 1964—live longer than previous generations but save less. Simultaneously caring for parents and children, on top of paying for basic expenses, makes it difficult for many boomers to save. Mounting financial burdens leave many woefully unprepared for retirement.
The Employee Benefit Research Institute (EBRI) reported in 2010 that 47% of the oldest boomers are not on track to afford basic expenses in retirement. A 2016 EBRI report showed that nearly 80% of adults at or near retirement age lack confidence about their savings.
“Most people think they have enough money until they don’t,” says Michael Parrett, director of retail training and development for Finance of America Reverse. “It’s more comfortable to assume you do rather than look at the numbers.”
Is this you? It’s time to check under the hood.
If your investment portfolio won’t adequately fund your retirement, consider alternative solutions such as doubling down on saving, working longer, or taking out a reverse mortgage.
Do You Have Enough Retirement Savings?
To determine whether you’re saving enough for retirement, create a retirement blueprint. Consider the following:
- Prioritize your goals. What activities are necessary for your vision of a quality retirement? Buying a yacht to sail around the world might be less important than taking out-of-state trips to visit children and grandchildren. Consider your highest priorities when creating a budget. Factor in “dream” goals if you have a surplus.
- Account for change. You may need more discretionary income early in retirement to pursue hobbies and activities, but less in later years. Consider all life stages when retirement planning.
- Consider your legacy. Do you want to leave your children an inheritance? Budget wisely to make sure you don’t outlive your retirement. “One of the biggest fears among Americans is leaving behind debt for their children,” says Parrett.
With clear retirement goals in mind, it’s time to crunch numbers. Take an honest look at your account balances and ask yourself the following:
- How long should my money last? Consider your goal retirement age and estimated lifespan.
- How much will I need annually? Budget for current and future expenses. Don’t forget to plan for the unexpected, such as hospital bills and home repairs.
- How much have I saved? Factor in retirement accounts, investments, and other income sources, such as Social Security and pension.
- How much will I invest, starting today, for my retirement? Can you increase your contribution by one or two percent?
If you find yourself in the red after tallying income and expenses, it’s time to make some changes.
How to Reach Your Retirement Goals
If current savings won’t fund your retirement, consider working longer, delaying Social Security until age 70, and trimming expenses. You can also consider one overlooked investment tool—a reverse mortgage.
A reverse mortgage allows you to draw on home equity to supplement your retirement savings.
Available exclusively to homeowners and homebuyers age 62 and older, a reverse mortgage provides a steady stream of funds. Take the proceeds as a line of credit, as a monthly income stream, or as a lump sum. You’ll have no monthly loan payments as long as you stay in your home.
A reverse mortgage isn’t right for everyone. If you meet the qualifications, “a reverse mortgage provides access to assets you wouldn’t normally have,” says Parrett.
Although it sounds complicated, a reverse mortgage isn’t much different than other loans.
“It’s a mortgage against your house,” says Parrett. “You can make early payments if you choose or wait until the loan becomes due.” That loan only becomes due if you sell or move out of your home.
The Federal Housing Administration (FHA) insures most reverse mortgages as part of its Home Equity Conversion Mortgage (HECM) program. You can receive loan funds as a line of credit, in monthly installments, a combination of these two, or as a lump sum. You can also purchase or refinance a home using a reverse mortgage.
To choose the loan that’s right for you, speak to an experienced reverse mortgage consultant in your area. A consultant will explain the loan terms and walk you through the entire process, from application to closing.
Want to learn more about optimizing your retirement? Download our free guide.
This article is intended for general informational and educational purposes only, and should not be construed as financial or tax advice. For more information about whether a reverse mortgage may be right for you, you should consult an independent financial advisor. For tax advice, please consult a tax professional.
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