New Federal Reserve report confirms most Americans are financially unprepared for retirement, and financial planners continue to ignore the value and importance of housing wealth in the solution.
The Federal Reserve has recently released a new study, Report on the Economic Well-Being of U.S. Households in 2017. Notable findings include: (1) less than 40 percent believe their retirement plans are on track; (2) three-fifths of working people with retirement savings reported “little to no comfort” with managing them; and (3) of respondents over 60, 12 percent had no savings at all, and only 49 percent thought their plans were on track.
Disturbing as this may be, it’s not a new revelation, merely the continuation of a longer term trend made worse by the Great Recession (2008 – 2013).
Bottom line, a great number of seniors will not be able to maintain their lifestyles in retirement as they had hoped. In fact, many will simply run out of money. What can be done?
Planning – The First and Most Important Step
The solution, to the extent there may be one, involves everyone making a comprehensive plan (as early as possible) and executing it to take advantage of time. Easier said than done, but that is the simple reality. Unfortunately, most don’t have and won’t have a plan because they don’t know where to begin or what to do. They may continue to procrastinate, or ignore reality, preferring to assume things will somehow work out. Most likely they won’t. Without a plan there is only hope. Hope is not a strategy.
The frontiersman, Davy Crockett, once said: “When you see trouble coming, you’re best off to go out and meet it!” Good advice, but where to start? First, don’t try to go it alone. For the same reasons you wouldn’t attempt to remove your own appendix, one is best served by a qualified and reputable professional.
The first step is to make a decision to learn more – best accomplished by meeting with a qualified planner. The initial meeting is a preliminary (no cost or obligation) session to give you more insight into the process and a feeling for the individual planner, while it also enables the planner to learn about you to assure a good fit for all. Ideally, interview more than one as this will give you assurance and comfort. Start by asking friends for referrals, or call us for names in eastern Massachusetts.
Registered Investment Advisors (RIAs) are “fiduciaries”, meaning they are legally obligated to act in the best interest of their clients, not themselves. Certified Financial Planners (CFPs) are another good source. Both are licensed, regulated, and well-equipped to prepare plans, guide or facilitate execution of those plans, track and interpret progress to achieve objectives, and assist clients in making adjustments to the inevitable changes that will occur.
Most importantly, (1) choose a planner that is not only qualified, but someone you feel comfortable with, (2) will provide you with a written plan followed up by periodic meetings and written updates, and (3) discover if/how they consider and factor housing wealth into the overall financial plan. If they don’t, find another planner – one that understands the importance and necessity of maximizing all your resources, not just a portion.
Housing Wealth – The Overlooked Planning Resource
Clearly, the planning process is essential as are the roles of professional planners. A glaring problem is, and has been that most financial planning practices have overlooked or ignore using housing wealth in financial planning considerations.
That is beginning to change as prominent researchers and retirement experts have brought the issue to light challenging the planning community to incorporate housing wealth in their planning protocols. Extensive research has confirmed the inclusion of housing wealth may significantly increase and extend retirement financial security.
Time to Stay or Sell?
The first consideration is how long you intend, or are able, to stay in your current home. Given individual circumstances and the extraordinary rise in home prices today (June, 2018) it may be an optimal time to sell and relocate. On the other hand, if you plan to stay and age in place, you need to understand the different ways housing wealth can be used to increase and extend financial security.
Among the various methods, reverse mortgages hold the greatest potential for most, based on individual facts and objectives. Unfortunately, too few consumers and professional advisors sufficiently understand the facts and nuances involved.
Reverse Mortgages – A Misunderstood Resource
Often maligned, but seldom understood, the reverse mortgage is a unique mortgage program enabling senior homeowners (62 and older) with the ability to convert a portion of their housing wealth to cash, a line of credit, or stream of payments to increase cash flow without selling the home, or the burden of making monthly payments among other features. More generally, reverse mortgages can be used to: (1) improve cash flow and liquidity, (2) reduce longevity risks, and (3) protect assets under management.
TO LEARN MORE
It’s a new day in retirement planning, and the inclusion of housing wealth is proving to be a game changer. Whatever your circumstances, if you are in or approaching retirement, own a home (or plan to) you are well advised to learn and explore the various options available.
When Is the Best Time to Sell and Relocate?
