Across the globe, countries are facing an aging population that is unprepared to retire, and many governments are turning to reverse mortgages as an option to help fund longevity — the United States is no different.
With 10,000 baby boomers turning 65 each day for the foreseeable future, the United States needs to be a pioneer of the reverse mortgage product, and it has been.
If you look at the Canadian market, the industry is booming. HomeEquity Bank, the leading provider in Canada, saw volume grow 40% with a product that provides far less in proceeds, protections, and benefits.
In Australia, the government sees the reverse mortgage as part of the solution to help older Aussies retire and age in place comfortably. In China, which has the world’s fastest-aging population and a pension system hit by shortfalls, the government announced it will start allowing reverse mortgages for seniors nationwide.
Imagine if the United States government started looking at reverse mortgages as part of a policy strategy going forward for a population that hasn’t saved for retirement.
According to data from the Federal Reserve’s regular Survey of Consumer Finances, the average household retirement savings for those aged 64 to 75 is only $358,400, with the median being $126,000. When you factor in that Fidelity estimates the average retired couple aged 65 and over in 2018 may need approximately $280,000 saved — after tax — to cover healthcare expenses in retirement, it is obvious there is a major problem coming for the United States.
There will need to be a public policy solution to this problem, and it’s hard to argue that reverse mortgages won’t be part of the solution going forward, as the government will need to help retirees tap their own assets during retirement.
Based on these factors, the reverse mortgage industry in the United States is poised to grow. It’s not a matter of if; it’s only a matter of when.
-Thanks to John Yedinak
Marc has 36 years in financial services and 6 years in teaching.
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