While the finding by an American College of Financial Services study that a majority of retirees want to stay in their homes after retirement is not surprising, one has to take pause at the lack of understanding the survey revealed when it comes to knowing how to capitalize on the equity in their homes. This should be of particular concern to black families.
The Home Equity and Retirement Income Planning Survey found that 83% of the respondents do not want to relocate in retirement.
“One very interesting notion, was that the desire to age in place increases significantly as you get older,†said survey author Jamie Hopkins, professor of Retirement Income Planning and co-director of The American College New York Life Center for Retirement Income Planning.
“We saw more uncertainty between the ages of 55 and 62. But once we started getting past 62 and you start moving into retirement, we saw that these individuals really don’t expect or want to leave their homes.â€
- The survey, created to better understand retirees’ attitudes about home equity and housing decisions, also revealed that 44% have considered using home equity in retirement, but that only 25% feel comfortable spending it as a source of income.
- It also found that only about 20% felt that it was extremely important to leave their home as a legacy asset to their children or other heirs, while 45% listed it as not important.
- The respondents were generally misinformed about reverse mortgages, while holding a slightly negative view on reverse mortgages as a retirement tool.
“This is really going to open a lot of eyes about just how little people moving into retirement with some home equity know about reverse mortgages,†added Hopkins.
Home equity as a source of income is a particular challenge for blacks.
The American Civil Liberties Union, says given the unequal impact of the Great Recession, white descendants are projected to have 1.6 times the home equity of black descendants.
“We know that home equity is an important part of the household wealth passage for all Americans, but particularly true for families of color,†said Rachel Goodman, staff attorney with the ACLU’s Racial Justice Program.
“Black families tend to have fewer assets invested in the stock market and retirement accounts. Home equity is the source black families are generally drawing on to help family members do things like pay for college, help with down payments on homes of their own, or leave money in wills,†she adds.
When it comes to retirement planning, be sure to talk to a financial professional about the ways in which the equity in your home plays into your overall retirement savings plan.