Baby boomer debt is mounting at rates that are disparate with the previous generation, fueling fears that many will never be able to retire and live the same lifestyle they did when they were still part of the workforce.
About 53% of those involved in a Bankers Life Center for a Secure Retirement study wanted to pay off any debts before retiring. And just 23% of current retirees reported that they were entirely debt free. Shockingly, 60% of baby boomers who are still working are spending too much and not saving enough, according to a related study: Paying for the New Retirement: Responsibilities and Challenges for Middle-Income Boomers.
If you do have debt carryover into retirement, it’s more challenging to preserve the lifestyle you had before leaving the workforce. About 40% of boomers who are retired have had to adjust their spending habits to compensate for the difference in available funds in the aftermath.
About 69% of boomers are unsure if they can even live until their mid-80s on the funds that they have set aside, leading many to pursue side jobs and part-time work to compensate for the difference.
Many are now looking to tools like a reverse mortgage to access home equity to help procure financial stability during retirement. Banking instruments such as this can eliminate the monthly mortgage payment, allowing homeowners tap into their equity without having any payments (these types of HECM loans are only paid off after you have died, when your home is sold to recoup the balance, and any funds that are leftover are added to your estate to be divided unto your heirs).
With the oldest boomers turning 65, many meet the qualifying age of 62 to consider a reverse mortgage. Certain additional rules apply. These include that you be able to show that you can maintain home upkeep and pay property taxes and insurance. But things that usually limit mortgage approval, like credit score and income, are not factored into a reverse mortgage, making them ideal for boomers who are short on funds for retirement.
What’s more, reverse mortgages can be paid in a lump sum, as a monthly payment or accessible via a line of credit. They are a viable consideration for cash-strapped boomers who wish to preserve their lifestyle.