Many Americans have grand plans for their retirement. Some plan to travel and have more time to focus on family or hobbies or to relax after many years of hard work. But it is important for workers who are facing retirement to create a plan. What will they do immediately after retirement? What will they be doing 10 or 20 years after retirement? Will they have enough money to do these things? If they don’t, will they return to work? Or delay retirement in order to save more?
The Retirement Landscape Has Changed
According to an AARP report, between 2007 and 2013 the amount of unemployed people ages 55 and older increased by more than 70%[1]. The Great Recession created financial hardships for many Americans, but older Americans may have been hit the hardest as they don’t have the time that younger people do to make up the difference in their savings before retirement.
Another factor that can affect retirement plans is the concept of boomerang children. Boomerang children are adult children that have moved back in with their parents. Sometimes boomerang children bring their spouses and their own children back home. Not only can this disrupt the family dynamic, but it can add an extra financial burden to aging parents who are trying to save for retirement2.
The average retirement age is about 61 years old according to Jamie Hopkins, a Forbes.com1 contributor and the Associate Director of the American College’s New York Life Center for Retirement Income. He also says that nearly 75% of people who are 65 years old or older are completely retired and have no plans to return to work. Hopkins encourages older workers to have alternative plans to fall back on if their original plan for retirement doesn’t work out1.
Postponing Retirement
Workers who do not have enough saved may plan to work into their 70’s. For some, the option to continue working is a good one. They may enjoy their work and are physically fit enough to continue working. Work may give them a sense of purpose or community. For others, continuing to work into their senior years can be physically difficult or they may just prefer to retire if they could afford to do so. Hopkins cites an Employee Benefit Research Institute survey that states about 47% of people retire earlier than planned. The survey also shows that 43% retire when planned and only 6% retire later than planned1. Since unexpected events can arise, it’s best for workers to have a backup plan.
Alternative Retirement Plans
If retirement comes sooner than expected, or if a retiree doesn’t have the funds they need, alternative retirement plans may become necessary. One such option could be a reverse mortgage loan. If a retiree has significant equity in their home, they may be able to tap into that equity as another source of retirement funds.
Reverse mortgage loans can benefit homeowners who are 62 years or older. However, they must have the funds to continue paying their property insurance and taxes for the life of the reverse mortgage. Homeowners must also live in the home as their primary residence and maintain the home.
Reverse mortgage loan proceeds can be used any way the homeowner chooses. Often, the money is used to pay bills or make home improvements. Others use the funds to save for a rainy day or pay off major medical expenses. Whatever the need, a reverse mortgage loan can be a financial benefit for many retirees.
For more information about reverse mortgage loan call 866-751-6105.
1 http://www.forbes.com/sites/jamiehopkins/2014/03/05/is-forced-retirement-risk-rising-how-to-enter-retirement-on-your-own-terms/
2 http://www.bankrate.com/finance/financial-literacy/6-tips-for-living-with-boomerang-kids-1.aspx