Home Equity Becomes A Lifeline For Older Homeowners While Those Without Face A Financial Crisis – Financial Freedom Countdown
For many homeowners over 60, their homes represent more than just shelter; they serve as essential pillars of financial security and retirement planning. With nearly 80% homeownership in this age group, these individuals have not only developed strong emotional ties to their homes but also view the accumulated equity as a critical safety net for their retirement. A Fannie Mae study reveals that a large portion of this demographic intends to age in place, relying on their home equity as a core component of their strategy for a secure and comfortable retirement.
Confident in Their Retirement Finances
72% believe they’ll have sufficient income throughout their golden years. This confidence tends to increase with age. However, homeowners facing economic challenges show less optimism, with only 55% feeling confident about their financial readiness for retirement.
Little Interest in Tapping Into Home Equity for Retirement Income
Only 15% are open to leveraging their home’s equity for additional retirement funds, a sentiment echoed by economically disadvantaged homeowners. The primary reasons for refraining from tapping into their home’s equity were twofold: firstly, the absence of a requirement for additional funds during retirement, and secondly, a preference for owning their homes outright without any debts to the bank.
Majority Plan To Age in Place
56% intend to never sell; 27% consider selling in the future; and merely 17% have sold or plan to sell their residences. Those retirees who have sold cite various motivations, such as relocating to a more suitable home, financial benefits like lower taxes or housing costs, the desire to be nearer to family and friends, or the pursuit of a warmer climate.
Emotional Commitment to Their Home
Numerous older homeowners experience a sense of emotional and financial commitment: Their reluctance to relocate stems from a deep affection for their home, pride in having paid off debts (including mortgages), active participation in their community, and familiarity with local services.
Leave a Legacy for Their Children
A significant 62% expressed their aspiration to pass down their homes to heirs, suggesting that many consider their residences a crucial part of their legacy—an emotional and financial motivation to remain in their homes. Additionally, nearly half acknowledged that their home’s equity serves as a financial safeguard for unforeseen expenses, encompassing potential emergencies like significant healthcare costs, assisted living, or substantial home repairs, although the survey didn’t explicitly define these situations.
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Modest Interest in Loan Products for Home Improvement
Despite a general reluctance towards debt, there is a mild inclination towards utilizing loan products for home improvement. Additionally, almost half of the respondents would be open to a home-maintenance/repair service tailored for retirees at a more affordable rate. This marked the highest interest level among various programs and services surveyed, with 26% expressing interest in a home improvement loan and 48% keen on a cost-effective home-maintenance/repair service.
Open to Retirement Advice
More than a third are receptive to retirement guidance, with 38% expressing openness to receiving advice. Notably, younger homeowners exhibit a higher willingness, with 43% of those under the age of 65 being receptive, compared to 33% of those over 80 years old.
Over 60% of seniors regret not saving more for retirement in their younger years, and a notable distinction emerges between mortgage holders (68%) and outright owners (56%) in this regard.
Related Article: How To Invest
Concerned about Inflation, Healthcare Costs, and Assisted Living Costs
Older homeowners have voiced heightened apprehension about inflation and the financial and health challenges linked to aging. The escalating expenses of assisted living, compounded by inflation, could be influencing their inclination to age in place. Staying put allows them to exert more control over costs, leveraging their familiarity with the community and their home. With a robust grasp of current expenses, these homeowners are well-positioned to manage and potentially curtail costs as needed.
Securing Retirement Dreams with Home Equity
The Congressional Budget Office projects that the Social Security Old-Age and Survivors Insurance (OASI) trust fund will run out of funds by 2035, coinciding with the moment when individuals currently aged 58 reach the official retirement age and the youngest of today’s retirees hit 71. Consequently, all recipients will experience an automatic 25 percent reduction in benefits, irrespective of their age or financial situation.
It is not surprising that Americans feel concerned about relying on Social Security and Medicare in their old age. The paid off home will provide hope for some Americans who can tap into their home equity in the worst case scenarios.
Uncertain Future for Americans Who Don’t Own Their Homes
The Fannie Mae survey focused exclusively on homeowners. On the bright side, majority of the homeowners do not need to rely on home equity for retirement income. Unfortunately, for the vast majority of Americans who do not own a paid-off home, the future looks bleak. High inflation coupled with Social Security and Medicare trust funds running out of money, could result in a majority of Americans needing to work beyond the retirement age.
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11 Low-Stress Retirement Jobs to Keep You Happy and Healthy
After working so many years, it feels great to be able to retire. All those years playing with the best retirement calculators and planning how to retire early have finally paid off. So many plans, like travel, relaxing, working in the yard and doing other things you’ve put off for years. But after a while, many retirees get bored. Getting a job after retiring is a great way to stay active physically and mentally. Most retirees want to stay stress-free while still working at a new job. Retirees have a lot of knowledge and skills to offer. There are many low-stress jobs that retirees can do. Thankfully, some of the best low-stress jobs are some of the more exciting jobs a retiree can do. Before we jump into the list of retirement jobs, there are 5 benefits of finding a low-stress job for retirees.
11 Low-Stress Retirement Jobs to Keep You Happy and Healthy
Why 1 in 5 Retirees Are Returning to Work? The Surprising Reasons Behind the Unretirement Wave
In recent years, the concept of retirement has begun to evolve beyond traditional expectations of leisure and relaxation. A surprising trend has emerged, reshaping our understanding of work and retirement’s roles in life’s later stages. As this phenomenon unfolds, we’re left to wonder: What’s drawing so many retirees back into the workforce?
Why 1 in 5 Retirees Are Returning to Work? The Surprising Reasons Behind the Unretirement Wave
The 2024 CBO Report Unveils a Dire Path Ahead for the U.S. Economy and National Budget
The Congressional Budget Office (CBO) performs nonpartisan analysis for the U.S. Congress. The latest Budget and Economic Outlook offers projections for the country’s fiscal and economic landscape over the upcoming decade. This recent update, building on the May 2023 baseline, incorporates the effects of new legislation and executive decisions, alongside changes in inflation, immigration, interest rates, and economic growth patterns, among other variables.
The 2024 CBO Report Unveils a Dire Path Ahead for the U.S. Economy and National Budget
Deciding when to claim Social Security benefits is a critical decision for retirees. Two common strategies are claiming Social Security at age 62 and preserving retirement funds or using 401(k) savings and delaying Social Security until age 70. Each approach has its advantages and drawbacks, influenced by individual financial situations and goals.
Smart Retirement Planning: Should You Use Your 401(k) to Delay Social Security Until 70?
Dreaming of retiring to picturesque locales? Many Americans yearn for foreign adventures in their golden years. Yet, securing Social Security benefits abroad isn’t guaranteed. Before jetting off, learn which nine countries may disrupt your retirement dreams.
Master the Two Key Numbers for Financial Independence
Dreaming of retirement? It might feel distant, but reaching that magic number in your bank account is key. Yet, standard financial calculators offer generic figures. Unveil the path to financial freedom by focusing on just two vital numbers: retirement expenses and safe withdrawal rate. Let’s explore how to calculate these for your unique lifestyle.
Master the Two Key Numbers for Financial Independence
Exploring Government Programs Granting Free Land for Affordable Homeownership: From Colorado to Iowa
Small towns across the US are offering free land for those ready to build homes and contribute to their communities. As housing costs soar nationwide, these towns are innovating to attract new residents and revitalize their local economies. From the Midwest to the Mountain states, these programs offer more than just affordable homeownership; they invite you to join a tight-knit community and embrace a whole new way of life.
Exploring Government Programs Granting Free Land for Affordable Homeownership: From Colorado to Iowa
John Dealbreuin came from a third world country to the US with only $1,000 not knowing anyone; guided by an immigrant dream. In 12 years, he achieved his retirement number.
He started Financial Freedom Countdown to help everyone think differently about their financial challenges and live their best lives. John resides in the San Francisco Bay Area enjoying nature trails and weight training.
Here are his recommended tools
M1 Finance: John compared M1 Finance against Vanguard, Schwab, Fidelity, Wealthfront and Betterment to find the perfect investment platform. He uses it due to very low minimums and fees, automated investment with automatic rebalancing. The pre-built asset allocations and fractional shares helps one get started right away.
Personal Capital: This is a free tool John uses to track his net worth on a regular basis and as a retirement planner. It also alerts him wrt hidden fees and has a budget tracker included.
Streitwise is available for accredited and non-accredited investors. They have one of the lowest fees and high “skin in the game,” with over $5M of capital invested by founders in the deals. It is also open to foreign/non-USA investor. Minimum investment is $5,000.
Platforms like Yieldstreet provide investment options in art, legal, structured notes, venture capital, etc. They also have fixed-income portfolios spread across multiple asset classes with a single investment with low minimums of $10,000.
