Reverse mortgages are getting increased play in the media, but why? They popped up in the 1970s and 80s and then dropped off the radar. Now, as the wave of 76 million Baby Boomers crests at the shore of retirement, many question if they have sufficient funds to carry them through their golden years. The graphs below demonstrate the magnitude of this demographic shift. Each bar represents the number (in millions) of United States citizens in each age range. The red bracket designates individuals past the average retirement range, black designates the Baby Boomer generation (generally born between 1946 and 1964).
Comparing these two graphs, it is easy to see why retirement planning has become an important issue and why the next 10 to 20 years is equally important. In 1965, 18 million individuals were 65 or older, representing 9% of the United States population. In 2010, this number increased to more than 40 million, or 13% of the population. Also during this time span, the average length of retirement doubled to 20 years, with many now living well beyond that number.
Both acute and long-term trends have culminated in a need for another source of liquidity for many seniors. It is in this context that reverse mortgages have regained national attention. Financial institutions serving seniors play an active role in helping seniors convert assets into income when necessary. As such, especially in consideration of the demographic dynamics in play, an analysis of a reverse mortgage strategy is needed now more than ever.