This is not a rant about profligate boomers and slacker Gen X kids, so hang with me here while I quote a couple statistics that are pretty scary: according to a Wells Fargo study out this month, 71% of Americans between the ages of 50 and 59 lack confidence they will have enough retirement savings to live comfortably during retirement, and 41% have no savings whatsoever.
The Wells survey, which has been conducted each of the past five years, added a new question this year, with 22% of respondents stating they would rather “die early” than run out of money in retirement.
The poll was not a sampling across all economic classes; rather, the median income was $63,000, well above the national average.
Why do I bring up these sobering statistics? Because they represent real people and indicate a real issue.
A conversation I had this week highlighted the issue in Technicolor terms: the adult daughter of a baby boomer said, “Every penny I could be saving for my own retirement is going to support my mother.” This statement was not self-pitying, nor was it laced with bitterness. It was just a fact. And why hadn’t her mother saved better? There had been a late-in-life divorce, and the mother got the home but little else. She nows lives on Social Security, but every month there is a shortfall which the daughter makes up.
Joe Ready, director of Wells’ Institutional Retirement and Trust, is quoted in the Wells study as saying, “Saving for retirement isn’t easy. It requires sacrifice, and it’s not something people can push off and hope to achieve later in life. If people in their 20s, 30s or 40s aren’t saving today, they are losing the benefit of time compounding the value of their money. That growth can’t be made up later, so people have to commit early in life to make savings a regular discipline year after year – it is the only way most people will achieve their financial goals to carry them through retirement.”
I often read advice like this addressing spending habits and saving patterns – and saving more while spending less is always a good idea. But like I said, that’s not where I’m going with this. The truth often isn’t that straightforward. Many Americans have yet to financially recover from the Great Recession, and compounding the problem is the fact that many laid off in their 50’s and early 60’s were never rehired. Some had to tap into saving early, and others had to turn to adult children for support. It’s well and good to say one ought to have planned better. Sometimes life just isn’t that tidy.
In another conversation this week a 65-year-old, who is supporting his 90-year-old mother, said, “I never thought I would get to the point where $1,000 a month would be a big deal – but here I am.” He was, as were many of his age cohorts, laid off a few years ago and has not been able to find work since. His aged mother did save – for retirement. But now she’s funding longevity, a different matter altogether. Her retirement savings are long gone and she is dependent upon her son, who is caught in the classic “double draw-down”: he is burning through his savings much more quickly than planned because he didn’t work as long as he anticipated, and he is bankrolling his mother, whose expenses climb year after year.
In both these situations a reverse mortgage is going to pay off the existing “forward mortgage” and create a financial buffer.
There is still going to have to be self-discipline. They are still going to have to practice economy. That’s just the way it is. But that’s a far cry from lying awake nights worrying whether there is going to be money enough to meet monthly expenses.
As I’ve said many times, in retirement no one is going to get by on just their Social Security. No one is going to make it on their 401-K. Few are going to survive on their pension, their annuity, their IRA, their bank account – or their reverse mortgage. But when added together, all these combine to create a long-term means of maintaining dignity and independence in retirement.
If you would like to explore how an FHA-insured reverse mortgage might help with your retirement plans or those of your loved ones, give me a call. I always love hearing from you.
Laurie MacNaughton  is a freelance writer and Reverse Mortgage Consultant with Atlantic Coast Mortgage.
She can be reached at 703-477-1183 Direct or Laurie@MiddleburgReverse.com