Do Adult Children Resent Reverse Mortgages?

It might seem as though reverse mortgages are a uniquely American concept but that’s not the case: You can find reverse mortgages overseas and with them many of the same issues we have here.

In an interview with the Indian publication MoneyLife.com, S Sridhar, chairman of the National Housing Bank, says in some cases reverse mortgages are “psychologically resented by children.”

“Many of them see their legacy going away,” he says. “It is perverse, but many children do not want their parents to have a better life. This is not universal, but I did get this feedback even from parents. There are instances when the son or daughter-in-law will ask why they need more money or to spend on a holiday. So there is an element of psychological tension associated with this product.”

You read this and think: hmm, small world. Surely in the U.S. there are households with a similar dynamic.

Inter-generational Wealth

Reverse mortgage resentments are sometimes the symptom of a vastly larger issue, the question of inter-generational wealth.

Many parents would dearly love to leave an inheritance for their children, and some go further and extensive provide support and assisance during their lifetimes, even when the “children” are well into adulthood. And, to be fair, there are instances where adult children assist their parents as they get older.

But the dynamics of many households have been strained by changing economics.

For instance, Pew Research reports that “37% of full-time employed adults of all ages say they have thought in the past year about postponing their eventual retirement. This proportion swells to 52% among fulltime workers 50 to 64. Members of this so-called “Threshold Generation” are twice as likely as younger workers to say they never plan to retire (16% vs. 8%).

“Moreover, the Thresholders who do plan to retire someday say they plan to keep working, on average, until they are age 66 — when they would be four years older than the age at which current retirees 65 or older report that they stopped working.”

New Economics

For years Americans have been conditioned to think that retirement begins at age 65, but that’s surely not the historic experience. How many people retired before the Social Security system evolved? How many people want to retire, if only to retain their interests as well as their bank accounts?

It’s not surprising that some adult children feel entitled to an inheritance. That would certainly be nice. But in the real world times are changing. Bank accounts and retirement funds are no longer so robust. In such a world it makes sense to look at a reverse mortgage if it can be a prudent financial option for the homeowner.

Alternatively, if adult children have the means and want to avoid psychological resentment they can help solve the problem by chipping in when appropriate. After all, why should inter-generational wealth be a one-way street?

This entry was posted on Monday, July 26th, 2010 at 12:47 am and is filed under Reverse Mortgage . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.