According to the Gallup Poll, 53 percent of the non-retirees polled said they are concerned that they will run out of money during retirement. This attitude represents a major shift just since 2002, when 59 percent of those polled said they would have enough funds to live on, compared with only 32 percent who believed they might run out of money and not be able to live comfortably.
A report released on April 13, 2011 by the American Institute of Certified Public Accountants (AICPA) confirmed that Americans fear they are unprepared for retirement, with almost 40 percent of working Americans saying they will never be able to afford to retire.
The AICPA poll showed that, for the second year in a row, retirement is at the top of the list of financial concerns for Americans, even above uninsured medical costs and skyrocketing education costs. The majority of those polled (56 percent) said they were not saving at all for retirement, mostly because rising prices for everyday items such as gas and food are requiring more of their budget. Fifty-five percent of those polled said they did not know how much they needed to save for retirement. Those that thought they knew how much to save underestimated the amount of savings they would need.
Delayed retirement
Many of those polled by Gallup suggest that delaying retirement is a solution for their financial concerns because they can earn more income and have more time to build up retirement savings. The majority of those polled (37 percent) say they expect to retire after age 65, while another portion of those polled (25 percent) expect to retire at age 65. The non-retired Americans' average projected age of retirement has risen from age 60, when the poll was first taken in 1995, to age 66 in this year's survey. Only eleven percent of those polled recently think they will retire before they turn 60.
According to Gallup research, Social Security income is the most important source of income for Americans who are currently retired. Concern about the availability of Social Security in the future represents part of the financial worry of Americans who are not yet retired.
Reverse mortgage option
Homeowners age 62 and older may have another source of income available to them besides Social Security income and their personal retirement savings or pension: a reverse mortgage. Qualifying for a reverse mortgage depends on the age of the borrowers and the amount of equity in the home, not the borrowers' income or creditworthiness. Borrowers do not need to repay the loan until the home is sold; their heirs will not be responsible for any additional loan repayment even if the loan balance is less than the remaining equity in the property.
The majority of these loans are HUD reverse mortgages, known as a "Home Equity Conversion Mortgage" or HECM. Federal rules changed in 2010 and made these loans less costly in terms of upfront fees. The HECM Saver option, which is more limited in the amount that can be borrowed, has a reduced upfront insurance premium of 0.01 percent of the home's value. This is down from the two percent insurance premium required for a HECM Standard reverse mortgage.
Reverse mortgage lenders can provide you with detailed information about your loan options, including a lump sum payment, a line of credit, monthly income or a combination of these choices. Mortgage counseling is a requirement of the program, and it is recommended that you include your adult children in the counseling to be sure they understand the implications of borrowing against the equity in your home.
When investigating financial options for a more comfortable retirement, be sure to look into a reverse mortgage as one potential source of income.
Michele Lerner
Michele Lerner is a freelance writer with twenty years of experience writing articles and web content for newspapers and magazines on topics related to real estate, personal finance and business. Her clients include The Washington Times, Urban Land Magazine, NAREIT's Real Estate Portfolio, and numerous Realtor association publications. Michele's first book, "HOMEBUYING: Tough Times, First Time, Any Time" is available now at Amazon.com or from www.MicheleLerner.com.
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