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Are Traditional Retirement Income Strategies Enough?

Three Major Retirement Problems for Baby Boomers

If there’s one generation in recent history that has most dramatically changed the retirement planning game, it’s the baby boomers. They’re one of the most talked-about generations today, with a host of well-documented challenges facing them.

  1. Living Longer
    Instead of spanning 15 or 20 years, their retirement will last 25, 30 or even 35 years (or more). A longer retirement necessitates additional funding.
  2. More Consumer Debt
    Much of the boomers’ money in retirement will be tied up in debt they accumulated during their working years. This can be especially problematic when retirees move to a fixed income.
  3. Haven’t Saved Enough
    The most talked-about fact of all is that the majority of baby boomers have not saved enough to sustain retirement income for their projected lifespan.


The Advisor’s Traditional Tools and the Fourth Pocket of Wealth

For years, advisors have had three primary sources of client wealth to work with:

  • The Income Bucket (Social Security, pension, employment)
  • The Investment Bucket (IRA, 401k, 403b, )
  • The Insurance Bucket (annuities, life insurance, business to be sold in future, second home, )

It was from these available sources that advisors transformed client wealth into lifetime income, while attempting to lessen risk and meet the retirement expectations of their clients. The question arises:

Are these three pockets of wealth and traditional tools enough to mitigate the risks with the current financial dangers retirees are facing?

For the average Baby Boomer, I believe the answer is no. To help their clients achieve a successful retirement, advisors will need to consider an additional tool: Housing Wealth.

Recent surveys say that close to 87 percent of boomers and existing retirees own their home. In addition, the U.S. Census Bureau states that the average retiring sixty-five- year-old couple will have 68 percent of their total wealth tied up in their home equity. For most, that nearly doubles their amount of assets.

Simply stated, the average boomer is living in their biggest asset and most significant source of their total wealth. In the context of the current savings and longevity crisis, plus more than $6 trillion in accessible senior home equity, doesn’t integrating housing wealth into a retirement income plan just make sense?

So how do reverse mortgages and retirement savings work together to enhance retirement outcomes and client satisfaction? Let’s take a look at one example.


“Retirees simply cannot afford to continue to ignore home equity as an income source and still meet their retirement goals.”
– Professor Jamie Hopkins


Housing Wealth Incorporation

Bob (68) is retired and Sally (66) works part-time and is retiring soon.

Traditional Line of Credit: Over the last 30 years, Bob and Sally have always had some sort of home equity loan or line of credit to draw on for enjoyment and expenses. It started when one of their kids needed financial help finishing college and then they used it to pay for their daughter’s wedding. They also consolidated some high-interest credit card debt, upgraded the kitchen, and took a longer than usual vacation across Europe, among other things.

Bob and Sally were smart to leave their retirement savings alone and use their home equity instead. They made payments after each use and then if necessary, acquired a new line of credit and started again. It worked great for them, and they appreciated having a reserve.

Retiree’s Line of Credit: As they enter retirement, things begin to change, and they start to rely on accumulated savings and Social Security.

Bob and Sally still want the flexibility of a home equity reserve, but they no longer want the burden of a mandatory monthly payment when they use it. They heard from some friends about a reverse mortgage line of credit. As they did their own research, they felt that this type of reverse mortgage would be the perfect replacement for their traditional home equity line of credit because it gives them their desired reserve fund without the mandatory payments.

They also saw the benefit to having a growing line of credit that couldn’t be frozen, canceled, or reduced. If it’s a good month and they can afford to make a payment on it, they will, but the pressure is off knowing they don’t have to!


Fortunately, with the rise and development of retirement income planning, housing wealth can now play the role it was created to play: serving as an additional tool to help increase the security and longevity of retirement savings during the descent. It can be added to the three income buckets to bolster income allocation by increasing efficiencies.

Don Graves, RICP®, CLTC®, Certified Senior Advisor, CSA®
Don Graves, RICP® is a Retirement Income Certified Professional and one of the Nation’s Leading Educators on the Emerging Role of Reverse Mortgages in Retirement Income Planning. He is president and founder of the HECM Institute for Housing Wealth Studies and an adjunct professor of Retirement Income at The American College of Financial Services. He has helped tens of thousands of Advisors as well as more than 3,000 personal clients since the year 2000
Don Graves, RICP®, CLTC®, Certified Senior Advisor, CSA®
Don Graves, RICP®, CLTC®, Certified Senior Advisor, CSA®
Don Graves, RICP®, CLTC®, Certified Senior Advisor, CSA®

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