Most seniors today feel unprepared for retirement despite having worked and saved for decades. The National Retirement Risk Index says that nearly half of older adults expect to see their standard of living decline during retirement. This hardly seems fair after so many years of saving—and truthfully, it’s not their fault. Many contributing factors beyond their control have led to less money in their bank accounts.
Why Seniors Are Getting Shorted
While many seniors might think that they just should have better prepared for retirement, the truth is that several social, political, and economic shifts have contributed to their current situation. Here are some of the biggest:
- People are living longer. Many retirees managed to save enough to carry them through what was considered the average life expectancy when they first began to save, but now people are living significantly longer. This is, of course, great news for society, but nevertheless a complicating factor for retirement planning.
- It costs more to live these days. The increase in an older adult's cost of living compared to any increase in wages and retirement benefits such as social security over the past few decades shows that the money saved doesn’t go as far, particularly when it comes to healthcare, where inflation has been most acute.
- Americans have suffered a financial crisis. A lot of retirement accounts took a hit during the financial crisis of 2008, and seniors are still trying to recover their losses.
Thankfully, Seniors May Have More Solutions Than They Think
... While many seniors don’t have the cash on hand that they need for retirement, they still have significant wealth in home equity.
According to the Urban Institute, older adults own over four trillion dollars in home equity. At the end of 2016, eight out of ten older adults owned their homes with roughly two-thirds of them owning them outright. In fact, according to the U.S. Government Accountability Office, two out of three senior households have no retirement savings but do, in fact, own a home. This means that while many seniors don’t have the cash on hand that they need for retirement, they still have significant wealth in home equity.
Thankfully, according to some studies, if older adults use their home equity to the fullest, their retirement income could potentially increase by 40%! Needless to say, finding the best solutions for seniors to leverage their home equity may be the answer they’re looking for. And they deserve it! After so many years of good work and service, older adults have earned all that a great retirement has to offer.
See our how older adults can benefit from their home equity in our guide.