Vanguard published its first-ever Retirement Outlook Report to measure retirement readiness across different age groups and income brackets. The report also discusses how liquidating and spending home equity improves retirement outlooks and mentions reverse mortgages as one option to do so.
“When we assume that homeowning retirees can liquidate and spend their home equity, the retirement readiness gap shrinks, even after accounting for ongoing post-liquidation housing expenses,” says Vanguard. “Home equity also enhances the highest-income boomers’ surplus, raising their sustainable replacement rate by 7 percentage points. Its impact on the other income cohorts is more modest but powerful.”
In conjunction with the report, Vanguard introduced the Vanguard Retirement Readiness Model (VRMM) which found that older millennials (ages 37 to 41) and Gen Xers (ages 49 to 53) are better equipped to meet their retirement-spending needs compared to young boomers (ages 61 to 65). The reason, says Vanguard, is that more employer-sponsored retirement plans are automatically enrolling workers and in effect socking away a portion of each paycheck into their 401(k) plans — without them having to take any action.
“While the inaugural Vanguard Retirement Outlook highlights that retirement security is certainly in reach for some Americans, it underscores that more progress can and should be made,” says Vanguard in a separate press release. “The report reveals that policymakers have an opportunity to connect low-income workers with the capital markets to reduce their projected retirement readiness gap. Further, employers can help workers save adequately by adopting best practices in retirement plan design.”