A new Vanguard paper encourages retirees to view their homes as more than just a place to live, suggesting that home equity—including reverse mortgages—can serve as a valuable financial resource in retirement.
In Principles for Retirement Income, Vanguard says investors can hedge against longevity risk with guaranteed income sources, such as Social Security, pensions and annuities, while tapping home equity can help supplement income, improve liquidity, and manage financial risks later in life.
“Consider your home not just as a place to live, but as a financial tool,” says the paper. Options for tapping home equity may include “downsizing, using a home equity loan or line of credit, or obtaining a reverse mortgage, which provides access to funds without requiring monthly mortgage payments.”
What they’re saying: “Many investors focus on accumulating wealth but feel less prepared to convert their savings into reliable retirement income,” said Joel Dickson, Vanguard’s Global Head of Advised Strategies. “Without a clear understanding of what their savings can support, some retirees underspend out of fear of running out of money, while others risk overspending.
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Our research is intended to bring greater clarity and discipline to retirement income planning and spending decisions.”
