According to Jon Greer of Old Mutual Wealth, “Retirement housing means different things to different people. For some, it’s a place they would never go because they see it as a sign of decline. For others, it conjures up images of a way of leading a more active and sociable independent life.”
It is becoming well known that many seniors wish to stay in their homes, but what is not always considered is that they will need to utilize the equity in their homes as a part of the planning for their future years. Prosperity in housing is likely the biggest asset belonging to individuals, and it is a critical matter regarding having adequate funds during retirement.
Old Mutual Wealth and Tisa have recently presented research indicating that people aged 50 and over typically had a retirement money shortage to the tune of £11,400 per year.
Interestingly, according to KeyRetirement.com, individual property owners, ages 65 and beyond, collectively have homes valued at £1.072 trillion. While this is a huge figure, wealth in property is one thing; however, these same homeowners seem to be lacking in cash liquidity.
Those surveyed indicated that they know their homes will play into retirement nest egg calculations, with 68 percent of 1,000 indicating they need to plan accordingly.
However, as it stands, the best way to get a return from housing riches is through downsizing which can be deceiving. This is primarily because it requires a great initial cash outlay resulting in not a lot of results. For example, £150,000 may only provide a yield as low as £4,000 per year. So, it may not seem to some that selling a home with that yield makes sense.
Having said that, there are other concerns here. If a decision is made to downsize, simply stated, a home with a larger value must be sold to purchase a smaller one. This is hampered by a big shortfall in “stock” housing.
Another form of putting housing equity to work is “equity release.” This comes in various forms. However, research showed that only 14 people out of the 1,000 surveyed would consider using equity release to bring up their retirement monies. Some of this may have to do with past problems with release “schemes.”
Regardless, the Equity Release Council (ERC) recently reported that in 2016, records were set as to those partaking of equity release.
So even though the wealth in people’s housing is wealth is not likely to solve all retirement shortfalls, it has to be considered. Yet, retirement services and other advisers do not seem to actively take into account housing proceeds when providing their retirement expertise to customers in suggesting solutions as to the big picture of planning for retirement.
Despite the fact that the utilization of one’s home has been a part of the retirement equation for decades, the concept(s) are changing and a complete retirement scenario needs to be activated with the industry, the regulators, and the government as interested participants in supporting citizens to form new concepts of their retirement home.