While retirement is aimed at allowing people to make up for all of the relaxation and free time they missed while working, more and more retirees are finding it difficult to cover living costs after they’ve left their jobs.
According to The Hill, this has become such a widespread concern that the White House is now taking action with President Barack Obama culminating a number of ideas and proposals designed to ensure that Americans are able to save for their retirement.
Currently, the White House reports that one-third of all working Americans don’t have access to a retirement plan from their employer. This estimate includes about half of workers at small businesses, as well as 75% of those working part-time.
Only about 10% of those without access to an employer plan will go out of their way to set aside funds for their own retirement accounts.
One of the major proposals put forth by President Obama involves making it easier for small companies to offer these retirement savings plans to their employees.
At this time, multiple employer plans are only available from companies in similar fields, such as auto dealers. The proposed changes will eliminate that requirement, allowing more employers to share the costs of retirement savings plans.
In addition, the administration is fanning the fire of older ideas, including giving employers tax incentives for providing or expanding retirement coverage, and also making these plans more available to part-time employees.
The White House projects that these alterations could offer up to 30 million more Americans access to retirement savings plans.
However, these proposals have yet to gain much traction, leaving soon to be retirees unsure of what their financial state will be like during retirement.
Because of this, many retirees are looking for other ways to reduce their individual cost of living. One prime example, as The Huffington Post reports, is a surge in using reverse mortgages to reduce one of the most expensive aspects of retired living housing costs.
Some retirees choose to reduce housing expenses by moving to more modest locations or to retirement communities. The taxes, insurance, upkeep, and utility bills for smaller townhomes and condominiums, for instance, usually amount to around 3.25% of the value of a standalone house, according to the Center for Retirement Research at Boston College.
However, a large portion of retirees are close to paying off their home but are not quite there yet. A reverse mortgage allows them to use this equity to fund other living expenses.
A 2014 report by Mortgage Finance magazine found that homeowners took out more than $15 billion in reverse mortgages across the country that year. This amounts to a 20% increase from 2012.
Reverse mortgage demand is expected to increase substantially as 77 million baby boomers near the age of retirement.
Of the 10,000 boomers currently reaching age 65 everyday, as much as 48% don’t have the necessary funds to retire with stability. Almost 60% of those in the Mortgage Finances report had only $10,000 or less saved for their retirement.