Many of today’s workers are at risk of having insufficient resources in retirement. The reason for this gloomy picture is a rapidly changing retirement landscape defined by a rising Social Security retirement age, a sharp decline in traditional pensions coupled with modest 401(k) balances, and longer life spans. Yet, in spite of these trends, Americans have not responded by saving more on their own. Outside of employer-sponsored pension plans, individuals save virtually nothing for retirement. The one potential bright spot is housing equity, which is the major asset for most families. While most retired households do not currently tap equity, this approach may be a luxury that future retirees will not be able to afford. As the baby boomers retire and the retirement income system contracts, housing equity is likely to become an increasingly important source of support. To see if attitudes are changing about the potential for using one’s home to cover living expenses in retirement, this brief reports on a survey that asks older working people today the role they think their house will play in their future. The results show that most households do not plan to access their home equity to cover regular living expenses. The house is seen as insurance against old-age contingencies and as a way to leave a bequest to children or charity. But the characteristics of those who say “yes” to tapping home equity suggest that more will do so in the future.
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Paper provided by Center for Retirement Research in its series Issues in Brief with number
ib2007-7-7.
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