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Even with a reverse mortgage, not all retirees can afford to maintain standard of living
2010-01-11

Forty-three percent of people will not be able to maintain their standard of living in retirement even with a reverse mortgage in hand, a CBS Money Watch columnist said recently.

Columnist Eric Schurenberg took the 43 percent figure from an October study by Boston College's Center for Retirement Research. The study's authors concluded that "today's workers face a major retirement income challenge" - and the challenge may extend to those already retired.

Due largely to the bubble in home prices that appeared in the middle of the last decade, the study said, many households have "high levels of mortgage debt relative to the value of housing." Some homeowners "will not only be ineligible to take out a reverse mortgage, but will also face substantial mortgage payments dur¬ing retirement."

Seniors turn to reverse mortgages to provide much-needed income in retirement. Reverse mortgages can only be taken out on a primary residence and must be repaid when the home is sold (or when the owner moves out).

With so many people lacking adequate retirement savings, even a reverse mortgage may not help seniors maintain their standard of living. The Boston College findings underscore the need to make smart retirement decisions years before retirement age.
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