A recent AARP study shows that 26% of people they surveyed were finding it more difficult to pay their mortgage or rent, and 66% found it more difficult to pay for food, gas and medicine.

The recent AARP study, “The Economic Slowdown’s Impact on Middle Aged and Older Americans” by Jeffery Love, Ph.D. and Woelfel Research, Inc., examines how the slowdown is affecting Americans in retirement or nearing retirement and what steps they are taking to cope with the slowdown. 

The report shows that 23% of those surveyed were prematurely withdrawing funds from their 401Ks, IRAs, or other investments, and another 33% had stopped putting money in their retirement accounts.  Twenty-six percent of people surveyed were finding it more difficult to pay their mortgage or rent, and 66% found it increasingly difficult to pay for essentials such as food, gas and medicine.

As far as quality of life, 60% of those surveyed have started spending less on eating out and entertainment.  Forty-seven percent have postponed plans for travel.

In any economic environment, retirement should be the “golden years” when people can take the time to travel and see family more often because they are no longer restricted by their work schedules.  Retirement for most people of course also coincides with generally less income, or a concern about making savings last a few decades.   With the recent economic downturn, the traveling and recreation appears to be diminished and the concern about income and making savings last appears to be increased substantially for many retirees and those approaching retirement. 

There may be several ways that Americans can plan for making their retirement more comfortable.  Some seniors choose to rent out a room, or to convert part of their house into an apartment.   A conversion like that can be costly, however, and can take a considerable amount of time, as well as require permits and inspections.  Taking a renter can have some benefits such as the rental income and the company, but it could also have serious risks associated with allowing a stranger into your house. 

Some communities have senior assistance programs, such as programs to help low to moderate income seniors pay their property taxes.   There are equity sharing programs, and deferred payment programs.  Equity sharing programs are generally unregulated, and deferred payment programs so far seem hard to come by; however, more information will surely be available as demand for this product increases.

Reverse Mortgages are an easy, government regulated, and flexible financial tool for many seniors.  Reverse Mortgages allow homeowners over the age of 62 to convert a portion of their equity into cash, a line of credit, or monthly payments, and title to the home remains solely in the name of the homeowner.  No payments are required on the mortgage for as long as the homeowner lives in the home.  By law, they are also non-recourse loans, which means that when it does come time to pay off the loan (when the home is passed on to heirs, or the homeowners decide to move out) if the home’s value happens to have fallen below what the balance of the loan is, the homeowners or heirs are not responsible for the additional amount.  They can sell the home for market value, and they will never be held responsible for anything over that amount.  On the other hand, if the value of the home is more than the balance of the loan when the heirs or homeowners decide to sell or refinance, all of the equity still belongs to the homeowners.   

Since no mortgage payments have to be made, it is a simpler and safer choice than a traditional mortgage or home equity line.   As long as you have the reverse mortgage, the only payments that you still have to make are your homeowners insurance and your property taxes. 

Not having a mortgage payment, or even being able to access an additional credit line when necessary, can certainly make a retirement more comfortable, and give retirees extra peace of mind.  As fuel and food costs quickly rise, it is critical to know that your retirement money will be able last as long as you need it to.  It is equally important to know that you will be able to enjoy your retirement the way you always envisioned it, and not have to be anxious about your finances while doing so.  

Reverse Mortgages are not necessarily the best option for everyone, and not everyone will qualify.  It is important to speak with a trained, licensed specialist who will take the time to explain your reverse mortgage options.  Counseling with a HUD-approved counselor will be required, and you can also choose to speak with your attorney or financial advisor as well.