Takeaways from the testimony of Shai Akabas before the U.S. Senate Special Committee on Aging Hearing

If there’s one audience that should repeatedly hear of the exceptional value of home equity in retirement, it’s our elected officials in our nation’s capital. After all, how lawmakers view the Home Equity Conversion Mortgage program has a direct influence on their support and scrutiny of the federally-insured reverse mortgage.

For that reason, that’s why the testimony of Shai Akabas who serves as director of the Economics Policy Project at the Bipartisan Policy Center was indispensable. Members of the Special Committee on Aging are well versed in the mounting retirement crisis that has grown worse each year.

Here are some key takeaways from Akabas’ written testimony.

• Akabas points out that while our current retirement system works well for many, there are some who do not benefit. It is these individuals, he argues, to which policymakers should direct their attention. 
• The path to retirement security is much more difficult for low-income workers, minorities, and those without a college degree.
• Akabas suggests six areas for policymakers to direct their attention:

1. Improve access and design of workplace retirement savings plan,
2. Promote lifetimes-income options,
3. Enable the use of home equity,
4. Improve financial capability,
5. Modernize and strengthen Social Security, and
6. Promote personal savings for short-term emergencies.

Enabling the Use of Home Equity

In the interest of time and relevance to reverse mortgages, we will focus on Akabas’ third point- enabling the use of home equity. A salient point considering  American homeowners are holding $21 trillion in home equity which could significantly boost $35 trillion of retirement assets held today. More specifically home equity accounts for the majority of net worth for half of those 62 and older. Furthermore, the majority of those without a pension or retirement savings are homeowners. Akabas testified that means, “many of these older Americans can—and will have to— rely on home equity to supplement their Social Security benefits.”

Akabas specifies how homeowners may tap into their equity with a second mortgage, a home equity line of credit or a reverse mortgage. Of those options only one does not require monthly installment payments.

Despite the growing retirement income gap Akabas points out that the reverse mortgage market is currently quite small.

“Policymakers could work to improve this market and make it a simpler, more useful, and a more cost-effective tool for older, “cash poor” Americans to utilize their home equity.”

What would a simpler, more effective reverse mortgage look like? It’s a question that’s certainly as complex as the potential answer.

Download the written testimony:

Written Testimony of Shai Akabas before the U.S. Senate Special Committee on Aging Hearing