More From Fidelity: Reasons Why Retirees Avoid Guaranteed Income Options
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We’ve written in the past about the reasons why HECM borrowers stay away from guaranteed lifetime payment options (like annuities or the HECM tenure option form of payment) despite strong research showing these are the optimal financial payment plans for most people.
Now, a new report from the Fidelity Research Institute sheds more light on the topic. As part of the recently released study Structuring Income for Retirement: addressing America’s Emerging Guaranteed Income Gap, a survey of retirees and pre-retirees was conducted to help identify barriers to selecting annuities.
Although the survey was geared toward annuities, it is likely the same emotions and perceptions can help explain the low popularity of the HECM tenure payment option and, conversely, the overwhelming popularity of the HECM line of credit option.
The following table summarizes the survey results:
It is interesting to note that the top ranking reason for retirees (”Already have regular income coming in”) is not perceived to be as much a barrier by pre-retirees. This suggests that annuities (and the HECM tenure option) may be more popular with the next wave of retirees:
For those already retired, the greatest obstacle is tied more to their satisfaction with their existing income sources of pensions and Social Security, with four-fifths of retirees believing they already have enough guaranteed income in retirement. However, as Social Security and traditional pensions both decline in terms of their future ability to replace pre-retirement income, future retirees will likely be more amenable to annuities to help sustain — or recreate — the levels of guaranteed income today’s retirees enjoy.
Other reasons cited in by retirees in the survey that seem especially pertinent to HECM borrowers’ overwhelming selection of the line of credit option over the tenure payment option are:
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- Reverse Mortgage Payment Options - Are You Prepared to Self-Insure Life Expectancy?
- Study Shows HECM Lifetime Tenure Payment Option is Best Choice
- Reverse Annuity Mortgage Can Be a Sensible Strategy
- HECM Line of Credit Gains in Popularity Among Reverse Mortgage Borrowers
- Reasons Why People Don’t Choose Lifetime Payments
- ‘Guaranteed Income Gap’ Study Has Implications for Reverse Mortgage Borrowers
- More From Fidelity: Reasons Why Retirees Avoid Guaranteed Income Options
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