In a new column for Kiplinger, Kristen Sieffert, president of Finance of America Reverse‘s (FAR) parent company, Finance of America Companies (FOA), discusses the potential utility of tapping home equity in retirement
Citing U.S. Census Bureau retiree data and solvency issues related to the U.S. Social Security program, Sieffert illustrates why home equity might serve as a tool for retirees to draw from during times of economic uncertainty.
“The home may indeed be the solution for many struggling retirees who can access their home equity, either through a reverse mortgage or other home equity solution, to fund living expenses, pay for long-term care, college tuition, travel plans and all sorts of retirement adventures,” Sieffert writes. “And some are using their home equity loan proceeds, which are often income-tax-free, to invest, pay taxes on a Roth IRA conversion and other asset-leveraging maneuvers.”
Still, many seniors remain unwilling to explore home equity tapping as a way to make ends meet, according to Sieffert, despite an abundance of research showing that the majority of older people prefer to remain in their homes.
“The benefits of aging in place also shouldn’t be overlooked,” she writes, citing 2022 data from the University of Missouri and AARP. “Researchers are increasingly finding that those who age in place are more likely to avoid physical and mental declines and have better health outcomes.”
Sieffert was promoted to president of FOA after the company completed a deal to acquire the assets of leading reverse mortgage lender American Advisors Group (AAG).
Prior to the new role, Sieffert held the role of FAR president, a position held since 2015, when the company was still known as Urban Financial of America.
While FOA faced a $182 million loss in Q4 2022, the company returned to profitability in Q1 2023 by posting an adjusted $14.6 million profit.
FOA CEO Graham Fleming said in the Q1 2023 earnings call that following the dissolution of FOA’s forward mortgage arm, the company is focused on its retirement solutions businesses that include home renovation loans and reverse mortgages.
“In the U.S., the retirement savings gap is approaching $4 trillion, yet homeowners age 62 and older have amassed more than $11.5 trillion in home equity value,” Fleming said. “This is the market opportunity: Helping older homeowners use their homes’ ‘superpower’ to achieve their financial goals, whether by tapping home equity via AAG or FAR, securing the Finance of America Home Improvement Loan or generating additional income by home sharing with Silvernest.”
