Home Equity May Save Baby Boomers Retirement

Baby Boomers have not been diligent in saving enough money to fund their retirements. But with the soaring real-estate prices many of their homes have appreciate in value giving them a large asset base.

Many of these baby boomers will have to look to their home equity to help fund their retirements.

Keene, a regional manager in private client services for San Francisco-based Wells Fargo & Co., added that baby boomers will have a number of options to "monetize" their homes, from buying a less-expensive house or condominium for cash and investing the proceeds, to reverse mortgage loans or interfamily deals.

But seniors that haven't saved money for retirement had better be cautious:

To be sure, there are mortgage experts who are skeptical of putting too much faith in tapping home equity to fund retirement.

"If somebody has no savings, the chances are they don't own a million dollar house free and clear either," said Michael Moskowitz, the president of the New York mortgage company Equity Now. "I think it's a bit of wishful thinking."

He added: "Without retirement planning, without a 401(k) or IRA savings account, people aren't going to be able to enjoy the same standard of living they had before retirement."

Plus baby boomers can't expect the same appreciation as in the last decade:

Chicaferro also cautioned that baby boomers shouldn't count on their homes appreciating as fast in the future as they have in the past decade.

"There's no guarantee that equity in the home is going to double or triple in value, so it's not a prudent thing to sit there and think it will happen," he said.

The key is to start saving for retirement and not rely on the equity in your home. If it is there, then it can add to your retirement lifestyle, but don't expect it to completely support your retirement.

Information brought to you by the Reverse Mortgage Guide and the Reverse Annuity Mortgage Blog.

IPO Possible for IndyMacs Reverse Mortgage Unit

IndyMac Bancorp Inc. is considering an initial public offering for its Financial Freedom Senior Funding Corp. as net income at the reverse mortgage unit doubled in the first quarter. The IPO would help attract and retain talent, raise cash and enhance shareholder value for Financial Freedom.

The Financial Freedom unit nearly doubled its net income from $4.2 million to $8 million in the first quarter of 2006. It funding $1.1 billion in reverse mortgages, compared to $507 million in the year-ago period.

Wachovia analyst Jim Shanahan assigned an estimated a value of $250 million to $400 million for Freedom Financial, based on a price-to-earnings multiple of 8-12, he said in a note to clients.

IndyMac paid about $80 million for a 94% stake in the firm back in 2004, Shanahan said.

Source: http://www.marketwatch.com/News/Story/Story.aspx?guid=%7BCFAD7068-6F93-4D50-B3F5-DA967D6BE278%7D

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