The NRRI Examines the Underused Reverse Mortgage
Wednesday, 10 March 2010 08:39
The National Retirement Risk Index (NRRI) measures the share of American households ‘at risk’ of being unable to maintain their pre-retirement standard of living in retirement. The Index is calculated by comparing households’ projected replacement rates – retirement income as a percent of pre-retirement income – with target rates that would allow them to maintain their living standard.
To make the estimates as conservative as possible, the calculation assumes that households derive the maximum possible income from the assets they hold at retirement. A crucial component of that exercise is the highly unrealistic assumption that they access their home equity through a reverse mortgage and invest the proceeds in an inflation-indexed annuity – very few households actually take reverse mortgages or buy annuities.
This fact sheet looks at how not taking full advantage of housing equity affects the share of U.S. households ‘at risk.
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