The economy is currently coming out of a recession, and is slowly gathering itself back together. However, there have been emerging problems pertaining to employee pensions and 401K plans for years now. The problem has been that for the last few years retirees haven’t had enough money saved in their 401K’s for retirement. In addition, Social Security seems to have almost hit a wall and many are unsure of its future. These nuances and unsure futures have driven many retirees to exploring the option of reversing their mortgage. Those that are seriously considering a reverse mortgage as an option have quickly realized that the 401K they’ve saved, including the money their company has matched isn’t enough to sustain them throughout their retirement years. A driving force in this issue is the U.S. life expectancy has grown larger than it has ever been causing retirees to have to plan for many more years than their predecessors had to.

401K’s have always looked substantially bigger than they usually are being that money saved from the plan is taxable income which is taxed upon withdrawing it. So, is a reverse mortgage a better option than a 401K plan? Not necessarily. A reverse mortgage, which is increasing in popularity, is the implementation of a homeowner leveraging the equity in their home, by selling their property back to the bank and getting paid in monthly payments for it. Reverse mortgages are very hard to attain and risk adverse compared to 401K plans. In order to be approved for a reverse mortgage you have to meet a number of requirements first. Most people find it hard to get approved for reverse mortgages because banks don’t want people to outlive the sale of their homes. For instance, if I’m 70 years old and I’m approved for a reverse mortgage, and the bank decides to pay me X dollars over the next 20 years for my home; they don’t want me outliving the 20 years because I wouldn't own or have a home to live in once they’re finished paying me for my home. So why are so many people now trying to get approved for a reverse mortgage? It’s because unfortunately, the times we live in have financially bound many people to do so and cause them to look for more money elsewhere in their retirement. Most people think and see their house as the biggest asset they have. So, the train of thought is to try to squeeze all of the equity they have in their home out, to act as retirement funds until they pass away.

However, the biggest looming question for the millennial generation should be, “How should we prepare for retirement if the system is already shaky now?” I believe the best way for millennials to prepare for their retirement is to start to invest in plans and/or things that accrue interest over time that can create free cash flow as early as they possibly can. If you look at 401K plans they aren’t really investment plans they’re savings plans with the potential added benefit of a company matching up to 3% of what you contribute. Invest into things that accrue interest and value over time; this is the way all of us especially millennials should be preparing for our retirement and future.