Caught between a rock and a hard place

The economy might be making a slow return to health, but for many baby boomers, that upturn cannot happen fast enough.

A recent survey of baby boomers conducted by the Atlanta-based Generation Mortgage Co. found that 64% of respondents viewed their current financial situation as negative, consistent with the 61% who also viewed their parents’ situation as negative. Worse still, 78% of respondents said they fear they will not be able to retire comfortably.

Generation Mortgage commissioned Zogby International to conduct the study, done as an online survey in August of 271 adults who have children and who are also caregivers to their parents.

That is the plight facing the so-called sandwich generation, the baby boomers who are not sure how they will fund comfortable retirements for themselves, and who have to provide financial assistance to their parents.

For some of those adults, according to the company, a reverse mortgage might take the financial pressures off.

"Few years ago, it was common for the children of seniors to object to a reverse mortgage," said Jeff Lewis, chairman of the Generation Mortgage, which writes reverse mortgages.

"They felt their parents were squandering the inheritance. That has evolved. What we have seen is the children coming to grips with the reality that they are paying for their parents," he added.

They also have to grapple with some sobering realities of their own financial situations.

Some 51% of respondents have failed to make a rent, mortgage, credit card, auto loan or college loan payment over the last year because they were short of funds.

About 60% of the respondents indicated that they would rely on their 401(k) or individual retirement accounts to sustain them through retirement. Also, 37% of respondents noted that they would turn to their home equity line of credit to supplement their retirement funds.

A reverse mortgage, Lewis said, might take a significant amount of pressure off of baby boomers and their parents, who are trying to meet the demands of financing their retirements during the protracted period of economic sluggishness.

But a reverse mortgage works best under particular circumstances, notably if the homeowner has a significant amount of home equity tied up in the house. If the homeowner cannot retire all the existing debt on the house, however, then a reverse mortgage will not work.

Donna Mitchell is a senior editor at Financial Planning, a SourceMedia publication.Follow EBN on: Twitter | Facebook | LinkedIn | Podcasts