In a recent research brief released by the Center for Retirement Research at Boston College, the research team posits that those nearing retirement should worry less about asset allocations and look to other more effective tools including reverse mortgage loans.
Investing money wisely is obviously very important, but the fact is that many Americans have little savings. The typical household approaching retirement has less than $100,000 in 401(k) and other financial assets, which means that investing has little effect on retirement well-being. Fortunately, there are many options or levers that can help those in or nearing retirement. These options are also in control of the individual, not the stock market.
These financial options may be as powerful as asset allocation in attaining retirement well-being. The study states that it is not surprising that asset allocation is less effective for most households given the fact that most have only modest financial assets. Households nearing retirement have options that fly under the radar including: delaying retirement, taking out a reverse mortgage, and controlled spending. Each of these options is a more potent alternative to asset allocation for most households.
With that said, financial planners will be of greater service to their clients if they focus on a broad array of tools for boosting retirement security.