Not a week goes by when there’s not a new article – or several articles – reminding us of the benefits of reverse mortgages. In case you need more reasons to consider this powerful financial tool, here’s an excellent new article from Next Avenue (www.nextavenue.org) that we think does a good job of outlining some of the important benefits of reverse mortgages. The article, written by a financial planner, lists five ways a home equity conversion mortgage (or HECM, better known as a reverse mortgage) can help you in your retirement.
First, though, let us state at the outset that a reverse mortgage may not be right for everyone. Before you decide for or against pursuing a home equity conversion mortgage, you need to sit down with an expert, someone who will patiently examine your circumstances and your desires and help you make the decision that’s right for you. We encourage you to call us here at AgingOptions and let us refer you to one of the experienced reverse mortgage professionals with whom we have a strong relationship. This type of free consultation will help you make the right reverse mortgage decision, with absolute confidence.
In the Next Avenue article, the author points out that there was a time not long ago when reverse mortgages were considered almost as a loan of last resort. Those days are long gone.
“There is a healthy skepticism about reverse mortgages, and that’s not necessarily bad,” says the article, “because people should exercise caution when utilizing debt. But reverse mortgages can improve retirement spending outcomes in a sensible way.”
The first benefit of a reverse mortgage relates to something we discussed on our AgingOptions blog last week: a reverse mortgage can help retirees weather the ups and downs of the stock market. The idea is simple: your HECM provides you with a line of credit, giving you ready access to funds you can draw on when your stock-based portfolio declines in value. When the market recovers you stop using your reverse mortgage and draw on your regular retirement funds. (For more information about this strategy you’ll find a link to our recent Blog article here.) This maximizes your flexibility and gives your stock-based funds some time to recover their value.
A second suggestion from Next Avenue is that retirees consider using their reverse mortgage as an income source to allow them to delay taking Social Security. As you probably know, Social Security benefits grow by about 7-8% every year from age 62 until age 70. It may pay for you to tap into your equity and hold off as long as you can before starting Social Security benefits. Our team at AgingOptions can advise you about this strategy if it interests you.
The Next Avenue article lists three more ways a reverse mortgage can help stabilize your retirement finances. Here’s a quick summary of the final three recommendations:
- You may want to consider using your home equity to pay the taxes that will be required to convert a conventional IRA into a Roth IRA. This makes future withdrawals tax free.
- It may be possible to use a reverse mortgage to increase the estate you leave behind. This could happen if you are able to leave your stock-based portfolio alone to grow, using your home equity to supplement your income. In the event that your home value drops, your heirs would also be protected: even if your reverse loan balance exceeded the value of your home, your heirs would not be obligated for the difference.
- Your HECM provides an excellent contingency fund if your health should take a turn for the worse. You may also choose to use your home equity to cover in-home care and even to pay long term care insurance premiums should you need to. Again, the key benefit is the financial security and maximum flexibility a reverse mortgage can bring.
Once again, none of these strategies is right for everyone, so please contact us at AgingOptions to we can advise you and, if appropriate, refer you to someone for expert counsel. We also stand ready to guide you through the entire process of retirement planning, so that you can face your future with confidence and assurance. Our LifePlanning strategy answers all the key questions you’ll need to consider in order to protect your assets and keep you from becoming a burden to those closest to you. Are your financial plans fully thought through? Have you considered the housing choices that are right for you? Are your legal affairs in order? Is your health care strategy the right one for your needs? Is your family informed of and supportive of your wishes? With your LifePlan in place the answer to each of these questions is a confident “yes.”
Find out more about this comprehensive planning approach by attending one of our free LifePlanning Seminars. We assure you, this will be a few hours very well spent – and there’s no obligation whatsoever. For dates, times and online registration, click on the Upcoming Events tab on this website, or call our office during the week for assistance. We’ll look forward to seeing you soon!
(originally reported at www.nextavenue.org)