You’ve heard about it – you’ve read about it – you’ve thought about it. The idea of a reverse mortgage has been on your “retirement radar” for quite a while, but for some reason you’ve delayed taking action. A pair of recent news articles might just change your mind and persuade you that now is the perfect time to get serious about this powerful retirement tool.
Home Prices Continue Their Decline
The first article we read recently for the AgingOptions blog is this one from the Seattle Times last week. It’s actually just the most recent of many similar stories that have trumpeted the decline in Seattle-area home prices, which, according to the Times, are still dropping, having sunk 11 percent over the past six months. “The cool-down in King County’s real-estate market has now reached six months, and the drop in home prices over that span is among the largest on record,” writes Seattle Times real estate reporter Mike Rosenberg. “Prices have been falling faster here than anywhere else in the country.” Of course, that’s great news for home buyers, but for sellers the landscape has shifted dramatically from the overheated market of the past few years.
Home value is extremely important to reverse mortgage clients because it is one key measure of the homeowner’s borrowing capacity. All other things being equal, says reverse mortgage specialist Ted Butler, the time to take out a reverse mortgage is when home values are as high as possible.
“This article from the Seattle Times is another timely reminder that for most retirees, their home represents one of their most significant investments – and that investment is subject to market volatility,” Ted Butler states. “We have been encouraging those who are considering the use of a financial tool such as a reverse mortgage to realize that they can protect their value by locking in their reverse mortgage sooner rather than later. If this current trend toward lower home values continues, as it has and is for many other parts of the country, then they could be risking tens of thousands of dollars needlessly.”
Reverse Mortgage Line of Credit a “Powerful Tool”
As Ted points out, one of the great advantages of the reverse mortgage is that it gives qualifying homeowners access to a line of credit which grows over time. This credit line becomes a powerful tool to build income security in retirement. “Particularly if the homeowner doesn’t need the funds from the reverse mortgage today, which is the case for a significant percentage of people, the growing line of credit is the greatest single advantage of this financial tool. By locking in home value today, a borrower can put that credit line in place and watch it grow over time, no matter what the real estate market does. In a way,” Ted adds, “it’s almost like equity insurance. And it’s a powerful strategy for increasing peace of mind in retirement.”
Reverse Mortgage Adds to Retirement Income Strategy
That topic – peace of mind in retirement – was the focus of this second article, from the Kiplinger financial website. The article tells retirees how to lock in lifetime retirement income, and we found it generally helpful. “Guaranteed income for life, and the peace of mind that comes with it, is within reach,” writes Kiplinger editor Eleanor Laise. “By maximizing Social Security benefits and any available pension income, incorporating plain-vanilla immediate or deferred income annuities, and perhaps adding in a reverse mortgage that allows your home to bolster your retirement-income plan, most retirees can build an income floor that will support them as long as they live.” Most of her recommendations seemed like solid, common-sense suggestions to us, but it was her comments about the pluses of a reverse mortgage that caught our eye.
“For some retirees,” Laise writes, “the numbers just don’t add up. They can’t afford an annuity that will fill their retirement-income gap, and they’re at high risk of outliving their savings. For those who own a home, the answer might be a reverse mortgage.” After explaining some of the familiar reverse mortgage basics, Laise tells her Kiplinger readers about some of the ways proceeds from a reverse mortgage might be used: as regular monthly payments that continue as long as you live in the house, as a lump sum for whatever purpose you choose (such as remodeling so you can age in place), or as a line of credit that you can tap in an emergency. The important take-away for us here at AgingOptions is that this Kiplinger article represents yet another example of a mainstream financial publication endorsing the idea of a reverse mortgage as a vital tool in your retirement “toolbox.”
For Reverse Mortgage and Retirement, Knowledge is Power
The next step in our view is to speak to a trusted reverse mortgage expert like Ted Butler and explore the pros and cons of this strategy. It’s not the solution for everyone, but it very likely might be exactly right for you. Contact us here at AgingOptions and let us put you in touch with the person who can best answer your reverse mortgage questions.
The same is true in the realm of retirement in general: knowledge is power, and the best way to gain knowledge is to talk to someone who takes a holistic view of all the aspects of retirement, not just a single facet such as money or housing. Rajiv Nagaich of AgingOptions is well known for his comprehensive approach to this issue. We call it LifePlanning, because our approach creates a plan for all the essential elements of retirement life – your money, your housing, your legal affairs, your medical coverage, and your family dynamics. A LifePlan is the blueprint you need to build the retirement you’ve been hoping for! We invite you find out more by attending a free LifePlanning Seminar with Rajiv Nagaich soon. Click here for a complete calendar of upcoming seminars, then select the date, time and location that works for you. It will be a pleasure to meet you at a LifePlanning Seminar and to introduce you to the peace of mind that comes with a robust retirement plan. Meanwhile, as we like to say, “Age on!”
(originally reported at www.seattletimes.com and www.kiplinger.com)