Reverse Mortgages Can Provide Retirement ‘Safety Net’
"Your greatness is limited only by the investments you make in yourself."–Grant Cordone
RECESSION PROOF YOUR HOME
A reverse mortgage can be a viable financial product for seniors looking to protect their retirement assets from a volatile influences like the stock market, while also reducing the risk of a retiree exhausting all of their financial resources in retirement.
“Reverse mortgages have often been branded as a way for older retirees to raise money only when other sources of retirement income have dried up,” writes Eileen Ambrose and Sandra Block, two of Kiplinger’s senior editors. “But a growing group of financial planners and academics say that taking out a reverse mortgage early in retirement could help protect your retirement income from stock market volatility and significantly reduce the risk that you’ll run out of money.”
For a “standby reverse mortgage,” a retiree can take out a reverse mortgage line of credit and set it aside. Then, if the stock market falls, the line of credit can be drawn from to pay day-to-day expenses until a portfolio recovers. Retirees who follow a strategy like this should be able to “avoid the pitfalls of the Great Recession,” Ambrose and Block write, when many seniors were forced to take money out of depressed portfolios to pay their bills.
If people know they’ve got resources when the market collapses, they don’t panic and sell. Also adding to the increased attractiveness of a reverse mortgage today are these three keys:
A currently-beneficial interest rate climate
The amount of housing wealth that seniors currently maintain
Untapped credit lines increase as time goes by
While a traditional home equity line of credit (HELOC) can also provide a potential source of emergency cash, a reverse mortgage line of credit can be more reliable in the event of a market downturn.
“Just when people needed money and liquidity during the Great Recession, the banks needed liquidity, too,” Giordano tells Kiplinger. During the 2008–09 financial crisis, many banks either froze or outright closed borrowers’ home-equity lines. That will not happen on a reverse mortgage line of credit, Giordano says.
“As long as you meet the terms of the reverse mortgage—you must maintain your home and pay taxes and insurance—your line of credit is guaranteed,” Ambrose and Block write.
YOUR TAX-FREE PROCEEDS CAN BE USED TO:
Eliminate your current mortgage payment
Repair or remodel your home
Pay off your credit card debt
Provide monthly TAX-FREE income
Safety net for unexpected medical or household emergencies
Pay for in-home care
Reduce financial stress by building a nest egg
Help purchase a new home
Find out today if a Reverse Mortgage is the right solution for you—request your personal complimentary assessment today.