Many retirees and their families have discovered that Reverse Mortgages have many benefits that can help them with retirement planning. Planning is often the key to improving retirement security and enjoyment. We are all going to be worried about running out of money one day. This appears to be a constant we must all learn to live with but we should not allow it to ruin our lives with unnecessary insecurity. A plan can get us past the day to day worry so we can focus more on the big picture. This equates to security and peace of mind so we can enjoy our retirement years and our families.
Some of the Benefits of a Reverse Mortgage can add to a retirement plan are as follows:
Balancing Monthly Cash-Flow for Living:
One of the key advantages that a Reverse Mortgage can provide is paying off forward mortgages and other debts that require monthly payments. Given most retirees live on fixed incomes, balancing monthly cash flow is usually step one. This will free up cash flow for living expenses while the reverse mortgage pays off the forward mortgages and other chosen debt payments, although you would still be responsible for regular property tax and insurance payments. In many cases this will help families get a tight handle on the debt side of the equation and allow them to extend their nest egg further into retirement.
Maximizing Social Security Benefits:
The home equity access provided by a Reverse Mortgage can allow you to delay yur Social Security benefits to later years so you can maximize your benefits. You will receive more benefit with Social Security with this strategy and a Reverse Mortgage can provide the funds, whether it be for supplementary income or simply a reserve credit line, to get you there. To read more on this, visit our reverse mortgage blog titled "Planning Options for Leveraging the Most Out of Social Security with a Reverse Mortgage".
Instead of reliance on credit cards or traditional home equity lines of credit, a Reverse Mortgage Credit line is a more stable option that can serve as an emergency reserve and it does not require a monthly mortgage payment. Unlike traditional credit lines, the untapped portion of the Reverse credit line will grow each year as you age, thereby providing you additional access to your home equity.
A Reverse Mortgage can provide an avenue to supplement income so you don’t prematurely dissipate your retirement accounts that are still growing tax deferred. A Reverse credit line can provide access to your home equity as needed for better balance. Having all of your eggs in one basket, whether it be in your home, reliance on a single stream of income, or too much in one investment area, has been proven not to be the best strategy. The addition of a Reverse can often provide much needed diversification.
Non-Recourse Benefit to Estate & Heirs:
Government insured Reverse Mortgages are non-recourse loans. Specifically, this means that there is no personal liability attached to the mortgage note like exists with a traditional forward mortgage. Once a Reverse Mortgage has been established, the property is still owned by the homeowner but the property now stands on its own. This means that if the homeowner(s) have significant longevity and at the end of life the balance on the loan exceeds the fair market value after selling expenses, the heirs and the estate are not financially responsible for any loss. By design, this loss will be absorbed by the government insurance fund or otherwise termed MIP. This can be a very attractive benefit given many families may have liquid assets besides their home that they would like to pass on to their children or grandchildren as heirs.
Income Tax Planning:
Others may wish to use a Reverse Mortgage in a more complex way to limit taxes. Some advisors may recommend the use of tax free funds from a Reverse Mortgage to supplement expenses so you can limit the withdrawals from your qualified retirement accounts to achieve a lower overall tax bracket.
Addressing Income Insecurity in Retirement:
The addition of a Reverse Mortgage is a terrific way to remove income insecurity from the retirement equation by bridging tax deferred accounts and a more beneficial planned Social Security award schedule with the annuity or term payment option provided by a Reverse Mortgage.
The benefits of a Reverse Mortgage do not end with the death of the primary spouse. The surviving spouse can live in the property for their remaining natural life in accordance with FHA guidelines. This is comforting because no one knows when they are going to die but now we know that are loved ones will have a constructive plan in place when the time comes.
Whether it’s planning at the early stages of retirement or more balance and security at the later stages of life, the potential benefits that a Reverse Mortgage can provide to an overall retirement plan should be considered.
Visit our Reverse Mortgage Blog for more information on planning. More questions? Visit our Reverse Mortgage FAQ to find the answers.
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