Tips to making YOUR retirement more profitable
In the past, the main goal of a Reverse Mortgage was to help seniors to increase their cash flow. Today, some seniors are still using it to help with daily expenses but many are also understanding how to use it more strategically to further their retirement goals. Here are a few ways a Reverse Mortgage can help you in the long run.
1) Postpone drawing down on your retirement assets giving them more time to grow. Your financial adviser can shed some definitive light on this one.
2) Postpone taking your social security allowing it to grow. As most seniors know, the earlier they take their SS, the lower the amount. Having your expenses handled by your reverse mortgage might allow you to have a bigger social security check at 65 or 70 vs. 62
3) If you have a current mortgage payment, a reverse mortgage can eliminate that payment, providing you with more cash flow. If you have enough equity, you could potentially eliminate a payment and get a monthly check for as long as you live in your home.
4) Many reverse mortgage programs also provide a growing, NON-cancelable line of credit for future needs/surprises. Reverse mortgages can provide peace of mind in many different ways. A line of credit is just one of them.
5) Portfolio protection: In a down market, your portfolio may take a hit. You may panic thinking I need this money now. With a reverse mortgage, you take some of the pressure off yourself for short term hits to your portfolio allowing it to hopefully rebound and provide the average market returns over time. Decisions made in haste often provide a hasty result, having time to make a decision based on more facts or maybe a meeting with your financial adviser might be helpful.
6)Steady income – If your equity allows, the reverse mortgage payment you receive will be steady and on time for as long as you own your home. This allows you to plan your life around a fixed and reliable income. As a senior, this is reassuring given all the twists and turns life can take as we age.
7) Lump sum of cash. Who doesn’t want this? If your equity allows, you can get a lump sum of cash, monthly income, pay off a home and have a line of credit for the future.
So, is a reverse mortgage right for you? It’s easy to get some idea of what to expect. There are NO costs or commitments, just a simple conversation to see what you might qualify for. Call or email me for more information.
Forbes – Oct.2015 – “Reverse Mortgages can be a retiree’s saving grace”
“Strategic use of a home’s equity, could save many people from financial failure in retirement and help stem the retirement income crisis facing Americans.” Not only is home equity a bad investment, but if not strategically used as part of a comprehensive retirement plan, it becomes a bad retirement asset providing almost no return above inflation and is not a readily liquid asset”
- Americans are unprepared for retirement to the tune of 4.13 trillion, per the Employee Benefit Research Inst. Based on their expected longevity and current savings/retirement funds.
- For 67% of seniors over 50% of their retirement income is made up of Social Security. The other two main sources of income are savings and home equity. Savings is usually considered when planning, but according to Forbes, the home’s equity is usually ignored.
- 30 million baby boomers are moving towards retirement and the majority want to stay in their current home. Reverse mortgages allow this to happen for those with approximately a 50% equity position. Other conditions apply, but this is a major consideration.
The four main reasons a senior might want/need a reverse mortgage.
- Defer SS benefits. – Although your reverse mortgage balance may rise at around 5% (in today’s market) per year, your SS benefits will rise about 7-8% between age 66 and 70.
- Reduce sequence of return risk – Having income or a credit line from a reverse mortgage will allow seniors more time to let their assets grow and not panic sell if their investment portfolio drops.
- Allow for Roth conversions at a low tax rate – If you tap into your home’s equity early in your retirement, this does not increase your taxable income. As such, you can potentially convert a portion of your IRA at a lower tax rate to get money into a Roth IRA. Keeping your taxable income down can potentially prevent being taxed on your SS benefits as well.
- Reduce retirement expenses & increase cash flow. – Seniors with about 50% equity in their homes can replace their existing mortgage with a reverse mortgage and therefore eliminate that payment. If a senior has only 10 years left on their 30 year loan, their payment is still the same as it was 20 years earlier. Eliminating this mortgage could be a substantial increase to their cash flow. This could prevent a senior from selling higher earning assets to pay current expenses.
Nobel Prize-winning economist Robert C. Merton, a finance professor at MIT’s Sloan School of Management, recently stated “Americans have wrongly steered clear of reverse mortgages.”
With the new financial assessment rules in place since 4.27.15, reverse mortgages are a much safer product and are available to those with strong payment histories. This has made our industry stronger and our product safer for all. Call me today and I’ll provide you with your own personal analysis. I will show you exactly what reverse mortgage may be able to do for you. 941-301-8750.
Disclosure information: C2 Financial Corporation, NMLS 135622. Fla license # MLD #1136. Loan approval is not guaranteed and is subject to lender review of information. C2 is an equal opportunity mortgage broker/lender. C2 Financial Corporation is approved to originate VA and FHA loans,and has the ability to broker such loans to VA/FHA approved lenders.C2 Financial Corporation is not acting on behalf or at the direction of HUD/FHA or the VA. Reverse Mortgage Specific Disclosure: The loan is repaid when the last borrower leaves the home or refinances the home or passes away. When the home is sold or refinanced the proceeds pay back the loan, accrued interest and mortgage insurance All of the remaining equity goes to the borrower or their heirs. As with any home-secured debt, the homeowner remains responsible for property taxes, homeowners insurance, HOA dues and property maintenance. An under-age spouse is not a borrower and is not on title. Their right to remain in the property for life is dependent on meeting all conditions of the HECM program including continued payment of property taxes and homeowners insurance and maintenance of the property. Available tenure payments or lines of credit extended to the borrower will cease upon their demise and will not be available to the non-borrowing spouse.