Which Assets Do I Spend First?
It’s not an easy question to answer. And you know that, in retirement, it’s not what you earn that is the critical factor- it’s when you earn it.
While saving for retirement, dollar cost averaging can help the accounts experience significant growth over time by allowing them to purchase stock and other investments at ideal intervals. However, pulling funds out of the retirement account at regular intervals when prices are low may actually cause irreparable damage to the account value and even prematurely deplete retirement account funds.
Many are looking for ways to supplement your retirement income, a Home Equity Conversion Mortgage (HECM) may be worth looking into and at least getting some information. A HECM allows you to access a portion of the equity in your home to obtain tax-free cash without having to make monthly loan payments. If you’re 62 years of age or older and have sufficient home equity, you may be able to get the funds you need to pay off an existing mortgage, make home repairs or help with medical or other debts.
Stretching Retirement Savings
The Situation: Mr. and Mrs. Brown thought they had saved enough for retirement. But now at age 67, they are not so sure. They worry every time they look at their retirement account statement. They have been withdrawing about $1,500 per month, which amounts to $18,000 a year since they retired two years ago, and have $350,000 left in their account. If they continue withdrawing at their current rate, they may be at risk of running out of money in their mid-80’s.
A reverse mortgage loan could provide the Brown’s with an alternative source of tax-free funds so that they don’t have to withdraw as much from their retirement account. By using a Reverse Mortgage Saver Line of Credit with a monthly draw to supplement 50 percent of their income needs ($9,000 a year), their current retirement account can last more than 30 years compared with only 18 years without a reverse mortgage loan.
A reverse mortgage is a loan that allows you to tap into the equity of your home with NO monthly payments, and without risk of losing your home. Seniors age 62 or older can convert a portion of their home equity into tax free funds, without having to sell their home or give up title….and there are NO qualifications. Homeowners must be at least 62 years old, the property must be the primary residence and homeowner’s insurance and all real estate taxes must be maintained by the homeowner.
It’s an interesting product and one that many are hearing more about. It’s not for everyone but could be a tremendous benefit for the right person. And, an interesting product to know that is out there.
(Editor’s Note: Tina Steele is a reverse mortgage loan officer with Nova Home Loans.)