Using a Reverse Mortgage as a Strategic Financial Tool
At a recent professional symposium hosted by the Retirement Experts Network, financial planners discussed the challenges of saving for retirement in today’s world — and the unexpected demands on those funds once you retire.
But for eligible homeowners, a reverse mortgage loan can improve your retirement efficiency and help ensure financial stability for the best years ahead.
Rising to the challenge
According to Joe Jordan, behavioral finance expert and founder of Insured Retirement Institute, Americans nearing retirement age are impacted by four major factors:
- Longevity and health risks
- Asset depletion and running out of money
- Managing their tax burden
Says Jordan, “Right now, longevity is the great multiplier of all the other risks that we’ll face.”
Nobody is immune to risk. But you can take steps to mitigate it, for example by utilizing home equity to maximize your Social Security benefits by delaying until full retirement age. And you can keep your retirement investments intact for growth †, reducing your exposure to locking in losses after a market downturn.
Plus, the proceeds of a reverse mortgage are non-taxable as income, as these payments are not considered income (not tax advice, consult a tax professional).
“A reverse mortgage can be a Social Security bridge to get the higher amount later on,” adds Jordan. “It can be used as a buffer asset and a long-term care asset, helping to pay long-term care premiums. It can help manage taxes.
Cash now or credit for later
Borrowers may use a reverse mortgage to help pay those short-term expenses to provide better long-term outcomes for investments and Social Security benefits. Or the fast cash could simply help you be more flexible with spending as long as you continue to meet the terms of the loan — living in the home as your principal residence, paying property taxes and homeowner’s insurance, and performing basic home maintenance and upkeep.
But to retire comfortably, you must plan to have the funds to sustain your lifestyle over the course of retirement — for however long that may be. So even if you don’t need cash right away, a reverse mortgage also allows you to preserve credit as an insurance policy for the future.
Dr. Wade Pfau, RICP and Curriculum Director and Professor of Retirement Income at the American College for Financial Services, has long studied the complexities of retirement finances. Says Pfau, “The idea here is you open the line of credit, allow it to grow‡, and it potentially can grow to a much higher value than if you had waited and opened it.
He continues, “It also provides a protective hedge on the home value because the line of credit will grow even if the home is declining in value after initiating the loan.”
The earlier you establish a reverse mortgage line of credit and the less you take out upfront, the more available funds you’ll have in the future.
Because you never know what the future holds…
Don’t be left worrying if you have enough money saved to get you through retirement. If you’d like to learn more about the unique benefits of a reverse mortgage loan, the loan specialists at Reverse Mortgage Funding, LLC (RMF) are ready to assist you. Call RMF today at (888) 277-1567 to get your questions answered.
This content is sponsored by RMF, one of the nation’s leading reverse mortgage lenders. We are dedicated to helping older Americans live the retirement lifestyles that they imagined and deserve, in the comfort of their own homes. As a result of our commitment to providing an extraordinary and positive customer experience, we have earned a 98% customer satisfaction rating; a 5-star / Excellent score on Trustpilot; 4.5 out of 5 stars on LendingTree; and an A+ rating with the Better Business Bureau. Call (888) 277-1567 to speak with one of our experienced reverse mortgage specialists to learn about our retirement financing products and solutions.
†As with any mortgage, you must meet your loan obligations, keeping current with property taxes, insurance and keeping your home in good condition.
‡If part of your loan is held in a line of credit upon which you may draw, then the unused portion of the line of credit will grow in size each month. The growth rate is equal to the sum of the interest rate plus the annual mortgage insurance premium rate being charged on your loan.