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Reverse Mortgage as a Retirement Tool

Social Security has been the foundation of economic security for millions of Americans since 1935, and today, covers more than 50 percent of retirement income for nearly two-thirds of America’s baby boomers. But Social Security isn’t the only retirement asset seniors have to rely on. For many there are investment portfolios, savings accounts, and company pensions. But one asset that generally hasn’t gotten as much attention until recently is a retiree’s home equity. By tapping into home equity through an FHA-insured Home Equity Conversion Mortgage (HECM), otherwise known as a reverse mortgage, baby boomers have one more tool in their retirement income plan. Here are four strategies to use a reverse mortgage as a retirement tool:

1. Bridge the Social Security Gap

If you are looking to retire earlier rather than later, a reverse mortgage can help bridge the gap before collecting Social Security benefits. Since Social Security benefits increase around 7% for each year you wait, the longer you wait to collect, the better. A reverse mortgage can provide you with cash flow and security early in retirement so you can delay withdrawing your benefits.

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2. Leave your investments in place longer

Similar to deferring Social Security, a reverse mortgage can provide you with financial security without having to withdraw from your investment portfolio while it’s still growing. Particularly, if a down market occurs, a reverse mortgage can provide income while you wait for your investments to bounce back.

3. Pay taxes for Roth IRA conversions

A reverse mortgage can provide retirees with the upfront cash needed to pay the taxes when they roll over a traditional IRA to a Roth IRA.

4. Create a sense of security

A reverse mortgage can simply give retirees peace of mind and financial security for the unforeseen like medical expenses, necessary home improvements, and long-term care solutions.

Learn more about how people are using home equity conversion mortgages for purchasing homes:

Please keep in mind that the reverse mortgage industry in constantly changing and some of the information contained on this site may not be current. Please ask a licensed reverse mortgage professional for up-to-date guidelines.