It is no surprise that Social Security is the largest retirement income asset of the average American senior. As baby boomers enter retirement age, it is expected to supply more than 50% of income for about two-thirds of Americans in retirement. With such dependency on this single source of income, many Americans may be ill-equipped to handle future changes to these benefits.
While one remaining typical source of wealth includes the usual personal retirement savings, another possible income source is largely ignored, according to a recent article from Forbes.com.
The author points out that lack of focus on home equity as a retirement income planning tool is an oversight that needs to change in order to save many people from financial challenges in retirement. The article continues to describe that utilizing a reverse mortgage loan is one such strategy that deserves special consideration.
Reverse mortgages, specifically the government-insured Home Equity Conversion Mortgage (HECM), are home equity loans that help “retirement-age homeowners ‘age in place’ in a familiar setting where convenience and long-term relationships contribute to a preferable quality of life,” says ReverseVision President and CEO John Button.
The article outlines four techniques where reverse mortgages can be strategically used to improve a retirement income plan:
- Defer Social Security benefits to guarantee a 7-8% increase every year.
- Give investments time to recover after they drop in value.
- Allow for Roth conversions at a low tax rate by using tax-free reverse mortgage proceeds.
- Reduce retirement expenses and increase cash flow.
However, though experts such as Nobel Prize–winning economist and MIT professor Robert C. Merton endorse this loan, many consumers still hold reservations about them. Gaining a better understanding of how a reverse mortgage works can clear up any misconceptions the public may have, and provide a way to save America’s senior population from a potential housing crisis.
Strategic uses of home equity should be considered as a part of every homeowner’s comprehensive retirement income plan. Home equity may also serve as a saving grace for many baby boomers facing a retirement income shortfall, the article states.
Learn more about what a reverse mortgage is and how it can help you by contacting a licensed American Advisors Group reverse mortgage professional at 1-888-998-3147.