The judicious use of a reverse mortgage has the potential to aid those at or near retirement in avoiding exhausting their financial resources while on a fixed income, something that is likely of particular interest to those who are concerned of outliving their resources well after they’ve retired from a career. This is according to a piece recently published in USA Today about retirement security.
According to a 2019 Aegon Center for Longevity study cited by columnist Robert Powell, 49% of Americans related that their primary retirement fear is running out of money. When it comes to mitigating the dreaded “longevity risk,” four recommendations emerge based on expert analysis performed by Powell and USA Today. One of the options cited is the use of a reverse mortgage loan.
“A reverse mortgage is a loan that allows homeowners who are generally 62 or older to use part of their home equity to obtain cash proceeds that can be used in many ways, according to the National Reverse Mortgage Lenders Association,” the column reads, citing information from the reverse mortgage trade association.
As the homeowner gets older, the reverse mortgage loan grows in credit capacity according to Shelley Giordano, co-founder of the Academy for Home Equity in Financial Planning at the University of Illinois Urbana-Champaign, and head of enterprise integration at Mutual of Omaha Mortgage.
“So, in a sense, a reverse mortgage is an ideal vehicle to address longevity challenges,” Giordano explained to Powell.
There are also different options available to reverse mortgage borrowers in terms of the disbursement of the loan’s proceeds, including regular draws, an unused line of credit, or some kind of combination of the two, Giordano told the columnist.
“[A] reverse mortgage can help smooth out turbulence in a long retirement,” she said to USA Today.
The other three tips the article posits include simply choosing to work longer and put off living on a fixed income; relying on payments from Social Security benefits which enjoy certain tax privileges, inflation adjustments and is less expensive compared with other forms of longevity insurance; or using an annuity which can specify regular payments for a predetermined term.
Article by Chris Clow on reversemortgagedaily.com