Monthly Archives: March 2017

The Reverse Mortgage and Retirement Income

Reverse Mortgage Written on Paper Lying on Money

Can a reverse mortgage support your retirement plans?

Making ends meet in retirement can be downright challenging. Even when you do feel prepared, an unexpected health issue or surprise home repair can sometimes throw you off course. And now, Social Security benefits may not be enough retirement income to support your lifestyle.

So how can retirees generate more income for the type of retirement they desire?

One strategy may be the reverse mortgage.

What is a Reverse Mortgage?

As the name suggests, a reverse mortgage is the opposite of a traditional home mortgage. Instead of paying down a loan to build equity in your home, you use the equity in your home to receive money.  

Not everyone qualifies for a reverse mortgage, but if you do you may choose to receive the funds in a lump sum, in a series of payments, or you may treat it as a line of credit and only take the money out when you need it.

It’s probably becoming pretty clear how this can help you generate additional retirement income. Instead of relying on your Social Security benefits or using up your retirement accounts, you may be able to leverage your home equity for a reliable stream of income.

Reap the Benefits and Know the Risks

With a reverse mortgage, you only pay back the loan once you sell your home. So this type of loan can create retirement income, provided you adhere to all of the program’s regulations.

But let’s say you’re not living in your home for a certain period of time. Whether it’s for work or a long-term absence, you may have to pay back your loan. Or, if you fail to maintain the home, the bank may require you to repay the money.

State and federal laws have highly regulated these programs; however, there are still risks associated with this lending tool. It’s a good idea to speak with your loan officer or banking professional who can help you understand the risks and implications of applying for and using a reverse mortgage.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. There are significant costs associated with Reverse Mortgages, such as: Up-front mortgage premiums, annual premiums, origination fees, closing costs, monthly service charges, appraisal fees and your Medicaid may be affected.

Do I Need an Emergency Fund in Retirement?

Do You Need Emergency Funds in Retirement?

Emergency funds are different once you’re in retirement.

Throughout your life, you’ve probably heard that an emergency fund is a must – or, at least, a very good idea. If you lost your job, those savings would hopefully be able to cover your expenses until you found a new job. But what about after those working years – do you still need an emergency fund in retirement?

Emergencies in Retirement May Be Different

When your working life comes to a close, you may no longer be concerned about losing a job or needing emergency cash to cover you in that instance. Instead, retirement may come with another set of emergencies. While different than they were before, these emergencies can sometimes require you to have additional funds on hand.

For example, if you’re dealing with a medical issue or your home needs major repairs, you may need to pay for anything insurance doesn’t cover. Remember, you’re no longer receiving income from an employer, so now you have to fund emergencies with other sources of income.

Your Emergency Funds May Be Different, Too

It’s still a good idea to have access to liquid cash when you need it, so you may want to keep that savings account active. Outside your traditional emergency stash, however, you may have other types of funds you can tap.

Home equity lines of credit, for example, can leverage the equity in your home and may give you access to  additional cash. Reverse mortgages may also be an option, but may come with additional rules and regulations to consider first.

You may also lean more on your insurance as an emergency fund in retirement. Medicare may cover some of your health expenses, as may supplemental and long-term care insurance. Home repairs and maintenance may be covered under your homeowner’s insurance plan. While they may not cover everything that comes up during retirement, insurance can be much better than paying for it all out-of-pocket.

To discover what types of emergency funds you may need for retirement, be sure to talk with a financial advisor who specializes in retirement planning.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.