Examples to Stretch Retirement Savings

Retirement SavingsSeniors who have debt may put off retirement in order to pay off their mortgage or credit card bills. Alyssa Gerace of Reverse Mortgage Daily reports that the number of adults ages 62 through 69 with debt increased from 48% to 62% between 1998 and 2010.

In 2010, the median amount of debt for that age group was $32,100 per person.1 When you add in the costs of aging such as in home care, home modifications that may allow seniors to live in their own home, or medical bills, the amount of debt may seem insurmountable.

A reverse mortgage loan may be the financial solution that can help many of these struggling seniors.

A Home Equity Conversion Mortgage (HECM) reverse mortgage loan is insured by the Federal Housing Administration (FHA). Reverse mortgage loans allow senior homeowners, ages 62 and older to access the equity they have built up in their home.

Borrowers can receive their loan proceeds in monthly payments, a lump sum, as a line of credit, or in a combination of these options. The amount that can be accessed depends upon the age of the youngest borrower, current interest rates, all mandatory obligations as defined by the HECM requirements and the lesser of the appraised value of the home, sale price and the maximum lending limit.

The following are three possible scenarios that reverse mortgage borrowers might face. These are hypothetical examples and are for illustrative purposes only.2

Example 1
The Situation: Paul and Nancy have been married for 42 years and are 65 and 62, respectively. Both have been in good health and both planned to work until their late 60s. Due to impending lay-offs at work in 2010, Paul decided to retire earlier than planned.

Nancy will continue to work until she is 65. They have not saved as much as they would like for retirement and are concerned about their future. They own a home that will be paid off in 3 years and do not want to downsize, though there are some costly updates that they would like to have completed.

The Solution: Paul and Nancy have significant equity in their home. As both are over 62, they can take a reverse mortgage loan with a line of credit disbursement option to perform the home updates and still have credit left over should there be a financial emergency in their future.

Both now have peace of mind that their retirement will be secure and comfortable.

Example 2
The Situation: Bruce and Loretta have lived in their home for 48 years and paid off the mortgage a decade ago. Bruce worked at the local factory and Loretta raised their children in their home.

They have no intention of moving and are in their early 70s. Loretta’s recent health issues have not only depleted their savings, but they are facing mounting credit card debt to pay for her treatment.

The Solution: Because they own their home outright and need extra income to afford Loretta’s treatment, a reverse mortgage loan disbursed in monthly payments could help Bruce and Loretta pay off their debt and afford ongoing medical costs.

Example 3
The Situation: Tom and Diane both retired last year. They didn’t have the retirement savings they had hoped for and are struggling to make ends meet on their current income. They own their home and their vehicle, but health insurance costs, utilities and even groceries are becoming a financial burden.

Tom and Diane know they could ask their children for help or they could sell their home and move to an apartment, but they don’t want to trouble their children and they love their neighborhood.

The Solution: Tom and Diane could be candidates for a reverse mortgage. With the equity they have built up in their home, they could take a reverse mortgage loan in monthly payments to supplement their retirement income while still living in the home and neighborhood they love.

If you are facing circumstances like in the examples above, a reverse mortgage loan could be the answer for you. In a 2012 article in AARP.com, Jane Bryant Quinn suggests yet another use of a reverse mortgage loan for seniors in their 70’s, “You might use the income from a reverse mortgage to reduce the amount you have to withdraw each month from your savings.

That leaves you with more liquid money invested for growth, which could help you pay the bills for many years more.”3

If a reverse mortgage loan feels like a good choice for you, you should calculate how much you may be eligible to receive, click the link below to begin calculating today.

Click —> Reverse Mortgage Calculator