With older homeowners struggling to find the best way to cover their costs in a down economy, many are left with the decision of whether to sell stock or utilize a reverse mortgage loan. Suze Orman recently gave advice regarding a homeowner facing this particular dilemma and had ascribed to the theory that it’s better to hold onto stock investments and employ a reverse mortgage. The rationale being that stocks are more likely to provide a larger profit and recoup their losses at a faster rate than the housing market will. So theoretically the heirs of the homeowner could be left with more money overall in 10 years (stock and equity left in the house after the cost of reverse mortgage is taken out). There is also an argument to be made for utilizing a reverse mortgage to enable later collection of Social Security benefits. The interesting thing about Social Security benefits is that while you can start collecting at age 62, your social security income is reduced a fraction of a percent for each month before your full retirement age and increased by a percentage (depending on birth date) if you delay past your full retirement age.
The benefit increase maxes out at age 70, so if you can wait until then to collect Social Security benefits, it can result in higher monthly benefit payments. For homeowners with sufficient equity, a reverse mortgage can help bridge the eight year cash flow gap between age 62 and age 70. It’s certainly something to think about and discuss with a financial advisor. You can also research delayed retirement credits on the Social Security website. Be sure to check out our what is a reverse mortgage page for more information as well.
The response above is not intended to be anything other than the educated opinion of the author. It should not be relied upon as financial advice.