Retirement Savings: Will You have Enough?

According to a recent study, the majority of pre-retirees and retirees reported having “modest” retirement savings, with the average amount reported as $128,000. The lifetime income a retiree will receive from this saved amount, even when combined with Social Security benefits, will be much less than their pre-retirement income.

As a result, most pre-retirees won’t have enough retirement income from all sources to retire full-time at age 65 at their pre-retirement level of spending. Because of this situation, they may face potentially difficult decisions: They may have to delay retirement, reduce their spending, and/or utilize all their financial resources, such as home equity, to maximize their retirement cash flow.¹

A Home Equity Conversion Mortgage (HECM), also known as a reverse mortgage loan may be able to help.  A reverse mortgage isn’t intended to replace one’s retirement plan, but when used sensibly, it can be a valuable means of supplementing one’s finances.

A reverse mortgage is a Federal Housing Administration (FHA) insured loan² for homeowners who are 62 years and older. A reverse mortgage loan allows older adult homeowners to access a portion of their home’s equity into funds that can be used to pay for everyday living expenses, make home improvements, afford medical/prescription costs, cover large or unexpected expenses, or set aside proceeds for an emergency fund.

Benefits of a Reverse Mortgage in a Retirement Plan

• Eliminate Monthly Mortgage Payments³: Older adult homeowners can increase their monthly cash flow by eliminating their monthly payments, allowing them to focus on other financial obligations.
• Access to a Low-Cost Line of Credit⁴: With an adjustable-rate HECM, there is the ability to draw from a line of credit at any time (in any amount) until the line of credit is exhausted, or let it sit and grow over time, allowing access to additional cash if the home value increases.
• Receive Funds in a Lump Sum⁵: With a fixed-rate HECM, older adults can receive a portion of their home’s equity in a lump sum, often to pay for home improvement projects or to consolidate other debt.
• The Ability to Age in Place⁶: A HECM allows older adults to age in the comfort of their homes while maintaining ownership and the title.

There are a few requirements borrowers will be responsible for during the life of the loan.

• If there is a mortgage on the home, it must be paid off using the proceeds from the reverse mortgage loan.³
• Borrowers also must continue to reside in the home as their primary residence, continue to pay the required property taxes, and homeowner’s insurance, and maintain the home according to FHA requirements.³

Interested in learning more about how to use a reverse mortgage as part of your retirement plan? Call (800) 976-6211 to speak with a licensed reverse mortgage advisor for a free, no obligation loan assessment.