When it comes to retiring, a common worry for seniors is outliving their nest egg. In a 2019 report, 49 percent of older Americans cite running out of money as their chief concern1. With the average life expectancy in the United States being almost 79 years old,2 many may be wondering what options they have to prevent them from running out of money.
One way to avoid tapping into your retirement funds is to work longer. By continuing to work a few extra years and contributing to retirement, you can improve your financial outlook. This strategy can offer a couple of advantages. When you delay retiring, it generally increases your social security benefit amount. Plus, it gives you the chance to save more and gives your investments more time to grow. For every additional year spent in the workforce, it is one less year having to use your retirement savings and may decrease the chance of your money running out.
Once a senior turns 62 years old, they become eligible for social security. Many find themselves enrolling immediately to help supplement their retirement income. On average, social security replaces about 40% of one’s pre-retirement income.3 While social security can help with the cost of daily living, there is a significant benefit in waiting to enroll. Waiting to claim social security benefits until the age of 70 can result in higher benefits throughout the beneficiary’s lifetime.
Tapping into Your Home Equity
A different solution to this problem may be for seniors to use their home equity to cover their living expenses. A reverse mortgage is a loan available to homeowners who are 62 years and older and allows them to convert a part of their home’s equity into cash or a line of credit. By eliminating their monthly mortgage payment, it can provide extra cash flow throughout their retirement.3 Funds can be used to cover daily expenses, medical bills, or even long-term care. It can also help supplement income whether you decide to continue working or not.
To learn more about how a reverse mortgage can help maximize and extend your retirement savings, contact a licensed loan advisor at 1 (800)976-6211.
4 Your current mortgage(s) and any other existing liens against the property must be paid off at or before closing. You must live in the home as your primary residence, continue to pay required property taxes, homeowners insurance, and maintain the home according to FHA requirements. Failure to meet these requirements can trigger a loan default that may result in foreclosure.