Feb
Sooner or Later: Reverse Mortgage Requires a Decision on Enjoying Retirement
Written by Leo FranklinMany people dream of retiring early so that they can do all of the things they had to put off during their working years. Often, they don’t get right to their dreams. Some find that their retirement income doesn’t fully cover their living expenses and they need to work a part-time job to make ends meet. Others decide that they should let their account balances grow a little more before splurging on a dream vacation or an RV.
There are many sound financial reasons to delay doing something. There always are. However, there could be equally compelling reasons to act now instead of later.
Why act now on your retirement dreams?
Inflation favors acting now in many cases. In the long-term, even low inflation will steadily chip away at the buying power of your dollar. Over the past five years, Federal Reserve data shows that a dollar’s buying power has declined about 10 percent, even as inflation has been very mild. A retiree with an account balance of $100,000 at the beginning of 2007 can now buy only 90 percent of their dreams compared with that earlier time.
Another reason to act now is your health. Chances are that your dollar not only went further five years ago, but you did as well. You were probably at least a little bit healthier and stronger five years ago. Unfortunately, five years from now, you may have a few more aches and a little more trouble getting around.
Why use a reverse mortgage to fund your retirement dreams?
Reverse mortgages adapt to the age of the home owner. Younger borrowers have access to a smaller percentage of the equity in their home. More mature borrowers can get a larger share of the equity from a reverse mortgage. A point in favor of acting now is that you may be able to get more equity from your home in the future if the housing market recovers.
Reverse mortgages offer downside protection – that’s because they are guaranteed by the federal government, so you can never owe more than the amount you borrowed plus interest. There is no limit on your upside participation. If the housing market defies expert predictions and delivers double digit gains for the next few years, you could access the increased equity with a reverse mortgage.
Fifteen years ago, many reverse mortgage borrowers were in their 70′s and needed cash to meet a personal tragedy. Now, it is more common to see newly retired seniors using reverse mortgages to enjoy the first years of their retirement. The choice is a personal one, but a reverse mortgage could help many enjoy retirement sooner than later.
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