Do you imagine retiring to a tropical Caribbean beach living your days with a tropical drink in your hand, but maybe your savings is more in line with living at Motel 6 and bagging groceries the rest of your retirement? As we are reminded every time we go to the movies or the grocery store, the cost of living is increasing. Merrill Lynch published a survey last month showing the average cost of retirement (not including long term care) has risen to $738,400; 35% of this cost will go to healthcare alone. For retirees planning on staying in higher costs states like New York or California you would need even more funds to be well prepared. A simple way to figure your annual costs in retirement is to estimate 70 to 80% of your pre-retirement income.
If you’re close to retirement or already there and not as prepared as you would prefer; there are some simple solutions that can be done to greatly improve your financial situation. The average American over 65 has more than 82% of their net worth locked up in their home equity (US Census bureau). This holds especially true in areas like California where we have seen a large bump in home values in recent years. A reverse mortgage (RM) is a crucial part of a “comprehensive retirement plan.” Retirees & financial advisors that overlook this incredible source of wealth are doing themselves and their clients a disservice. As seasoned advisors learn more about this federally insured product, they are directing clients to take advantage of this financial boon. Here are a few ways this product can improve your financial picture:
Grow Social Security Check
Delay taking social security until age 70 and your check goes up 8% each year delayed. Did you know that with a RM you can draw a monthly check for a certain period of time? Following this practice until age 70 will significantly increase your social security check for later in your retirement, when you will probably need it the most.
Eliminate debt payment
Going into retirement with debt payments can be like trying to swim with ankle weights. Are you carrying credit card debt, auto loans, or personal loans? If you’re carrying a balance and have equity in your home there is an easy solution. The average credit card interest rate is over 15% and the average fixed rate reverse mortgage(RM) starts at 5.5%. You can almost cut your interest accrued by 2/3rds switching the debt to a RM.
Tax Free Money (consult your tax professional)
This federal program allows retirees 62 and older to pull out TAX FREE equity out of their homes in the form of a monthly check, lump sum payout, or drawing it in a Line of credit. Any moneys left in the RM Line of Credit will grow by the current rate, compounded annually. If rates rise in the future, your growth rate raises the same amount. Why leave your equity wasted in your home, when you could be earning compound growth on it without paying ANY interest on the money left in your RM Line of Credit?
The RM guarantees your monthly payouts, RM LOC, and/or lump sum payout. The Initial Mortgage Insurance Premium guarantees this money cannot be taken away, even if your home value were to plummet. This is not the case for a traditional LOC from your local bank. In the last market crash many retirees lost their homes because their equity LOC’s were frozen and they had no money to draw from and were unable to make mortgage payments. As long as you live in(as primary residence) and maintain your home, pay your taxes, and keep your insurance up to date you and your spouse can feel safe knowing you will always have a roof over your head.
For questions on how the RM can help you or one of your clients to live more comfortably in retirement feel free to contact Robert Snow Krepps, NMLS #255191, at HighTechLending Inc today to discuss how a reverse mortgage may be able to help you (877) 567 – 7476 or firstname.lastname@example.org .
See what you qualify for on our reverse mortgage calculator: https://www.funds4seniors.com/reverse-mortgage-calculator/
HighTechLending Inc, NMLS # 7147, is an Equal Housing Lender. Licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act.