As the saying goes, “what goes up, must come down.” Especially when it comes to financial markets. The reality is that no matter how much planning you’ve done to prepare yourself for retirement, market volatility will remain inevitable.
In your earlier investing years—20s, 30s, and 40s (maybe even 50s)—market volatility was pretty easy to shrug off. Retirement was years away, giving your portfolio enough time to recover.
But now as you near or enter retirement, time is no longer on your side. And without a guaranteed, regular paycheck, you need to ensure you’ll have enough money in cash and assets to last until the market heals. So what can you do to get ahead of the down market?
Home Equity: The Retirement Funding Hero
A Home Equity Conversion Mortgage—also known as a reverse mortgage—could be just the solution. Available to homeowners ages 62 and older, a reverse mortgage enables you to tap into a portion of the equity in your home to use as you wish. And with home equity shaping up to be one of the largest retirement assets for seniors, it’s important to leverage the home as part of your total wealth, and a means to generate additional retirement income.
The latest data from the US Census shows that the median 65-year-old couple has as much as two-thirds of their wealth in their home. During a market downturn, you can tap into this equity via a line of credit or reverse mortgage to provide the necessary cash flow to meet spending needs.
And while such loans used to be expensive and boast closing costs in the tens of thousands of dollars, recent FHA regulations have reduced borrowing costs—while also lowering the overall risks to homeowners.
In today’s market, reverse mortgages represent a valuable part of an overall financial strategy for a secure retirement. In recent years, financial experts have published research showing how the strategic use of reverse mortgages could help retirement portfolios better survive down markets, or even delay the need to claim Social Security benefits.
And here’s the best part: reverse mortgages require no monthly mortgage payments, and the funds do not have to be repaid until after you, or the final borrower, no longer lives in the home.*
Reverse Mortgage Proceeds: Managing Your Expenses in a Down Market
Despite the current down market, there is some good news. With today’s record-low interest rates, you can access reverse mortgage proceeds not previously available for the things you want and need—even in the current market state.
Meet everyday expenses
Everyone could use some extra money every month. With reverse mortgage proceeds, you can cover recurring expenses like property taxes, insurance, and other home maintenance.
Pay off your debts
With no monthly mortgage payments required, a reverse mortgage allows you to redirect the money you would use to pay the mortgage toward other things, such as eliminating or reducing credit card balances and other accumulated debt.
Manage healthcare costs
With the rising costs of healthcare services, many of today’s seniors are opting to “age in place,” and remain in their homes rather than relocating to a senior community, assisted living facility or smaller house. The funds received from a reverse mortgage can help make it all possible.
Establish a financial safety net
If you’re part of the 90% of seniors who are choosing to stay in their homes come retirement, you need to prepare for the unexpected in terms of expenses. A reverse mortgage allows you to establish a line of credit to make sure that you’re better prepared for these expenses, or to pay for long-term care should it become a need. This financial “safety net” gives you peace of mind today, and financial protection for the future.
While the market is down, there’s a way to help you avoid readjusting your retirement lifestyle. By proactively taking out a reverse mortgage in early retirement years, you’ll have access to an additional funding source that doesn’t depend on the stock market.
Want to learn more? Contact the Longbridge team today to see how we can help you improve your retirement plan.
* Real estate taxes, homeowners insurance, and property maintenance required.