When you think about preparing for retirement, you probably picture a mix of Social Security, a pension or 401(k), and maybe some savings or investments you’ve built up over the years. But these days, with people living longer and the cost of just about everything continuing to rise, those sources may not always stretch as far as you’d like.
That’s why more and more older homeowners are turning to a powerful alternative—a source of financial stability that’s often hiding in plain sight: your home.
The Resource Right Under Your Roof
For most people, their home isn’t just the place where memories are made—it’s also their single biggest financial asset. In fact, your home may make up half (or even more) of your total net worth. Yet surprisingly, many retirees never think about using it as part of their long-term financial plan. A reverse mortgage changes that.
Designed for homeowners 62 and over, a reverse mortgage gives you the ability to tap into the power of your home’s value and turn it into usable funds—without having to sell or move. (Of course, you’ll still need to meet your loan obligations, like staying current on property taxes, homeowners insurance, and home maintenance.)
What makes it even more appealing is that the funds you receive are income-tax free,¹ so you keep more of what you access. But, best of all, unlike a traditional mortgage, you aren’t required to make monthly mortgage payments!² That’s money you can redirect toward everyday living expenses, medical costs, travel, or simply breathing a little easier knowing your budget has more flexibility.
And if you’ve been watching home prices climb in recent years, you already know: your house is likely worth more today than when you bought it. That appreciation works in your favor.
Think of your home as another valuable tool in your financial toolbox that can work alongside your retirement savings to give you greater stability and peace of mind for the road ahead.
A Financial Buffer When You Need It Most
One of the greatest strengths of a reverse mortgage is its flexibility. Depending on your current and long-term goals, a reverse mortgage gives you options for how you’d like to receive your funds. You can take a lump sum if you have a larger expense to cover—such as paying off an existing mortgage or making major home improvements. Or, if you’d prefer steady support over time, you can opt for monthly disbursements that supplement your retirement income, much like a regular paycheck.
Another popular choice is to secure your funds as a growing line of credit,3 which allows you to access funds when you need them—while the available credit actually increases over time. Many homeowners like this option as a long-term safety net, since it provides added flexibility for the future. And of course, you can also choose a combination of these methods4 to fit your unique needs.
The ability to customize how you receive your funds is what makes a reverse mortgage so versatile when it comes to supporting your overall retirement strategy.
The Many Strategic Uses of Home Equity
Having a financial buffer at any age is important, but in retirement, it’s critical. Life is unpredictable—medical expenses, rising costs of care, or even unexpected home repairs can throw a wrench into the best-laid plans. Having access to home equity means you can cover those expenses without draining your retirement accounts.
But when it comes to your investments, a reverse mortgage can be especially valuable during turbulent times. If the market takes a dip and you need extra cash, selling investments at a low point could permanently reduce the amount your portfolio earns in the future. This is what financial planners call “sequence of returns risk”—and it’s one of the biggest threats to financial longevity.
Here’s a simple way to think about it: if you withdraw money from your investments while the market is down, you lock in those losses. That means your nest egg has less time and fewer dollars to recover when the market eventually bounces back.
By tapping into reverse mortgage proceeds instead, you give your investments time to recover, protecting your long-term financial health. In this way, your home equity acts like a shield for your savings—helping to smooth out the bumps that come with market ups and downs. Of course, a financial advisor can discuss how a reverse mortgage can work with your specific financial situation.
Beyond preserving your investments, reverse mortgage proceeds can support your retirement strategy in major ways. Here are a few other examples of how homeowners today put their reverse mortgage funds to work for them:
- Delay claiming Social Security.1 By using home equity to cover expenses early on, you can wait to claim Social Security benefits until later. The longer you wait (up to age 70), the bigger your monthly checks will be for life.
- Cover rising everyday costs. From groceries to healthcare, the cost of living isn’t slowing down. Your home’s appreciation over the years can now be turned into cash to help offset those expenses.
- Make home improvements. Whether it’s upgrading your kitchen, adding accessibility features, or tackling long-overdue repairs, reverse mortgage proceeds can help make your home more comfortable and safe as you age in place in the home you love.
- Buy a new home. Many people aren’t aware that you can use a reverse mortgage to purchase a new home that better fits your needs—without taking on a monthly mortgage payment.2
- Create a “rainy day” fund. Establishing a reverse mortgage line of credit4 can help you better prepare for emergencies or occasional expenses—just like a “rainy day” fund.
Building a Stronger Retirement Plan
A reverse mortgage isn’t meant to replace your retirement plan—it’s designed to complement it. Think of it as adding another leg to the stool that supports your financial future. With home equity in play, you can feel empowered to create a plan that’s more flexible and better equipped to handle whatever comes your way.
If you’re interested in bolstering your retirement strategy with a reverse mortgage or other senior home equity solution, our team is here to help. Contact Longbridge today!