More than 10,000 Americans retire every day. When the time comes that you’re among them, will you be as prepared as you should be? Many are not. A survey from investment company BlackRock found that, on average, baby boomers have a gap of more than $36,000 per year between their expected retirement income and what their savings will actually allow them.
A lower-than-expected retirement income could put a damper on plans and even affect necessary expenses such as health care and housing.
Fortunately, there are many ways Americans can ensure they will live comfortably in retirement. You can invest more in retirement savings accounts while still working, adjust how you invest, or put off retirement to sock more money away for the future.
For those who may not have those options, one of the best-kept retirement planning secrets is gaining traction among retirees: the reverse mortgage.
Reverse mortgages let homeowners age 62 and older take advantage of the equity in their homes. With this cash flow, they can delay using other retirement assets. These other sources of income (such as Social Security or an IRA) then have more time to increase in value through compounded interest. For example, according to the Social Security Administration, Social Security credit can increase by 3 to 8 percent every year it is delayed.
“Homeowners invest in their homes their whole working life. When they retire, their home can start working for them”. “Reverse mortgages are a tool that retirees can use for the financial flexibility needed to live comfortably while other investments continue to grow.”
A reverse mortgage is very similar to a traditional mortgage—homeowners borrow money based on the value of their home, they still own their home and it can be paid off at any time. With a reverse mortgage, however, the homeowners can make payments if they choose but it’s not required. There’s also a guaranteed line of credit option, which isn’t affected if home values decrease.
We reminds retirees to keep every option in mind when making their financial plans. “If homeowners don’t consider reverse mortgages, they may be selling themselves short. All seniors should talk to a reverse mortgage specialist to see if a reverse mortgage is a good option for them.”