Even with decades of preparation, retirement can leave anyone feeling as if they are not ready. There are several tools, including reverse mortgages, that can help to mitigate the risks that come with retirement.
Learning more about reverse mortgages, how they can prove beneficial, and what they can be used for, can help give you peace of mind. Here are how reverse mortgages can help with retirement.
What is a Reverse Mortgage?
A reverse mortgage is similar to a traditional mortgage in that it lets homeowners borrow money by using their home as the security for that loan. Just like a traditional mortgage, you keep the title of the home in your name.
The main difference is that you can skip the monthly payments that come with a traditional mortgage. The loan is not paid back until the home is sold or you no longer live in the home. Homeowners pay insurance and property taxes and must use the home as their primary residence.
It is important to note that the amount owed goes up, not down, with time. The more time until the loan is paid off sees fees and interest are added to the balance each month. Still, it can be a great way to get the money you need now without having to sell your home.
Risks of Retirement
Even with proper planning and saving, there is always the risk that funds set aside for retirement may not be enough. Three risk factors threaten retirement in particular: inflation, personal spending, and market volatility.
Inflation. Inflation is a growing issue, especially in this day and age. It has spiked to near double-digit levels in the last year, though it is finally slowing. With higher inflation comes a higher cost of living, tapping into retirement funds at a rapid pace.
Personal Spending. People are living longer than ever, which is good news. But with that extended lifespan comes challenges in mitigating personal spending and ensuring that those funds last the duration of retirement. Planning further ahead can help to ensure that you have the proper funds, though changing markets and inflation can cut into that.
Market Volatility. Markets historically gain, but they can move down as well. Should there be a major drop before you retire – or early in retirement – it can tap into assets. Speak with your advisor about withdrawal programs and take a look at investments throughout the course of retirement.
How a Reverse Mortgage Can Help
The good news is that there is any number of ways in which a reverse mortgage can provide insulation against the pitfalls of retirement. It all depends on how the reverse mortgage is used, so talk to your advisor before deciding.
First of all, it can help with paying off debt. Debt can be a major detriment come retirement, and a reverse mortgage can help to get those bills under control. High-interest credit cards and other debts can eat into your retirement quickly.
Reverse mortgages can also be used to protect retirement investments. Think of the recession and the housing market crash as clear proof of what can come. By having the funds from a reverse mortgage, you can insulate yourself from those catastrophes to some degree.
That is just the tip of the iceberg as to what you can expect from reverse mortgages. The simple fact of the matter is that you can do even more to benefit from reverse mortgages before and during retirement.
Face the Challenges of Retirement
From inflation to market volatility to personal spending, several risks can threaten the stability of your retirement funding. The good news is that there is help to be had in the form of reverse mortgages.
With the proper knowledge and implementation, a reverse mortgage can help you to navigate the minefield of retirement. Make sure that you have the tools to make your retirement even more enjoyable.