An increasing number of baby boomers are beginning to retire. Some estimates claim that up to 10,000 individuals retire each day in the United States. If you are close to retiring, you should consider the benefits of reverse mortgages. Keep reading to learn what reverse mortgages are and how they can help improve your retirement.
A reverse mortgage gives homeowners the opportunity to borrow money on the value of their property. While the mortgage doesn’t have to be repaid until the property is sold or the homeowner dies, homeowners still pay property taxes and insurance. The amount of the loan is never greater than the home’s value—even if the value declines over time.
Spending and Your Portfolio
Many retirees withdraw from their investment portfolios after they retire. However, if you retire when the stock market is down then you have to deal with shrinking investments. Retirees may even find it necessary to sell investments early in order to cover living expenses. A reverse mortgage can help cover your living expenses so that you don’t have to sell your investments at the wrong time. Some reverse mortgages offer a standby line of credit. If the stock market is performing badly, you can use the credit until the market improves.
Delay Social Security Benefits
In general, retirees should try to delay their social security benefits for as long as they can. The earliest age that a person can claim benefits is 62. However, the benefits increase for each year that a retiree waits to collect the funds. The percentage increase depends on your date of birth, and after age 70 the increases stop. A reverse mortgage can help retirees delay their benefits for as long as possible.
Help Pay IRA Conversions
Retirees with traditional IRAs may want to roll over their accounts to Roth IRAs once they retire. A reverse mortgage can be used to pay the taxes associated with this type of conversion. Converting to a Roth IRA is an appealing option to some since it can help save taxes in the long run. However, when you withdraw funds from a traditional IRA, you will owe taxes on the amount you withdraw. This is where the funds from a reverse mortgage can help you out.
Preparing for the Worst
A reverse mortgage can help you deal with unexpected expenses related to health or assisting family members who face a financial hardship. Long-term care can be very expensive, and a reverse mortgage is a great option for covering the expenses.