Part Four of Four
This is it. My last column about “reverse mortgages.” At least for awhile. They’re one of those things most people love to hate even though they don’t really know much about them. I’m not even sure why I’m even talking about them since they don’t have much to do with helping people Buy and Sell homes.
But they can make a huge difference when it comes to helping some people to stay in their homes while enjoying much happier, healthier and longer lives. So stay with me on this. You might not think it’s important right now, but the whole point of these columns is to introduce relevant info you might need in the future.
The long, wandering ramble I’ve been on the last few years has been my attempt to give voice to the things I see and hear out there in the real estate trenches everyday. The things so many people seem to be wrestling with in the privacy of their own homes at the moment.
How does selling a house fit into the giant puzzle of retirement planning, long-term health care, estate planning, property tax and capital gains tax issues, social security payouts, pension distribution – not to mention just the simple, everyday questions most of us have about maintaining quality of life as we age?
The longer the discussion continues, the more convinced I am that no one past the age of 50 should even think about selling a house without learning more about all of the above. It is all of these factors combined, in conjunction with your largest asset and most important bastion of security (a.k.a. Home), that create the wholeness out of the sum of the parts of our lives.
If you believe that’s true, then I’d like to posit that Reverse Mortgages are one possible tool you can use to help design the kind of flexibility your life is going to need in the future. Here are a few ways they can help:
Social Security: Consider them as a way of delaying the start of social security benefits – which can mean higher monthly payments later.
Delaying Pension Distribution: They might allow you to push back the age you start taking your pension distribution (which could also have tax advantages.)
Increase Cash Flow: In situations where retirement assets aren’t quite enough to make life comfortable, they can supplement your income.
Growing Line of Credit: Reverse mortgage equity lines can grow at a compounded rate of 5% per year and provide an ongoing safety net that actually gets bigger as you age – not smaller.
Long Term Health Care: A reverse mortgage equity line can act as a defacto long-term care hedge, specially if you can’t stomach the ongoing expense of a standard long-term care policy.
Protect Portfolio Performance: If you rely on your portfolio for your living expenses, there’s nothing worse than selling equities during a down market cycle. Reverse mortgages can help hedge against the possibility
Buffer Cash Reserves: Every financial plan on the planet calls for a reasonable amount of cash reserves as an emergency buffer. Reverse mortgages can help maintain a comfortable level.
Homeownership: Best of all, in cases where people have no choice but to sell their home to get to their equity, reverse mortgages do offer a choice to consider that may keep them in their home.