CBS News Weighs Reverse Mortgage Benefits in Retirement

For people approaching retirement with modest savings but with considerable home equity, CBS News’ MoneyWatch offers several options one should consider to supplement retirement savings, including using a reverse mortgage.

While not all retirees—or pre-retirees for that matter—have the same financial situation, older Americans tend to have more home equity than retirement savings and other financial assets, says MoneyWatch writer Steve Vernon, citing a report from the Boston College Center for Retirement Research. 

And where home equity has in the past been commonly used as a cash reserve for individuals to draw on in the event they incur high out-of-pocket medical or other long-term expenses, it is becoming more commonplace for homeowners to use home equity to improve their day-to-day finances in retirement.

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Two practical ways to make this happen, as identified in the Boston College report, are via the use of reverse mortgages or downsizing to a smaller residence. 

“Reverse mortgages are best for those people who want to stay in their current home for the rest of their lives,” writes Vernon.

In its report, Boston College details various aspects of a reverse mortgage, including basic definitions, fees associated with Home Equity Conversion Mortgages (HECMs), the potential disbursement a borrower may be eligible to receive, along with other key information. 

Published in September, the report does not get into the most recent rule changes that have transpired in the past weeks, particularly guidelines regarding the financial assessment.

“Clearly there’s no one-size-fits-all solution to the best use of your home equity in retirement,” writes Vernon. “The above strategies primarily consider the financial aspects, but for many people there are strong emotional and psychological attachments to their homes that should be considered as well.”

Read more at CBS MoneyWatch.

Written by Jason Oliva

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  • I don’t know if this is a good answer. I wouldn’t want to leave my loved ones with debt after i go.

    Here is what I’m doing to make sure I don’t end up needing to do something crazy to supplement my retirement income:

    1. I now put away the maximum amount in my 401K (5% for me) that my employer will pay into the plan as a match. It is free money and dumb not to do it. It was basically a raise I gave myself.

    2. After calculating my expenses, I found that driving was my biggest expense. I fixed that by buying a fuel efficient car thats durable (Honda Civic), finding an affordable insurance policy for it ($25/month from Insurance Panda, yay!), and using apps like Gasbudy/Waze to save money at the tank. I cut my transportation costs in half!

    3.I cut way back on eating out. I am having a year of putting away money hard, and food was a huge portion of my budget. I save about an extra $100 a week now, and eat healthier and better. Ditto for others if you spend a lot of money in bars.

    4. I need life insurance to protect my 2 daughters, but I ditched a $275 a month whole life policy for a term policy and now I only spend $25 a month. I save the difference to my Roth IRA. If you are unfamiliar with this and want to learn more watch shows or read articles from Suzey Orman or Dave Ramsey sometime. They are huge proponents.

    There really were no two ways about it. If I plan on having a full savings account (getting there) and a comfortable retirement (I will) I have to make good decisions with my money.

    Thoughts?

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