There has been a lot of discussion surrounding the future of Social Security and how that may affect older American’s retirement. With no bump in benefits likely for next year, some retirees could turn to reverse mortgages as an alternative source of cash flow, according to a recent CNBC article.
The Board of Trustees of the Social Security Trust Funds released information that estimated that the increase in cost-of-living adjustments will be very small or flat, CNBC reports. Last year it was 0.7% and now is estimated to be zero.
In May the average monthly retirement benefit was about $1,300, the article writes, but for most retirees, that amount is not enough to live off of. The strategy of using a home equity conversion mortgage is brought up as a possible alternative to increasing cash flow in retirement.
“This is a reverse mortgage that permits older homeowners to tap some of their home equity,” the article states. “As long as borrowers meet the terms of the mortgage and continue to use the home as their principal residence, they will not have to repay the loan.”
There are however around 34% of senior households who still owe money on a mortgage, home equity line of credit, or both, in 2013, which could be a problem for some people who may want to look into a reverse mortgage.
In addition to the flat Social Security payments, some retirees may have to face higher costs for Medicare Part B, the article points out. A reverse mortgage could also help with higher medical costs. There are certain Part B protections that may not apply to everyone, leaving many retirees with very high health care costs.
Read the full CNBC article
Written by Alana Stramowski