A reverse mortgage is among several tools that can be used to help minimize the damage caused by retirement income “shocks,” writes author John F. Wasik in a Forbes article published this week.
These shocks might include loss of employment, needing to assist aging parents with care costs, and divorce, among others. And the odds are high that many, many people will experience a major loss of income at some point, according to findings from a recent report by the National Endowment for Financial Education.
“People want to believe `it won’t happen to me,’ report author Prof. Teresa Ghilarducci told Forbes. “The truth is that almost no one is safe from these shocks, and low-income individuals are disproportionately affected.”
For men aged 66 to 70, the report found, 96% had experienced at least four of these “shocks.”
But there are ways to survive a shock, Wasik writes, including the use of home equity via a reverse mortgage.
“When retired, you may be able to get a ‘reverse’ mortgage that will pay you a monthly income — if you qualify,” the article states. “You also may be able to get a home-equity loan. But both of these options are last resorts in the event that you don’t have enough cash or retirement savings to meet your expenses.”
Other possible solutions covered in the article include looking at long-term care expenses in advance; funding 401(k) plans, other IRAs, or HSAs; and keeping some form of emergency savings at all times.
Read the full Forbes article.
Written by Elizabeth Ecker