Many seniors may feel anxiety when looking at their retirement account balances if they have either not saved enough while working, or if something has happened requiring unplanned draws from fixed income. In that event, it may be beneficial for seniors to look at sources of cash that some might consider to be unexpected, and one such potential source is the home that they live in.
This is according to a new article at finance website the Motley Fool, which seeks to illustrate for seniors how it may be a good idea to consider certain cash flow alternatives if faced with insufficient retirement income. Health savings accounts (HSAs) are one such option worthy of exploration, and another is a monetization of hobbies or other possessions to start earning additional money, such as through the rental of property or another side job.
The home, though, is one potential source of cash that is often overlooked by many homeowners, the article says.
“There are a few different ways you can squeeze money out of your home,” the article says. “If you’re not too attached to it, you could consider downsizing. Moving to a smaller home or to a more affordable area could reduce or even eliminate your monthly mortgage payment in retirement. This would enable you to spend more of your savings on things you enjoy. You could also consider renting out your home if you plan to travel in retirement. This could provide you with some extra income every month. However, you’d have to remember to set aside some of that money for taxes.”
However for seniors who may not want to rent their home out or leave it altogether to sell it, a reverse mortgage could present a possible option for seniors in certain situations, the article says.
“This is only available to seniors 62 and older who have a lot of equity in their home,” the article explains. “It enables you to borrow against your home’s equity in exchange for a lump sum, monthly payments, or a line of credit. You don’t have to make any payments while you’re still living in the home, but the full balance immediately becomes due when you die or move away. It’s not the right choice for everybody, but if you plan to remain in your home and you aren’t interested in passing it on to your heirs, it could be a good source of retirement income.”
Illustrative of a lack of general awareness, the article doesn’t make any mention of other reverse mortgage options including a Home Equity Conversion Mortgage (HECM) four Purchase (H4P), or certain proprietary reverse mortgage options available from major lenders and brokers.
Read the article at the Motley Fool.