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Bankrate.com: Can Reverse Mortgages Replace Pensions?

Retirement income has long been characterized as having three legs: Social Security, personal savings and a pension. But now that pensions have become phased out by many employers over the years, it is possible that reverse mortgages may assume this vanishing leg of the retirement stool, suggests a recent Bankrate.com article.

Since employers have moved away from offering defined benefit pension plans, instead now offering defined contribution plans, where employees contribute from their own salaries, the traditional three-legged retirement stool is in danger of losing a much-needed support.

“Maybe not when seniors decide to tap the equity in their home with a reverse mortgage,” writes Bankrate.com contributor Dr. Don Taylor. “They aren’t for everyone, but it’s my expectation that they will become increasingly important as a source of retirement income to seniors over time. Reverse mortgages may become the 3rd leg of the stool.”

Because reverse mortgages may not be a good fit for everyone’s individual retirement plan, retirees must also consider a variety of important factors, including how long they can postpone Social Security draws, and how their personal savings can bolster, if not complement, the other leg’s of the retirement stool.

Read the full Bankrate.com article.

Written by Jason Oliva