The retirement picture is changing every year and for many Baby Boomers who are thinking about retirement, some may not have as much as they had hoped in their retirement savings. The old “4%” rule is outdating itself and retirees are seeking alternative options, explains a recent article from Forbes.
One alternative that may be an option for some is to take a reverse mortgage. With a reverse mortgage, a borrower can turn part of the equity in their home into a lump sum payment or another option that functions similar to an annuity, the article explains. The program was also made more attractive after the new reforms to the program have taken place in the last few years.
However, there are some requirements for a reverse mortgage. “First, you need to actually have enough equity in your home,” the article writes. “Second, when you move or pass away, the reverse mortgage will need to be repaid, so this could be a problem if you were planning to pass your home on to heirs.”
Another thing to consider about the reverse mortgage option is that many people prefer to use it as a last resort in case they need additional income to cover things like health or long term care costs, the article explains. But this statement is debatable, because a borrower can technically take a reverse mortgage line of credit and can let it sit until they need it. The line of credit option can also build up over time if it isn’t tapped into.
Two other alternatives that are given in the article include purchasing an income annuity, which is a way older Americans can increase their income from assets, and working and/or saving more if they haven’t yet retired, which can be tough if someone is forced to quit before they are ready due to health problems.
But getting a plan together no matter what the circumstances may be, is vital for success in retirement. Retirees and pre-retirees may want to consult with an unbiased and qualified financial planner to help determine which option is best for them and their situation, the article explains.
Read the full article from Forbes
Written by Alana Stramowski