Over the weekend, the Wall Street Journal published Reverse Mortgage: Get Cash, But Use Caution. Writer Anne Tergensen details how after seeing their nest eggs get hit hard over the last year, some retirees are turning to reverse mortgages to help them enjoy the luxuries and lifestyles they deem an essential part of life.
"We’re seeing more people use reverse mortgages to give their portfolios time to more fully recover," says Eric Bachman of Golden Gateway Financial, a reverse-mortgage broker in Oakland, Calif.
As an example, the WSJ turns to Frank and Carol Rider. The couple divides their time between a home in New Mexico and timeshares in California, Florida, and Hawaii. Last year, the Riders — both close to 70 — took out a reverse mortgage on their $330,000 home. They plan to use the extra $2,700 a month they realized by paying off their mortgage and taking out a reverse mortgage for the things they enjoy — including travel — while avoiding tapping a nest egg whose largest account, an IRA, has lost about one-third of its value during the past year.
While it makes sense to suspend withdrawals from beaten-down retirement accounts, taking out a reverse mortgage is an expensive way to achieve this, warns Vincent Russo, an elder-law specialist with several offices in New York.