Forget the 401k: This Is the Real Secret of a Secure Retirement

You probably intended to save more for retirement than you actually did.  Maybe you  have a 401k or an IRA.  Maybe you don’t.  The reality is that whatever savings you have scrimped together, it is probably not enough to pay for your golden years. Feeling the pinch?  You are not alone.  According to IRI data, 45% of retirees have no retirement savings and the Government Accountability Office suggests that the average retirement savings for Americans ages 55-64 is $104,000 — older retirees have less.  Experts say this is nowhere near enough. Everyone says that you need savings to retire.  However, there is another way.  Some call it a secret.

The “Secret” that Savings Experts Don’t Know

Maybe you don’t have a 401k or IRA or any kind of retirement savings.  If this is the case, the experts suggest that you are doomed to barely make ends meet. However, these so called financial experts are ignoring a VERY big source of your wealth — your home. You may not have saved enough into a retirement account, but you have worked extremely hard to buy a home and pay down your mortgage.  The equity you have amassed in your home can be turned into a secret source of retirement money.  In fact, your home is probably your most valuable retirement asset and you have options for how to use that money to help fund retirement:

• Downsizing — downsizing can be the most efficient way to tap your home equity.
• Getting a reverse mortgage — Stay in your home, get rid of ongoing monthly mortgage payments and turn your equity into cash
• Purchasing a home with a reverse mortgage — find out how the HECM for purchase works.

Using a Reverse Mortgage When You Have Very Limited Savings

If you have limited retirement savings, want to stay in your home and need to improve your cashflow, a reverse mortgage is the secret you need to know about.  Home equity is half of the average retirees net worth but almost no one takes advantage of it. A reverse mortgage is a federally-insured loan that allows homeowners age 62 and older to retain home ownership, but also eliminate ongoing mortgage payments and — in many cases — use some of their home equity to help make ends meet.  A reverse mortgage is a loan.  You are borrowing against your home equity.  However, unlike traditional mortgages, with a reverse mortgage you do not have to pay back the money borrowed as long as you are living in the home. Given the right set of circumstances, a Reverse Mortgage can be an ideal way to increase your spending power and financial security in retirement.  What can you get from this kind of loan? With a reverse mortgage, the loan balance accrues over time. Borrowers are not required to make monthly payments to the loan balance, as you would with a traditional “forward” mortgage. However, you are responsible for paying property taxes and homeowner’s insurance on their property—just as you would with a regular mortgage.

Using a Reverse Mortgage When You Don’t Necessarily Need Access to Cash

Reverse mortgages can be more than just a secret way to save your retirement. Reverse mortgages can also be a powerful financial planning tool — a really good back up plan — whether you need access to cash now or not. Financial flexibility is a big secret to maintaining your wealth.  You want to have options.  If you need to spend money, you ideally can choose from an array of different sources so that you can use your resources most efficiently. A reverse mortgage — specifically a reverse mortgage line of credit — gives you this kind of increased financial flexibility. When you get a reverse mortgage, you have choices for how to take the money.  If you take the money in a home equity line of credit, then NO interest accrues on your loan amount and the value of this account actually grows.  This reverse mortgage line of credit is a low cost way of increasing your financial options. You may not need or want extra money now, but when an unexpected financial crisis hits, accessing your home equity last minute with a reverse mortgage is not easily done — this type of loan can take upwards of 45-90 days to fund. Having a reverse mortgage line of credit available may be a good idea for several reasons:

1. It’s there if you need it, and the bank cannot pull the line of credit if your finances change.
2. It grows over time (if untouched), so the amount of equity you can access becomes larger year after year.
3. When the market isn’t performing, you can draw from your equity instead of liquidating investments.  When the market is doing well, pay your line of credit back if you want to keep the balance low.

Should You Tap Into This Secret Source of Retirement Wealth?

Use a reverse mortgage calculator to find out how much money you can get from a reverse mortgage now.  Or, try the suitability quiz to assess whether or not the loan is a good fit for your needs and values. Getting a reverse mortgage now can be an excellent way to boost financial stability and protect yourself from unpredictability.  Best of all, if you qualify for a line of credit, then you can minimize the costs of this loan since you do not pay interest on the money in the line of credit, but it is available for you to withdraw if you need it.