The current state of our nation’s retirement savings
With almost 80 million baby boomers expected to retire over the next 18 years financial planners could have their hands full with figuring out how retirees will meet their retirement goals. Studies show that current retirement savings profiles will not provide enough cash for many in or approaching retirement age. Looking at only at households made up of peoples ages 55 to 64 whose members are nearing retirement show less than 5 percent had retirement account balances that were on target to meet retirement savings targets. Added to this is the research that indicates the average 65 year old couple will need to have an estimate $305,000.00 to cover out of pocket health care over their lifetime. With so much at stake retirees and their financial planners are looking to other vehicles to help supplement their retirement planning.
The emerging trend of tapping equity to increase retirement income
While eliminating your monthly mortgage payment has always been a cornerstone of the benefits a reverse mortgage provides, financial planners are now discovering how powerful the guaranteed line of credit a Reverse Mortgage offers can be as well. This guaranteed line of credit will be a great tool to help seniors tap some of the almost 4 trillion dollars in home equity they have. This equity often referred to as “dead equity” can now put a spring into a retiree’s financial step.
There are several reasons a Reverse Mortgage guaranteed line of credit is so powerful and why financial planners are increasing looking to them as a retirement tool. Here are just a few:
First of all this line of credit is guaranteed to be there regardless of your property value. This is unlike a traditional line of credit from most banks that can be frozen if property values decline. This is very important because our real estate market is anything but stable these days and have and having access to one that is guaranteed to be there in any market condition is priceless.
Secondly, with this guaranteed line of credit you don’t make a monthly payment on it. So now you have access to cash and you are not raising your out of pocket monthly expenses. A traditional home equity line of credit requires you to pay on it monthly and the more you use it the higher your monthly payment goes.
A third benefit with this line is that is has a growth rate associated with it. So not only is this line guaranteed to be their despite a crashing housing market, it can actually make more money available to you in an up or down market. For Example, assume a 65 year old client were to have a $100,000 guaranteed line of credit with their Reverse Mortgage. This same client could at the end of the year will have seen the available line increase to 104,768 and in 10 years increase to 158,530. This assumes a growth rate of 4.611% and that the client let those funds grow untouched for those years. We can see here how this leaves the traditional home equity in the dust as it would never have increased in available funds without some type of new approval from the bank.
The finally reason that a Reverse Mortgage guaranteed line of credit might work well for a retiree is simply it is easy to qualify for. This loan does not require a good fico score and works well with a retiree’s limited income. While most traditional equity lines have been getting harder to qualify for the Reverse Mortgage continues to be the path of least resistance to make the dead equity come alive again.Retirement funds getting stretched too thin? Ask your financial planner how the efficient new reverse mortgage can safely provide more money in retirement.