The Reverse Mortgage as a Retirement Tool

EBRI, the Employee Benefit Research Institute (EBRI), a think tank dedicated to encouraging and enhancing the development of public policy and employee benefit programs via objective research and education, has published findings that indicate that Americans are not adequately prepared for their retirement years. EBRI estimates that roughly two-thirds of Americans are relying on their Social Security benefits for their retirement income, yet that income, in reality, will only cover approximately 50% of their retirement needs.

While social security income remains the largest retirement income asset of the average American, there are two other major income sources for American retirees — retirement savings and home equity. Retirement savings is a big item in retirement planning but many seniors and their financial planners ignore home equity as a possible income source.

These are the days in which the baby boomer generation is moving into retirement. Many consultants feel that society is not prepared to provide housing resources and alternatives to this population, especially those retirees who wish to continue to live in their homes. One possible solution involves Reverse Mortgages which offer strategies that can help retirement-age homeowners remain in their long-time home, in familiar surroundings, where long-term relationships and convenience contribute to a preferable quality of life.

Focus on Home Equity

Many consultants feel that, by not focusing on home equity as part of retirement income planning, seniors are failing to properly plan and utilize all of their available retirement assets. They point out that those individuals who do make strategic use of their home equity can avoid possible financial difficulties in their retirement years. When observing the process from a public policy standpoint, such a focus might stem the overall retirement income crisis which aging Americans could be facing in the years to come.

It’s always been part of the American dream to own a home. Americans

take pride in home ownership and feel that they can build a reliable nest egg when by owning a home. Yet home ownership, in itself, doesn’t translate into savings that can be accessed to increase retirement income. When, however, it’s used as a strategy as part of a comprehensive retirement plan, home ownership becomes a positive retirement asset that brings returns and can be turned into a liquid asset.


Home Equity Conversion Mortgages (government-insured Reverse Mortgages) can be utilized as part of a retirement income plan that dramatically improves the borrower’s financial security. Potential HECM borrowers who feel that they want to continue to live in their home and aren’t worried about leaving their home as an inheritance would do well to investigate their status under the Reverse Mortgage guidelines.

Reverse Mortgages aren’t the only way to utilize home equity as part of a retirement income plan but the tool does offer many benefits. Some of these include:

1. The financial security that allows you to defer your social security benefits, so when you do start to draw benefits, you’ll receive higher benefits.

2. Untaxable income that doesn’t affect the borrower’s social security retirement benefits.

3. Income that can be accessed as monthly payments or as a line of credit, providing flexibility

HECM loans aren’t appropriate for all situations but for many seniors, they are the difference between a tight retirement budget and the option to enjoy senior years with some additional disposable income.