Robbin Gray: Boomers facing retirement need help

Many Americans are awakening to the reality that their retirement dreams are at odds with their financial preparedness.  In fact, the National Institute on Retirement Security estimates that the retirement funding shortfall in the country could be as high as $14 trillion.

There are several factors involved in raising this concern.

First, more Americans today are reaching retirement than in any other time in U.S. history. Secondly, those who are now reaching retirement are expected to live longer.

Third, today’s retirees were given great flexibility in how, and if, they contributed to a retirement plan and how those funds were invested.

As a result, millions of workers who are nearing or already in retirement will not be able to maintain their current standard of living.

In fact, 66 percent of retirees get most of their retirement income from Social Security.  According to the Social Security Administration, the average retiree is only receiving $1,230 in monthly benefits.

Imagine having an income of $1,230 per month, with perhaps savings equal to one year’s income, and needing that money to see you through the rest of your life.  This is the reality for millions of retirees today.

Rethinking how and when to retire is necessary for most Americans.  Let’s consider the greatest portion of one’s personal wealth; home equity.  Tapping into one’s home equity has been relegated as a “last resort,” if discussed at all.  Fortunately, we are starting to see that home equity release products are part of the conversation.

Every borrower has a unique set of needs.  Reverse mortgages are a very flexible financial planning tool that can be customized to maximize the benefit to each individual borrower.  Here are a few ways a reverse mortgage is used as part of a retirement plan.

Cash flow is very important for retirees on a fixed retirement income.  A monthly check from a HECM mortgage can be life-changing for retirees by possibly adding few hundred dollars a month to his or her cash flow. Of course, in most cases, borrowers will pay off their mortgage and other debts resulting in increased cash flow.

A Reverse Mortgage can include a line of credit providing additional benefits and options.  First, the unused portion of the line of credit actually gets increased at the end of each year by a factor of the rate of interest on the reverse mortgage plus 1.25 percent so for example if the factor was 5 percent and there was $100,000 available at the end of the year the amount available for the next year would be increased to $105,000.  Some borrowers never touch the original line of credit and just draw the increased amount annually.

Second, the line of credit creates a source on tax free income that allows the borrower to let other sources of income, like Social Security and 401K/IRA funds, to grow. Financial Planners have many strategies for using deferred annuities to increase your retirement income.

The HECM for Purchase product can be used to downsize to a New, Smaller, Less Expensive house which means less money spent on upkeep, taxes and utilities and a greater monthly cash flow.  Your Reverse Mortgage HECM for Purchase option frees up your money to support your retirement goals and helps you downsize for comfortable living.  Americans want to age in place, which is less expensive than assisted living facilities.  The HECM for Purchase program is an ideal retirement planning tool.

Seniors need to keep an open mind and look at a reverse mortgage as a tool that could help live a more comfortable retirement.

Contact Robbin Gray at 410-543-8174 or

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