In this article we will discuss that how can you increase your Social Security Benefits by using a reverse mortgage strategy.
What is Reverse Mortgage Strategy?
Through reverse mortgage older homeowners can borrow money based on equity in their homes. So, in this article we will discuss following different options that what is the best way for you to increase your Social Security Benefits by using a reverse mortgage strategy.
Using Reverse Mortgage Strategy to Increase Your Social Security Benefits.
So, when it comes to a reverse mortgage or any different type of financial tool, a lot of times there’s a lot of bias or preconceived ideas. And so, sometime people face lot of challenges when they have in deciding what to do if they have preconceived ideas or feelings. You must have heard the word reverse mortgage and you may have bad thoughts come to your mind, or you’ve heard of stories in the past, you’ve been warned to avoid them or to never do one.
Well, that may have been good advice in the past, but you need to keep your mind open to a very changing world and consider all available options which would help you during these difficult times when inflation is skyrocketing. So, when it comes to a reverse mortgage, the laws have changed, the strategies have changed and there is much more flexibility that’s available, which was not there previously.
Do You Really Need Reverse Mortgage Strategy to Increase Your Social Security Benefits?
You might not even think you need or want a reverse mortgage, and many of you may not need it. But there are a lot of people who can benefit in ways that you maybe had not considered. So, today I will tell you a little bit more about reverse mortgages and it could be beneficial to you or people around you.
There is a writer named Don Graves, who wrote this book which is all about reverse mortgages. In this book “the Holistic Retirement Plan Revolution”, chapter nine specifically is where he talks about reverse mortgages. So here I give more of an outline as a reverse mortgage being a piece of more of a, or a possible part of a holistic plan. I Strongly recommend to read this book, which is very useful when it comes to different mortgages and how could you benefit from it. Like I said earlier that it is not going to benefit everybody, but for some people, for many people, it can make a very big difference.
Different Options Other Than Reverse Mortgage Strategy
Increasing your Social Security benefits by using reverse strategy is not just one possible strategy as there are many other strategies such as protecting at sequence risk and many others that could help you in increasing your social security benefits. But in this article, we are specifically discussing the option of increasing your social security by using reverse mortgage strategy, which could be one of many options to increase your social security benefits.
There are other strategies that allow you to do Roth conversions, keeping your tax brackets low because you are using tax-free income from a reverse mortgage. It may be added that there really is a surprising number of strategies that can make a very big difference in a retirement plan.
Home Equity Line of Credit
It is pertinent to mention here that when I started reading about reverse mortgages, I think it really was an opportunity to see that the normal conceptions people have about them may not always be right. I guess I didn’t even really fully understand the idea that you do not necessarily lose your house with the reverse mortgage. And I have to say the thing that really surprised me about reverse mortgages is that when you take out a home equity conversion mortgage or reverse mortgage, and you do not use it, that the line of credit actually grows.
I did not know very much about reverse mortgages, so a lot of things surprised me, and I think that’s true of so many consumers. I didn’t know, for example, you could keep the title to your house. These are just much lower than people expect, so I think that we’ve sort of legislated a responsible lending program, and right now reverse mortgages are really an attractive product. The most surprising element of all of that is the fact that when the credit line is not drawn upon, or to the extent that it’s not drawn upon, it actually grows. I’m sure the common answer is going to be the line of credit growth. And I think not just the growth of it, but the growth independent of the home value.
What the line of credit does is provide a set of cash that you could hold and reserve until those older years. It’s guaranteed to be there. Government backing, it’s got all these cool things that is going to continue to grow. It’s guaranteed to grow. So, its a tremendous risk reduction tool for the out years. It is set growth along with the tax-free properties and the guarantees to be there that makes that such a powerful long-term tool.
Reverse Mortgage Strategy Could Help You Delay Claiming Your Social Security Benefits
A reverse mortgage strategy could be the means to help you delay claiming Social Security. So you wait all the way till 70 to start Social Security, but for many people that’s a problem because they need the income sooner than that. And so with a reverse mortgage, you get this tax-free stream of income that could cover five or six or seven years, allowing you to delay your Social Security. So that when your Social Security does start, it’s nearly double what it would have been. And then for life, you are going to have this much larger Social Security benefit.
The big news on Social Security is if you can delay it, then you get bigger benefit. And if you live a long time, that bigger benefit just keeps on coming as long as you live. So its really important for people to get kind of automatic money, particularly in the out years and the years when they’re really elderly. And the problem with that is if you are delaying it, how do you live on it? How do you live between now and when the Social Security might start at 70?
One way to do that is to have some other kind of asset and reverse mortgages are a good option. In a case study for a single person who was in a high tax situation, relatively high pension income, but all by itself, with her starting her Social Security early at 62 and her healthy pension, her lifetime chances of success were like 5%, 95% of the time she ran out of money. But if we can figure out a way to delay Social Security until age 70, then we can make that picture a lot better. To do that, we use the reverse mortgage for the first 6 and 1 half years, out from 62 to 68 and 1 half or so.
She’s in a high tax bracket, reverse mortgage dollars are tax-free dollars. So she was funding the rest of her income gap from an IRA, she is in a 33% tax bracket so its take a dollar fifty from IRA to equal dollar of the reverse mortgage spending purposes. So by using the reverse mortgage strategy we are able to delay start of taking IRA withdrawals for over six years which almost got her to age 70. So this is very good as per investment point of view as IRA kept growing for over six years and it also shorter the amount of time that you could withdrew on IRA, it reduced or you can say it eliminated chances of really bad markets in the very first year of retirement and so-called sequence risk. So all together that enhanced the success rate from 5% to 90% by compiling these different financial planning principles.
Conclusion
In this article, we thoroughly discussed the option of using reverse mortgage strategy to increase your Social Security Benefits. Reverse mortgage is not your only option to increase your social benefits as there are many other ways you can increase your social security benefits, however, reverse mortgage could be one of the options available to you in said regard.
I hope you found this article beneficial and if you have any further queries in this regard, you can leave your comment and I will try to address your query as soon as possible.
FAQs
Q. What is Reverse Mortgage Strategy?
A. A reverse mortgage allows older homeowners to supplement their income in retirement by tapping the equity they have built up in their homes.
Q. How does Reverse Mortgage Strategy Work?
A. A reverse mortgage is a home loan that you do not have to pay back as long as you live in the same home.
Q. How Is Reverse Mortgage Paid?
A. It is paid in one lump sum, as a monthly income on regular basis or at the times and in the amounts homeowners want.
Q. In What Situation You Need to Repay Your Loan?
A. If you sell your home permanently or move out you have to repay the loan and interest.
Q. What is the disadvantage of a Reverse Mortgage?
A. Usually the interest rate on a reverse mortgage is higher if we compare it with a home equity line of credit.
Q. What is home Equity Line of Credit?
A. A home equity line of credit is a line of credit secured by your home that gives you a revolving credit line to use for large expenses.