One of the main challenges facing today's (and tomorrow's) retirees is having enough money to live on – comfortably – during a retirement that may last 20 years or more.

Property taxes and other costs of living are practically guaranteed to keep increasing, yet income during retirement usually decreases or remains fixed. Life spans are also increasing, which is wonderful, but an expanded lease on life is often accompanied by the costs of in-home care and other services necessary to keep you where most people want to stay as they get older - at home. And all too evident in the past year and a half has been the effect that the stock market can have on a retirement portfolio!

Until recently, a reverse mortgage has often been viewed as a last resort to provide funds for “house-rich, cash-poor” seniors. This somewhat shortsighted assessment of reverse mortgages doesn't take into account the flexibility that this financial tool can provide. Fortunately, more and more seniors – along with their financial advisors and estate planning attorneys – are utilizing a reverse mortgage to manage their wealth and protect their assets both before and during retirement. 

Let's use an average York county, Maine couple as an example of how to use a reverse mortgage for strategic retirement planning. Last year, when both of them were 69, this couple opened a reverse mortgage line of credit on their home, which appraised at $350,000. Both are now 70 years old, and the husband recently had a stroke that will require months of recuperating at home. For this couple, one of the biggest financial questions they had asked themselves was “how will we pay for a nursing home stay or for medical care at home”? Even vital non-medical home services can quickly add up. Before obtaining the reverse mortgage, the funds to pay for his care would have come from a variety of sources: checking and savings accounts, depleting retirement assets, and likely with financial help from family members. But they now have approximately $190,000 in reserve for just such an emergency. In the past two years, this couple had considered letting their long term care insurance policies lapse due to the expense of the annual premiums. The reverse mortgage, however, allowed them to keep paying on their policies without worry, and much of the unanticipated costs of recovering from the stroke are covered.

Visiting an estate planning attorney had been something they had been putting off for years, but the reverse mortgage allowed the couple that extra bit of money to finally get all of their legal affairs properly arranged and protected, saving themselves and their adult children a lot of money, time and worry in the future. And as time goes on, they'll use the reverse mortgage line of credit to make occasional home improvements, insuring that they will not pass on an asset that needs expensive repairs to their heirs.

Finally, this couple, though they have modest stream of income from retirement investments, can use the reverse mortgage as an alternate source of income during bad economic times. In this way, they can allow their investment portfolio time to recover from losses without having to continually draw from it at the same time. When economic conditions improve, they will simply switch back to withdrawals from the portfolio and allow the reverse mortgage line of credit to recover (any unused funds in a federally insured reverse mortgage line of credit will grow at a certain rate, currently 3.81%).

The federally insured reverse mortgage is increasingly being used as part of an overall retirement plan. A good financial planner or attorney, working together with an experienced reverse mortgage specialist, will be able to help you make an informed decision regarding the use of a reverse mortgage to help safeguard your hard-earned assets and achieve your financial goals.


To ask specific questions about how a reverse mortgage can fit in with how you'd like to live in retirement, you can reach Amy Catling at 1-800-476-2858 or 1-207-251-0633 or by email at acatling@seacoastreversemortgage.com.