According to the Center for Retirement Research at Boston College, the latest study in 2013
found that “a typical working household approaching retirement with a 401(k) had only $111,000
in combined 401(k) and IRA balances…that’s enough to yield an income of about $400 a
month.” Even if you combine that with social security, it still doesn’t leave retirees with much in
the way of disposable income. That puts many Americans in a tough spot as they face
retirement, but don’t have enough savings to sustain a comfortable lifestyle. While home
ownership has often been considered the pinnacle of the American dream, those who retire
without a savings plan may want to look at their home in a new light. Your home is an asset,
and while the goal has always been paying off your home, you may be able to use your home to
supplement your retirement income.
Here are four ways that your home may be able to help you retire a little easier:
1. Renting or sharing your home. Renting out a room is a good way to generate a little
extra cash and help offset some of your expenses. Another option is to invite a friend or
family member to live with you to help share in the expenses.
2. Downsizing. You can sell your home if you have enough equity and purchase a smaller,
less expensive home. Save the funds from the proceeds to supplement your income or
use them to pay off your debt and lower your expenses.
3. Borrow against your home. If you plan to continue to work and have considerable equity
in your home, you may be able to take out a mortgage or a line of credit. This can
provide you with a cushion at a low interest rate.
4. Reverse mortgage loans. Reverse mortgages are a way for seniors to access a portion
of their home’s equity to obtain tax free money without having to pay a monthly
mortgage payment. The home owner must live in that home as their primary residence.
How viable is this option? In a book called “Falling Short: The Coming Retirement Crisis
and What to Do About It,” authors Charles D. Ellis, an investment consultant, and Alicia
H. Munnell and Andrew D. Eschtruth of the Center for Retirement Research at Boston
College, suggest reverse mortgages as an option for seniors that don’t have the funds to
retire. A no cost evaluation can be done to determine if this is a good option for you.
If you would like to learn more about reverse mortgages or to see if you’re eligible, call Vince
Halek at 231-313-1800