According to the Social Security Administration, 42% of men and 48% of women begin drawing their social security benefits at the age of 62. Taking benefits at this minimum age locks in benefits at only 75% of what would be achieved at full retirement age. Some take the money because it's available and for others there is a sense that they will somehow lose in the event they die before accessing the money they've set aside. Overwhelmingly, many take the Social Security funds because there is a financial need to receive these monies, even if the funds are at a discounted amount.
For every year a senior defers taking their earned social security benefits, they earn an 8% increase in benefits. That's an average of 8% guaranteed by the Social Security Administration. You can't beat that guaranteed return anywhere!
So how does a senior defer their social security income and yet still have enough money on which to live for the 8 years between the ages of 62 and 70? The reverse mortgage is one such way.
The government-insured Home Equity Conversion Mortgage (HECM- reverse mortgage) allows homeowners who are 62 or older to access their home equity. Any existing mortgages are paid in full and the new reverse mortgage doesn't require monthly mortgage payments. Remaining home equity funds can be accessed through a line of credit, a monthly income guaranteed for life, or a higher amount for a specific term. Senior home owners can even blend these funding options.
The term option allows a senior to set a specific amount for a defined period of time. In this example, a senior can elect to take all of the funds available for an 8-year period in order to defer their social security and earn the higher benefits. At the end of the 8-year period, the tax-free proceeds of the reverse mortgage would end and the higher social security benefit would kick in.
More and more financial planners are learning the benefits of the government-insured Home Equity Conversion Mortgage so that they can show their clients how to live more comfortably through their retirement years.
Call today to see how the HECM reverse mortgage can benefit you or someone you know.