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Author: Mutual of Omaha Mortgage Staff

How Much Can I Get From a Reverse Mortgage?

A reverse mortgage can be used as a powerful retirement tool to supplement income, offset costs, fund major projects, or simply beef up retirement savings.  

But before applying for a reverse mortgage, you will want to get an idea of how much you will be able to receive.  

The amount of money you can receive from a reverse mortgage is impacted by several factors and variables, which we detail below.  

Ultimately, to get the most accurate idea of how much you can get from a reverse mortgage, we recommend talking to one of our reverse mortgage specialists, who will be able to answer all of your questions.  

A Reverse Mortgage Explained

The home equity conversion mortgage (HECM), commonly referred to as a HECM reverse mortgage or HECM loan, is the most prevalent type of reverse mortgage. Other options include single-use reverse mortgages and proprietary reverse mortgages, such as the jumbo reverse mortgage, tailored to those with specific needs. 

Reserved exclusively for homeowners aged 62 or older, reverse mortgages hinge on the accumulation of substantial equity in the homeowner’s primary residence. It’s important to note that investment properties and vacation homes don’t meet the eligibility criteria for a reverse mortgage. 

A reverse mortgage can serve as a financial lifeline, enabling senior homeowners to tap into the equity of their homes without shouldering monthly payments, unlike a home equity loan or a home equity line of credit (HELOC). 

Upon obtaining a reverse mortgage, the first step will be to settle any outstanding traditional mortgage. Once that’s taken care of, homeowners have a range of choices regarding the remaining reverse mortgage proceeds. They can opt for a lump sum payment, monthly installments, a line of credit, or a combination of those options. 

Although a reverse mortgage can offer financial flexibility to older homeowners, it’s crucial to remember that certain responsibilities still rest on the borrower’s shoulders. These include paying property taxes, maintaining homeowners insurance coverage, and ensuring the home’s overall upkeep. 

Notably, the security of a reverse mortgage stems from its backing by the federal government. The U.S. Department of Housing and Urban Development (HUD) effectively regulates reverse mortgages, which is further insured by the Federal Housing Administration (FHA). Such measures aim to safeguard both borrowers and lenders. 

How Much Can I Get From a Reverse Mortgage? 

reverse mortgage as part of your nest egg

The amount of money reverse mortgage borrowers can receive from a reverse mortgage loan is based on a variety of factors. But the most important formula to understand is what is known as the principal limit, so that is where we will start.  

This principal limit is derived from taking into account several key factors: the age of the youngest borrower, the expected interest rate, and the maximum claim amount.  

Through this calculation, lenders assess the potential borrowing power of individuals considering a reverse mortgage. 

We will go into each of these factors plus others that can affect how much you will be able to receive from a reverse mortgage. 

Age of the Youngest Borrower 

The age of the borrowers is considered one of the most important factors that affects how much borrowers are able to receive.  

To meet the eligibility criteria for a reverse mortgage, borrowers must reach the age of at least 62. However, when multiple individuals own the property, the borrowing capacity is contingent upon the age of the youngest homeowner. 

As a general rule, the older the borrower, the larger amount they will be able to receive.  

FHA Lending Limit 

Every year, the FHA determines the lending limit for HECM reverse mortgages. This is the maximum amount that homeowners are able to borrow from a reverse mortgage.  

The current lending limit for 2025 is $1,209,750. 

The principal limit is calculated with the lending limit as the baseline.  

For homeowners who have properties that are worth more than the FHA lending limit, several lenders do offer jumbo loans, which are propriety reverse mortgages that present an enticing option for borrowers seeking higher lending limits.  

These jumbo reverse mortgages have the potential to reach substantial amounts, soaring as high as $4 million. It’s important to note that jumbo reverse mortgages are solely supported by the lender, as they do not enjoy the backing of the FHA insurance found in other mortgage options.  

The Home’s Value 

With that in mind, one of the factors that will be considered is the current market value of the home.  

During the reverse mortgage application process, the lender will order an appraisal of your property. The appraised value of your home will be used to determine how much equity the home has accumulated, which is important for finalizing the total loan amount.  

Equity 

The equity is determined by making a simple calculation: take the current market value and subtract any money that is owed on the home. This may include the traditional mortgage or any other loans that may have been obtained such as a home equity loan or home equity line of credit (HELOC). 

The less money you owe on any such loans, the more equity that can be used for the reverse mortgage loan.  

There is not an exact amount or percentage of equity you need to obtain a reverse mortgage, but there will need to be enough money to pay off the current mortgage, if there is one, and the costs and fees that come with a reverse mortgage.  

Distribution Type 

Homeowners exploring reverse mortgages will have a range of options for how the funds are disbursed. This includes the option to receive their money through various avenues: a lump sum payment, fixed monthly payments, a line of credit, or a tailored combination of these options.  

The method chosen for receiving the funds can also influence the overall amount that one may receive. This element of flexibility allows homeowners to customize their reverse mortgage experience in a manner that best aligns with their unique financial goals and needs. 

Here are the options and how they each work in terms of payouts:  

  • Lump Sum. The single disbursement lump sum payout is the only option that comes with a fixed interest rate. The being said, the lump sum option does come with a handful of limitations you will want to consider. 
  • Monthly Payments. Borrowers have the choice between a tenure payment plan or term payment plan. Under the tenure plan, you will be able to receive payments for the rest of your life. The lender calculates the payments assuming you will live to 100 years old.  
  • Line of Credit. Receiving funds as a line of credit may have the potential to give borrowers both the most flexibility and possibly the most amount of money. A line of credit allows homeowners to use the funds as needed. One of the advantages of a line of credit is that the untouched balance actually grows.  

Interest Rates 

Interest rates play a role in how much equity homeowners have access to: As reverse mortgage interest rates go up, it lowers the total principal amount available to be disbursed to borrowers. As interest rates go down, it means there is more principal available to be disbursed to the homeowner.  

The interest charged is paid back with the loan balance when the homeowners sell the home, no longer live in the home full time, or when the last remaining borrower passes away.  

Closing Costs and Other Fees 

When a reverse mortgage loan closes, borrowers do need to pay some closing costs that will also affect the total amount that homeowners receive.  

Alternatively, borrowers may also choose to pay for these costs out of pocket, which means that they will not impact the total loan amount.  

Use a Reverse Mortgage Calculator 

reverse mortgage cost and fees calculator

If you want to get an estimate of actual numbers you may qualify to obtain with a reverse mortgage loan, check out our reverse mortgage calculator.  

Talk to a Reverse Mortgage Specialist 

The best way to get the most accurate and realistic idea of what you might be able to obtain from a reverse mortgage loan is to talk to one of our experienced reverse mortgage specialists.  

Reach out by filling out the form or calling the phone number on this page. Or find a loan officer in your area through our loan officer directory.  

Bottom Line 

A reverse mortgage can be a valuable financial tool for retirees to enhance their financial situation and meet various needs during their retirement years. By leveraging the equity in their homes, senior homeowners can access funds without having to make monthly mortgage payments.  

The amount of money available through a reverse mortgage is influenced by several factors such as the age of the borrower, the home’s value, the lending limits set by the FHA, and the chosen distribution type.  

Ultimately, consulting with a reverse mortgage specialist is essential to obtain accurate information tailored to your specific circumstances. These specialists can provide guidance, answer your questions, and help you make informed decisions about your retirement planning. 

Is Mutual of Omaha Mortgage right for you? Don’t take our word for it. Check out these Mutual of Omaha Reverse Mortgage Reviews to see what our customers are saying.

Reverse mortgage borrower must occupy home as primary residence and remain current on property taxes, homeowner’s insurance, the costs of home maintenance, and any HOA fees.  

This information is intended to be general and educational in nature and should not be construed as financial advice. Consult your financial advisor before implementing financial strategies for your retirement. 

Related Posts

What Is a Jumbo Reverse Mortgage and Who Should Get One?

If you’re a homeowner considering a reverse mortgage, you may have come across the term “jumbo reverse mortgage.” But what exactly is it and is this something you should consider?  

Reverse mortgage customers have the choice between four loan programs: a traditional reverse mortgage, a reverse mortgage for purchase, a reverse mortgage refinance, and a jumbo reverse mortgage.  

In this article, we will provide you with all the information you need to know about jumbo reverse mortgages so that you can know whether or not it is the right choice for you.  

Let’s dive in.  

What Is a Jumbo Reverse Mortgage? 

Jumbo reverse mortgages are proprietary reverse mortgage loans offered by some reverse mortgage lenders.  

It allows homeowners to borrow more than what is allowed with a traditional reverse mortgage. With a jumbo reverse mortgage, homeowners are typically able to borrow up to $4 million.  

They are offered by jumbo reverse mortgage lenders to those who have high-value homes. 

Jumbo reverse mortgages sometimes go by different names such as jumbo loans, jumbo reverse mortgage loan, jumbo reverse loans, and jumbo loans. 

Jumbo reverse mortgages are considered a proprietary product and therefore, given a white labeled name. For example, here are Mutual of Omaha Mortgage, our jumbo reverse mortgage is called the SecureEquity Reverse Mortgage. 

What is the Difference Between a Jumbo Reverse Mortgage and a Traditional Reverse Mortgage? 

The traditional reverse mortgage is known as the home equity conversion mortgage (HECM). This reverse mortgage is available to homeowners who are at least 62 years old and have specific levels of equity in their home in relation to the age of the youngest borrower.  

This reverse mortgage is backed by the federal government, which means that it is regulated by the U.S. Department of Housing and Urban Development (HUD) and insured by the Federal Housing Administration (FHA). 

Each year, the FHA sets a lending limit on how much homeowners can borrow with their reverse mortgage. The current maximum loan amount as of 2025 is $1,209,750. 

With a jumbo reverse mortgage there are some key differences. For example, in some states it is available to homeowners that are as young as 55 years of age. Jumbo reverse mortgages are not backed by any government agency. 

The limit on jumbo reverse mortgages typically tops at $4 million, although the exact amount may vary depending on the lender you decide to work with.  

At Mutual of Omaha Mortgage, our SecureEquity Reverse Mortgage allows qualifying homeowners to borrow up to $4 million. 

Benefits of a Jumbo Reverse Mortgage 

The primary benefit of a jumbo reverse mortgage is that homeowners can borrow more than the FHA lending limit.  

Another potential benefit is homeowners may be able to access it before 62 – in some cases as young as 55 years of age. However, this change will vary depending on the lender and the state where you live.  

In addition, jumbo reverse mortgages do not require borrowers to pay mortgage insurance premiums, which can be a hefty cost that comes with traditional reverse mortgages. A mortgage insurance premium is typically paid at closing, and then it is also an ongoing annual cost that must be paid throughout the life of the loan. 

There are also protections that come with jumbo reverse mortgages that are similar to the protections that traditional reverse mortgages are afforded as FHA-insured loans.  

For example, just like a traditional mortgage, jumbo reverse mortgages are also a non-recourse loan, which means that borrowers will never owe more on the loan than the appraised value of your home.  

Traditional reverse mortgages limit how much a borrower can receive in the first year to 60 percent of the total loan amount. With a jumbo reverse mortgage, borrowers can receive 100 percent of the total loan amount in the first year.  

How a Jumbo Reverse Mortgage Works 

A jumbo reverse mortgage works in a similar way to a traditional reverse mortgage. A jumbo reverse mortgage pays off the current conventional mortgage on the home, if there still is one.  

For the remaining loan proceeds, borrowers will receive that money as a lump sum.  

Homeowners are obligated to pay the property taxes, homeowners insurance, keep up on home maintenance requirements, and keep the home as the primary residence.  

The loan is paid back once the homeowners decide to sell the home, it is no longer their primary residence, or they fail to meet the requirements detailed above.  

The Jumbo Reverse Mortgage Loan Process 

The first step in obtaining a reverse mortgage is to talk to one of our reverse mortgage specialists to find out if you qualify. 

Next, applicants will need to complete a counseling session with a third-party counselor approved by the U.S. Department of Housing and Urban Development (HUD).  

After receiving a certificate of completion from the counseling session, the homeowners may then file their application which will also include submitting several required documents.  

The application will then be processed and sent to underwriting.  

Underwriting will finalize and approve the loan. Once this is done, a closing date will be set. Once the closing documents are signed, the borrowers can start receiving their funds in the method they chose during the application process.   

Borrowers can cancel the loan at any time, including three days after signing the closing documents.  

Please note that the jumbo reverse mortgage application process can take up to 45 days to complete from application to closing.  

Jumbo Reverse Mortgage Eligibility Requirements 

In order to qualify for a jumbo reverse mortgage, you need to meet the following requirements:  

  • Age Requirements. You must meet the age requirement, which may vary from 55 years of age to 62, depending on the lender and the state where you live.  
  • Primary Residence. The home you want to get a reverse mortgage for must be your primary residence, which means you live in it most of the year.  
  • Property Type. The property must be a single-family home, a qualifying condominium, a townhome, or a multi-family residence with one to four units in which the homeowners live in one of the units.  
  • Maintenance. The home must be in good, maintained condition.  
  • Taxes. You must be up to date on the property taxes and be able to continue to pay the property taxes.  
  • Homeowner’s Insurance. You must also be up to date on your home insurance premiums and be able to continue to pay the premiums.  
  • Other Fees. You must also be current on other fees such as homeowner’s association (HOA) fees.  

When Is the Jumbo Reverse Mortgage Repayable? 

A jumbo reverse mortgage is paid back when the homeowner decides to sell the home, the home is no longer the primary residence of the homeowner, or if the homeowners are no longer able to meet the obligations of the loan such as paying the property taxes or the homeowner’s insurance.  

Homeowners may also make payments toward the loan balance at any time without facing any penalties.  

 
Pros and Cons of a Jumbo Reverse Mortgage  

Just like any major financial decision, it is important to weigh the pros and cons, so you are an informed consumer. Here are the pros and cons of a jumbo reverse mortgage:  

Pros: 

  • Protections. Jumbo reverse mortgages come with several protections that are like traditional reverse mortgages. These include non-recourse benefits and protections for non-borrowing spouses. 
  • Loan Amount. Consumers who qualify for a jumbo reverse mortgage are able to borrow more than allowed with a traditional reverse mortgage, which is limited to the current FHA lending limit of $1,209,750. 
  • Fund Access. With a traditional reverse mortgage, borrowers are not permitted to receive more than 60 percent of the total loan proceeds in the first year. With a jumbo reverse mortgage, borrowers may access 100 percent of the loan proceeds in the first year.   
  • No Mortgage Insurance Premium. Jumbo reverse mortgage borrowers do not have to pay mortgage insurance premiums as required by traditional reverse mortgages.  
  • Flexibility. Just like traditional reverse mortgages, the proceeds from a jumbo reverse mortgage can be used however you want.  
  • Fixed Rates. All jumbo reverse mortgages come with fixed interest rates.  

Cons: 

  • Not FHA Insured. Since jumbo reverse mortgages are private loans, they are not FHA insured like traditional reverse mortgages. Your reverse mortgage specialist will help you understand the loan terms and the protections we offer here at Mutual of Omaha Mortgage.  
  • Inheritance. Because a jumbo reverse mortgage is a loan borrowed against the equity of the home, it also means that there will be less to leave to your heirs. You can still leave the home to your heirs, but they will need to pay off the reverse mortgage by either paying for it in cash or taking out a traditional mortgage.  
  • Fewer Options for Receiving Money. The funds from a jumbo reverse mortgage can only be received as a lump sum. By comparison, a traditional reverse mortgage can also be received as monthly payments or a line of credit.  

FAQs 

Who Owns the Home with a Jumbo Reverse Mortgage? 

One myth about reverse mortgages and jumbo reverse mortgages is that the bank owns the home or is buying the home from the homeowner. This is not the case.  

A home with a jumbo reverse mortgage still belongs to the homeowners, which is why borrowers are still required to pay the property taxes, homeowners insurance, and maintain the home.  

Is Money from a Jumbo Reverse Mortgage Taxable? 

Because the money received from a jumbo reverse mortgage is a loan, it is not considered income. Therefore, it is not taxable.  

Can You Get a Line of Credit with a Jumbo Reverse Mortgage? 

Yes, you can get a line of credit with a jumbo reverse mortgage, but not all lenders offer a line of credit option with jumbo loans. If you know you want a line of credit, you will want to shop around until you find a lender that offers one.  

What Is the Difference Between a Proprietary Reverse Mortgage and a Jumbo Reverse Mortgage? 

A jumbo reverse mortgage is a proprietary reverse mortgage. Jumbo reverse mortgages are considered proprietary because they are private loans offered by private lenders that are not insured by the federal government like traditional reverse mortgages. Rather, they are insured by the individual lenders that offer them, which means they are proprietary to those lenders.  

Will a Jumbo Reverse Mortgage Affect My Social Security Benefits? 

Reverse mortgage funds have no impact on Social Security benefits. This is because Social Security is not a “needs-based” program. The same goes for Medicare. That being said, it could affect someone’s access to a program like Medicaid or disability benefits.  

What Can Jumbo Reverse Mortgage Funds be Used for? 

There are no rules about how the funds from a jumbo reverse mortgage can or can’t be used. Common uses include supplementing income, paying off credit card debt, and making major home renovations.  

Bottom Line 

A jumbo reverse mortgage can be a viable option for homeowners who are looking to access more funds than is allowed with a traditional reverse mortgage. With the ability to borrow up to $4 million, homeowners can tap into their home equity and use the funds as they see fit.  

Additionally, jumbo reverse mortgages offer certain benefits such as no mortgage insurance premiums and the ability to receive 100 percent of the loan proceeds in the first year.  

However, it’s important to carefully consider the pros and cons before making any major financial decision.  

If you’re interested in exploring a jumbo reverse mortgage further, reach out to one of our reverse mortgage specialists to discuss your options and eligibility by calling the phone number here or finding a loan officer in your area.  

Reverse mortgage borrower must occupy home as primary residence and remain current on property taxes, homeowner’s insurance, the costs of home maintenance, and any HOA fees.  

This information is intended to be general and educational in nature and should not be construed as financial advice. Consult your financial advisor before implementing financial strategies for your retirement. 

Related Posts

What is a HECM for Purchase?

Are you considering a reverse mortgage but would like to relocate or downsize? A reverse mortgage is typically considered an option for those who wish to retire is place, but if you are wanting to relocate in your retirement, you may still be eligible for this option.  

One program that makes relocating with a reverse mortgage possible is the Home Equity Conversion Mortgage for Purchase (HECM for Purchase), also known as a reverse mortgage for purchase or H4P.  

The HECM for Purchase program enables borrowers to use a reverse mortgage loan to finance a portion of their new home purchase. But how does it work? 

Reverse Mortgage Basics

Let’s start with the basics of a reverse mortgage. The most common type of reverse mortgage is the home equity conversion mortgage (HECM), which is insured by the Federal Housing Administration (FHA) and regulated by the U.S. Department of Housing and Urban Development (HUD). 

A HECM reverse mortgage works by converting a portion of the home’s equity into cash. The borrowers receive money from the equity they’ve built up in their homes.  

To qualify for a reverse mortgage loan, homeowners must be 62 years of age or older and have significant equity in the home. Additionally, the home must be the primary residence of the homeowners, meaning they live in the home for most of the year. Vacation homes, secondary homes, and investment properties cannot be used for a reverse mortgage. 

Qualifying properties include single-family homes, two-to-four-unit properties in which the homeowners occupy one of the units, condominiums, townhouses, and some manufactured homes.  

The first thing a HECM loan will do is pay off your current mortgage, if you still have one. For the remaining loan proceeds, homeowners can choose to receive their funds as a lump sum, fixed monthly payments, a line of credit, or any combination of the three. 

The amount of money homeowners can receive is based on the home’s value, the age of the youngest borrower, and the current interest rates. Reverse mortgages come with both fixed rate and adjustable-rate options.  

One of the perks of a reverse mortgage is that it does not require monthly payments to pay it back. This makes it appealing to those in retirement who are looking for a way to supplement their income or save for unplanned expenses. There are no rules about how the money may be used, giving borrowers a lot of options. 

A reverse mortgage is paid back when the home is sold, it is no longer the primary residence of the borrower, or when the last borrower or qualified non-borrower passes away, in which case the home is typically sold. 

What is a HECM for Purchase? 

A HECM for Purchase is a financing option that allows home buyers to use a reverse mortgage to pay for up to half of the total sale price of a new home. This means that homeowners can complete both a reverse mortgage and a new home purchase with a single transaction and one set of closing costs. 

Similar to a traditional reverse mortgage, borrowers are not required to make monthly mortgage payments on the portion financed by the reverse mortgage as long as they live in the home. However, they must still meet the reverse mortgage loan obligations, which include paying property taxes, homeowners’ insurance, maintenance costs, and any required fees such as HOA fees.  

There are no prepayment penalties, so borrowers are allowed to pay down the loan ahead of time or make interest payments if they wish. 

The loan balance will become due when the home is sold, vacated for more than a year, or when the last remaining borrower passes away. If the borrower remains in the home until passing away, their children will have the option to sell the home and keep any proceeds or keep the home and pay off the loan.  

It’s important to note that the HECM for Purchase is a non-recourse loan, meaning that neither the borrower nor their heirs will ever owe more than the home is worth.  

The HECM for Purchase program was created by the U.S. Department of Housing and Urban Development (HUD) in 2009 to simplify the process of purchasing a new home with a reverse mortgage.  

Before this program was implemented, borrowers would have to apply for two mortgages and pay closing costs twice, which was a hassle and expensive.  

How Does a HECM for Purchase Work?   

When buying a home, you usually have two options: pay cash or make a down payment and finance the rest with a traditional mortgage. With a HECM for Purchase, you have a third option.  

HECM for Purchase borrowers typically make a large down payment, around 50%, and finance the remaining balance through a reverse mortgage. This allows you to use the money you would have used to buy the house to do other things while still owning the home. And for the amount that is financed with the reverse mortgage, no monthly mortgage payments are required.  

With a traditional reverse mortgage, you receive cash in the form of a lump sum, line of credit, and/or monthly payments. However, with a HECM for Purchase, you can use that money to purchase a new principal residence while the remaining reverse mortgage proceeds goes to the borrower. 

If you plan to get a HECM for Purchase, you will need to connect with a lender who specializes in these loans. It is also recommended that you contact a real estate agent who works with the HECM for Purchase product. Your HECM loan officer may be able to help connect you with one.  

Mutual of Omaha Mortgage has several loan officers who specialize in the HECM for Purchase program. Go here to find one in your area.

The HECM for Purchase Process 

As part of the HECM for Purchase process, you will sell your current home and use the proceeds for the down payment on your new purchase. 

You will also start to shop for the new home you wish to purchase. Your loan officer will help you understand how much you can afford. Once you find the right home, you will purchase it with the proceeds from the sale of your previous home.  

Depending on your age, interest rates, and other factors, you will need to put down 50% to 60% of the purchase price. The remaining balance will be financed by the reverse mortgage. 

A HECM for purchase at Mutual of Omaha Mortgage typically closes within 30 days.

It’s also important to note that all borrowers must complete a counseling session with a third-party counselor approved by HUD before filing a reverse mortgage loan application. Your HECM for Purchase loan officer will help connect you with qualified counselors.  

HECM for Purchase Example   

For illustrative purposes, let’s consider a fictional scenario with a couple from Illinois who have decided to move to Florida. Their reasons for relocating are to enjoy warmer weather and to be closer to their children.  

If they opt to use a HECM for Purchase program, they will have various options available to them, regardless of whether they choose to downsize or upsize. 

Downside vs. Upsize?DownsizeUpsize
Cash after sale of home$500,000  $500,000  
Purchase price of new home  $400,000$700,000
Down payment required to purchase new home  $236,000$405,500
Amount financed by Reverse Mortgage  $164,000$294,500  
Cash remaining$264,000$94,500

Please note that the specific figures may differ based on various factors such as the purchase price of the home, the age of the borrowers, interest rates, and other relevant considerations. 

Who is a HECM for Purchase for?   

A HECM for Purchase may be a good option for those who are planning to relocate, downsize, or upsize in retirement. This option has several advantages over paying for the entire home purchase with cash.  

First, it allows retirees to keep more of their nest egg, which is important as they head into retirement. Second, it makes it easier to qualify for a nicer home than you might without it. Third, it reduces monthly costs since you will no longer have a monthly mortgage payment. Last, it’s an excellent option for those who want to move into a new home and remain there as they age. 

While most retirees tend to retire in place, there are several reasons why retirees may want to move, including the following:  

  • Their current home may be more house than what they need, and they want to downsize.  
  • Their current home may be too expensive to maintain, or they want to live in a retirement community.  
  • They may want to move closer to their family  
  • Their neighborhood may not be as safe as it was when they first bought it years ago, and they want to move to a safer community.  
  • They may want to move to a warmer climate  
  • They may want to upsize. According to a study by Merrill Lynch and Age Wage, 49% of retirees don’t downsize, and 30% purchase larger homes when they buy a new home in retirement. 

Conclusion: Is a HECM for Purchase Right for You? 

A HECM for Purchase is a good option for those looking to relocate, downsize, or upsize in retirement. It allows homeowners to finance part of their new home purchase with a reverse mortgage loan and eliminates the need for monthly mortgage payments.  

The HECM for Purchase program offers several advantages over traditional financing options, including reduced monthly costs, the ability to keep more of the nest egg, increasing monthly cash flow, and the opportunity to qualify for a nicer home than they might without it, or the opportunity move into a home that’s a better fit for them. 

If you are interested in pursuing a HECM for Purchase, connect with one of our HECM for Purchase specialists and start exploring your options today. 

Reverse mortgage borrower must occupy home as primary residence and remain current on property taxes, homeowner’s insurance, the costs of home maintenance, and any HOA fees.  

This information is intended to be general and educational in nature and should not be construed as financial advice. Consult your financial advisor before implementing financial strategies for your retirement. 

Related Posts:

What Can a Reverse Mortgage Be Used For? 

As older homeowners approach retirement, financial stability and consistent cash flow becomes a top priority. Many retirees seek innovative ways to supplement their income, cover unexpected expenses, or achieve their desired quality of life.  

A reverse mortgage has emerged as a valuable retirement tool for homeowners aged 62 and above. Unlike traditional mortgages, a reverse mortgage allows homeowners to convert a portion of their home equity into cash without the need for monthly mortgage payments.  

But what can a reverse mortgage be used for? In this article, we will explore the diverse range of possibilities that a reverse mortgage offers, enabling retirees to enhance their retirement years and achieve their unique financial goals.  

Let’s dive in.  

What is a Reverse Mortgage and How Does it Work? 

Before discussing what a reverse mortgage can be used for, let’s first define what a reverse mortgage is.  

A Home Equity Conversion Mortgage (HECM) is a loan that is exclusively available to homeowners aged 62 years or older who have equity built up in their homes. The home must also serve as the primary residence of the homeowners, and it cannot be utilized for acquiring a vacation property or an investment asset. 

A HECM reverse mortgage is similar to other loans such as a regular mortgage, a home equity loan, or a home equity line of credit (HELOC) with some significant differences. 

This financial tool offers homeowners an opportunity to access their home equity without assuming additional monthly mortgage payments. When obtaining a reverse mortgage, older homeowners are able to pay off their existing mortgage, if applicable, and alleviate themselves from the associated monthly payments. 

It is important to note when obtaining a reverse mortgage, the property remains in the possession of the borrowers, not the lender. This means that homeowners are still responsible for fulfilling the obligations of homeownership such as paying property taxes, homeowner’s insurance premiums, and keeping the home in good, maintained condition. 

For any remaining equity leftover after the traditional mortgage is paid off, borrowers can choose from various options for receiving their funds. They can opt for a lump sum payment, monthly installments, a line of credit, or a combination of these options. 

The reverse mortgage loan balance is paid back when the homeowner decides to sell the property, when the home ceases to be their primary residence, or in the unfortunate event of the homeowner’s passing. 

A HECM reverse mortgage is backed by the U.S. Department of Housing and Urban Development (HUD) and the Federal Housing Administration (FHA). 

What are the Reverse Mortgage Requirements? 

Reverse mortgages have distinct requirements that differ significantly from traditional mortgages. Here are the key points to consider: 

  • Age. To qualify for a HECM reverse mortgage, at least one of the homeowners must be 62 years of age or older.  
  • Residency. The home designated for the reverse mortgage must be the primary residence of the homeowners. It is not possible to obtain a reverse mortgage for a second home or an investment property. 
  • Equity. Homeowners are required to have equity accumulated in their home to be eligible for a reverse mortgage. The exact amount will vary depending on the lender and the current interest rates.  
  • Property Type. The eligible property types for a reverse mortgage include single-family homes, two-to-four-unit properties where the homeowners occupy one of the units, townhouses,
    FHA-approved condominiums, or manufactured homes that meet HUD’s requirements. 
  • Maintenance and Fees. The home must be well-maintained and in good condition. Homeowners are responsible for the ongoing maintenance of the property, as well as paying property taxes and insurance. 

What Can Reverse Mortgage Funds be Used for? 

There are no restrictions on how homeowners may use the money acquired through a reverse mortgage. The funds can be used according to the homeowners’ preferences and needs.  

Below are some of the common purposes that homeowners use a reverse mortgage for.  

Supplement Retirement Income 

One of the most common uses of a reverse mortgage is to supplement monthly income. This may be necessary if you find that your pension or Social Security benefits aren’t cutting it.  

A reverse mortgage helps free up monthly income in two ways. First, it helps by eliminating monthly mortgage payments. Second, it helps by giving homeowners additional money coming in each month 

Make Home Renovations 

A reverse mortgage is an option for those looking to make major home renovations or home repairs. This may be especially necessary for those who have lived in their home for years and have significant home improvements that need to be made. This may also be necessary for those who have physical limitations, and they want to make it more accessible.  

Since a reverse mortgage allows homeowners to tap into the equity they have built in their homes over the years, it typically provides them with a substantial sum of money to fund such projects.  

By using a reverse mortgage, individuals can transform their property into their dream home without straining their current budget. 

Pay Off Credit Card Debt or Personal Loans 

Using reverse mortgage proceeds to pay off credit card debt can offer a practical solution for individuals burdened by large amounts of consumer debt going into retirement.   

A reverse mortgage offers the advantage of not requiring immediate repayment, as the loan is typically repaid when the homeowner sells the property or passes away. 

This deferred payment structure can provide much-needed financial relief and allow individuals to focus on improving their overall financial health.  

Cover Healthcare Costs 

A reverse mortgage can be used to pay off medical bills. But it can also be used to pay for future medical expenses that can be pricey such as home health care.  

If you have large medical bills to pay off, you will want to receive at least some of your funds as a lump sum. If you are looking to use a reverse mortgage to cover future medical expenses, you will want to choose to receive your funds as a line of credit.  

Travel  

If you have traveling aspirations for your retirement, the funds from a reverse mortgage can be used to help cover these costs.  

As a Retirement Tool 

If you are heading into retirement, and you don’t think you have enough saved in your retirement accounts to last through retirement, a reverse mortgage may help.  

A federal survey found that most Americans in the years leading up to retirement don’t have enough money to retire on even when combined with Social Security benefits.  

While a reverse mortgage used to be considered as an option for older homeowners who were in a desperate financial situation, experts are now recommending that a HECM loan can be used as an important financial tool in someone’s retirement plan.  

“Financial planning research has shown that coordinated use of a reverse mortgage starting earlier in retirement outperforms waiting to open a reverse mortgage as a last resort option once all else has failed,” retirement income expert Dr. Wade Pfau explained.   

For example, a reverse mortgage can increase cash flow, which is typically a top concern of retirees.  

In the event of a declining market during retirement, retirees can rely on a reverse mortgage to provide them with financial support while they wait for the market to recover.  

Purchase a New Home 

Additionally, it is worth mentioning that a reverse mortgage can even be employed to purchase a new home, a concept known as a reverse mortgage for purchase or HECM for purchase. 

When purchasing a home, the usual options are to either pay cash or make a down payment and finance the rest through a traditional mortgage, requiring monthly payments to pay off the loan.  

A HECM for purchase provides a third option. With this program, borrowers typically put around 50% down and use a HECM loan to cover the remaining balance.  

Unlike a traditional reverse mortgage that provides cash in various forms, the HECM for purchase allows borrowers to use the funds specifically for buying a home, with any remaining money going to the borrower. 

If you want to learn more about how this works, we recommend talking to one of our HECM for purchase experts who will be able to answer all of your questions. 

FAQs 

Can you withdraw money from a reverse mortgage? 

It depends on how you opt to receive your funds. Your choices are to receive your funds as a lump sum, monthly payments, or a line of credit. If you choose to receive your reverse mortgage funds, yes, you are able to withdraw money from your reverse mortgage.  

What is the most common use of a reverse mortgage? 

Most reverse mortgage customers use the funds to cover basic needs such as covering monthly expenses or to cover other more immediate needs such as paying off consumer debt, according to the National Council on Aging (NCOA).  

The goal for reverse mortgage borrowers when taking out a HECM loan is to make it possible for them to stay in their current home longer, NCOA added.  

While there are no rules about how reverse mortgage funds must be used, they are not typically used for travel or similar discretionary costs.  

Is money from a reverse mortgage taxable? 

A reverse mortgage is a loan, so it is not considered income. For this reason, the money received from a reverse mortgage is not taxable.  

Virginia woman Marjorie Fox told The New York Times that one of the reasons she decided to get a reverse mortgage even though she had significant retirement savings is because if she found that she needed extra cash for a specific reason, she would rather take the money from her tax-free reverse mortgage line of credit than her IRA where she would have to pay taxes on withdrawals.  

What are the restrictions on a reverse mortgage?  

As mentioned previously, there are no restrictions on how reverse mortgage funds can or can’t be used.  

That being said, there are obligations that must be met in order to continue to keep the loan. These obligations include keeping the home as the primary residence, staying up to date on property taxes, paying homeowners insurance, and any HOA fees, if required.  

What is the maximum amount you can get from a reverse mortgage? 

The Federal Housing Administration (FHA) sets a lending limit for HECM reverse mortgages every year. The current FHA lending limit for 2025 is $1,209,750.  

The amount you will be able to borrow will depend on a combination of factors such as the home value, the age of the oldest borrower, and the interest rate.  

If you have a home that has more equity than the FHA lending limit, several major reverse mortgage lenders, including Mutual of Omaha Mortgage, offer a proprietary reverse mortgage, also known as jumbo reverse mortgages, that typically allows homeowners to borrow up to $4 million.  

Bottom Line 

In conclusion, a reverse mortgage is a versatile financial tool that offers numerous possibilities for homeowners aged 62 and above. It allows retirees to enhance their retirement years and achieve their unique financial goals.  

With a reverse mortgage, homeowners can supplement their retirement income, make home renovations or repairs, pay off credit card debt or personal loans, cover healthcare costs, fulfill their travel aspirations, and even purchase a new home through the HECM for purchase program.  

The funds acquired through a reverse mortgage can be received as a lump sum, monthly payments, or a line of credit, providing flexibility and convenience. It’s important to note that reverse mortgage funds are not subject to taxation, offering additional financial benefits.  

While there are obligations to be met, such as maintaining the property as the primary residence and keeping up with property taxes and insurance, a reverse mortgage can be a valuable tool for older homeowners seeking stability and financial freedom in their retirement years. 

Before taking out a reverse mortgage, it is always recommended that you discuss this decision with your family members and financial advisor. 

For more information, grab our free info guide here.

Reverse mortgage borrower must occupy home as primary residence and remain current on property taxes, homeowner’s insurance, the costs of home maintenance, and any HOA fees.  

This information is intended to be general and educational in nature and should not be construed as financial advice. Consult your financial advisor before implementing financial strategies for your retirement. 

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Best Retirement Plans for Self-Employed Workers

As a freelancer, sole proprietor, or small business owner, planning for the future can be a daunting responsibility. This is especially true when it comes to saving for retirement amid inflation and economic uncertainty. If you feel unsure about how to independently fund your retirement, you are certainly not alone. Research shows that fewer than 30% of self-employed workers participate in retirement plans through their job. 

It doesn’t have to be that way, however, because most kinds of traditional retirement plans are still available to the self-employed, as are various other financial products designed for investing in retirement. Of course it’s no easy task to manage these all on your own, but learning about all your options is the best way to start. 

Individual Retirement Accounts (IRAs) 

IRAs are a common type of tax-deferred retirement account, and they are available to anyone. Regardless of your employment situation, you can open an IRA through a financial institution and contribute money on your own — up to $6,500 per year, or $7,500 at age 50 or older. There are two main types of IRA, each offering unique benefits for tax deductions. 

  • Traditional IRA: Contributions are tax deductible up-front, but are then taxed as income upon withdrawal. 
  • Roth IRA: Contributions are not tax deductible, but the earnings are not taxed when withdrawn after retirement. 

IRAs are popular because of their flexibility in investment options. The money in the account can be self-directed or professionally managed among a wide variety of assets including stocks, bonds, and mutual funds. The major caveat to both types of IRA is that funds cannot be withdrawn until the owner reaches age 59 ½, or an additional tax penalty will apply unless certain exceptions are met. 

*Consult a tax advisor

SIMPLE IRA

Short for Savings Incentive Match Plan for Employees, a SIMPLE IRA is a special type of IRA plan designed for small businesses that have employees but do not sponsor any other type of retirement accounts. As the name implies, SIMPLE IRAs are relatively easy and inexpensive to set up, and they offer the advantage of higher contribution limits than normal IRAs.

A SIMPLE IRA works by funding a Traditional IRA with both employee and employer contributions. This means that as a business owner, you can sponsor contributions for yourself and for other employees while deducting those contributions as a business expense.

As an employee, you can contribute up to $15,500 per year (plus a $3,500 catch-up contribution if you are over age 50). As the employer, you can choose to make either a non-elective contribution at 2% of employee compensation or a matching contribution up to 3% of employee compensation. The money in the fund then works like a Traditional IRA, with the same flexibility for management and stipulations for withdrawal at retirement age.

Simplified Employee Pension (SEP) 

A SEP plan, or SEP-IRA, is an alternative to the SIMPLE IRA that allows employers to make flexible contributions to an employee-owned IRA. SEP plans are relatively simple to set up and do not come with minimum requirements for annual contributions. This makes a SEP-IRA attractive for independent contractors or other businesses with irregular cash flow because there is no obligation to contribute regularly. The limits are relatively high, at 25% of employee compensation or $66,000 each year. 

SEP plans are offered through financial institutions and utilize a Traditional IRA structure, meaning they are subject to the same withdrawal and tax requirements. Once established, the SEP-IRA can be self-directed by the employee or managed with the help of the institution. This allows for a lot of freedom in funding and management of the account over time. 

Solo 401(k) 

Much like an employee-sponsored 401(k), a solo 401(k) can help maximize retirement savings for people who are self-employed or are partners in a business with no regular employees. This type of 401(k) plan is also called a one-participant 401(k), individual 401(k), or solo-k. 

Contributions to a solo 401(k) are tax deductible, and the account allows for both elective deferrals and nonelective contributions, with different limits applying to each type of contribution. This means that a business owner can choose how the money will be deducted from his or her paycheck and accounted for by the business. Superior flexibility makes the 401(k) a powerful tool for small business owners to fund their own retirement savings, but these plans come with higher set-up costs than the alternatives. 

*Consult a tax advisor

Annuities 

Annuities are a type of financial product that works much like an insurance plan, and they are typically issued by insurance companies. They are investment vehicles designed to provide a guaranteed, steady cash flow for people during retirement. Annuities are available to anyone regardless of employment, but work best as a supplement to retirement savings rather than as a retirement plan on their own. 

Annuities work in two main phases. The first is the accumulation phase, in which the annuity is funded by either a lump sum or regular payments. The second is the annuitization phase, which is the specified time in the future when the investment pays out. The time in between these two phases is known as the surrender period, when the money cannot be withdrawn without penalties. 

You can purchase an annuity at any age, but they are most useful if you are nearing or past retirement age and want to plan ahead for the possibility of outliving your retirement savings. If you are self-employed and thinking about retiring soon, you may consider purchasing an annuity now to ensure additional income in the future. 

Reverse Mortgage 

Reverse mortgages are a unique way for homeowners to supplement their savings in retirement.
These are special loans that convert home equity into cash, as either a lump sum or payments over time. Reverse mortgages are generally best for older people with little or no remaining mortgage payments and substantial equity built up in their home. 

Self-employed or not, if you own your home you may be eligible for a reverse mortgage once you reach the age of 62. Upon applying for a reverse mortgage, the amount you receive will depend on factors like your age, the value of your home, and current interest rates. You can use the loan to pay off any remaining mortgage, and the rest can go toward other needs you have in retirement. 

A reverse mortgage need only be paid off upon the sale of the home or death of the borrower, meaning that your home is not used as collateral while you are alive. This makes reverse mortgages an attractive option for many people, but you should consider your unique situation to decide if a reverse mortgage is right for you. 

*Borrower must occupy home as primary residence and remain current on property taxes, homeowner’s insurance, the costs of home maintenance, and any HOA fees.

Choosing the Best Plan For Your Situation 

As a small business owner with a lot already on your plate, sorting through all these options for retirement savings may seem overwhelming, especially when you realize that more than one type of investment may be necessary for ensuring a comfortable retirement. That’s why consulting with a professional advisor is always best, but some general guidelines can help you decide what type of retirement plan to prioritize.  

  • A common recommendation for anyone, regardless of employment status, is to open an IRA (Traditional or Roth) and try to maximize your contributions at $6,500 each year. Keep in mind, however, that these funds should not be withdrawn until after you reach age 59 ½. 
  • As a self-employed business owner, if you want to make additional contributions through your business, consider opening a SEP-IRA. This can complement your existing IRA with flexible,
    tax-deferred contributions and a limit of up to $66,000 per year. 
  • As a business owner with a few employees, you may be able to optimize tax treatment for yourself and your employees by sponsoring a SIMPLE IRA with either non-elective or elective-deferral contributions. 
  • As a self-employed individual with no employees, you may instead choose to set up a solo 401(k), which offers the most flexibility in funding and withdrawal, but may be more complicated and expensive to maintain. 

Your business structure is of course not the only factor influencing your retirement plan. You must also set personal goals such as what age you want to retire and how much money you’d like to have each month. Additionally, you should factor in other possibilities such as purchasing annuities or taking a reverse mortgage loan at some point in the future. 

The bottom line is, the earlier you can start mapping out your options and envisioning your retirement, the more prepared you’ll be when the day finally comes. 

Reverse mortgage borrower must occupy home as primary residence and remain current on property taxes, homeowner’s insurance, the costs of home maintenance, and any HOA fees.  

This information is intended to be general and educational in nature and should not be construed as financial advice. Consult your financial advisor before implementing financial strategies for your retirement. 

How ‘Unretiring’ Can Affect Your Social Security Benefits

As retirement approaches, you may worry about whether you’ve saved enough money to cover expenses for the rest of your life. And as inflation and economic uncertainty take their toll on retirement plans, you’re not alone. Unfortunately, because of this growing concern, many people like yourself are finding that they may need to return to work.

According to CNBC, one in every six retirees were contemplating returning to work in 2023. Additionally, the U.S. Bureau of Labor and Statistics (BLS) predicts that the labor force’s 75-and-older population will increase by 96.5% by 2030. Statistics like these set the stage for discussing how returning to work may affect your Social Security benefits.

Before you decide whether to return to work, it’s crucial to understand how that could affect your Social Security benefits. Knowing the details can help you prepare for potential income reductions and plan for retirement.

When Does Going Back to Work Affect Your Social Security Benefits? 

The good news is if you’re over full retirement age (currently 66 if you were born between 1943 and ‘54), you can work as much as you want and your benefits won’t be affected.

For those below this age, the situation is a bit more complicated. If you make over $21,240 annually in earned income, your benefits could be temporarily reduced. However, this reduction isn’t permanent; once you reach full retirement age, your benefits will be recalculated to account for any months that they were withheld.

How To Calculate the Financial Benefits of “Unretiring” 

If you’re considering going back to work, there are several factors to consider before making a decision. One of the most important is your current financial situation. You need to assess whether you have enough savings to retire for good or if you need to continue working for a few more years to supplement your income.

If you’re close to retirement age, it may not be worth it to unretire. Your Social Security benefits may be reduced if you earn income while receiving them.

Other important factors to consider:

  • Your health and energy levels. Are you physically able to continue working?
  • The availability of jobs in your field. Is there a demand for the skills you possess?
  • The potential earnings from returning to work. Will it really make financial sense for you to unretire?
  • The impact on your retirement lifestyle. Do you need to make any changes to accommodate going back to work?

Weighing these factors can help you decide if unretiring is worth the time, money, and effort.

How To Supplement Your Income Without “Unretiring” 

While you may feel like you need to return to work, there are other ways to supplement your income without affecting your Social Security benefits. While each option has its pros and cons, they can be viable alternatives to working full-time and can help in varying life situations.

Deferred Annuity  

A deferred annuity is an insurance contract designed to generate supplementary income for retirement. It’s an investment vehicle that allows you to make one-time or recurring deposits, which grow tax-deferred until you’re ready to withdraw the funds. The payouts can either be in the form of a lump sum or a reliable stream of income.

Investing in a deferred annuity offers you several benefits:

  • It provides a structured income stream that can help supplement retirement needs. Additionally, because deferred annuities accumulate over time, they could present a steady and reliable source of income, which may ensure you don’t run out of money during your golden years.
  • It is a low-risk investment tool as it provides guaranteed growth, meaning your savings remain protected when the stock market takes a dip or interest rates lapse. This helps you enjoy financial security and stability, especially when the market faces economic turmoil.
  • It provides tax-deferred growth, meaning you pay taxes on the deposit at a later date when you withdraw the money. This tax advantage allows the funds in the annuity to accumulate more money over time and can translate into significant savings.

An annuity’s ability to provide guaranteed returns and tax-deferred growth makes it an excellent investment tool to help you achieve long-term financial security.

Rental Income 

Did you know you can earn passive income during retirement by renting out extra space in your home? According to the IRS, rental income can be deducted from rental expenses, which is great news for anyone looking to maximize their earning potential. Whether you own or use a property, such as a vacation home or investment property, you can earn money through renting.

In fact, you may be able to rent out a portion of your primary residence to tenants for extra income. So, if you’re looking for a way to supplement your retirement savings, consider exploring rental income options. It may be a smart financial move that pays off in the long run.

Certificate of Deposit (CD)

Consider a certificate of deposit, or CD, to help save for retirement. A CD is a savings product that earns interest on a lump sum for a fixed period, usually ranging from six months up to five years.

A CD differs from a regular savings account because it requires a fixed amount of money for a set time. This means that during the term of the CD, you won’t be able to access your funds without paying penalties. However, the benefit of a CD is that it offers a fixed interest rate, which means you lock in a specific rate of return for the entire term of the CD.

While CDs can be a safe way to save for retirement, they may not be especially lucrative. CD interest rates tend to be lower than other investment products such as stocks and mutual funds. However, they’re insured by the FDIC up to a certain amount, so you can be confident in your investment. 

Reverse Mortgage   

A reverse mortgage loan is available to homeowners aged 62 and older, allowing you to convert a portion of your home equity into cash. Unlike traditional mortgages, to which you make monthly payments, with a reverse mortgage the lender pays you in the form of a lump sum, monthly payments, a line of credit, or a combination of the three.

One of the most significant benefits of a reverse mortgage is that it can quickly provide extra income when you need it most. For instance, if the stock market experiences a significant downturn, a reverse mortgage could provide the necessary financial cushion to help bridge the gap until the market stabilizes. So, if you’re considering this option, it’s essential to gain a thorough understanding of how they work and the benefits and drawbacks before making any decisions.

With various options available, research to determine which type of reverse mortgage is best for your situation. With some forethought and planning, you can determine how a reverse mortgage works best for your retirement goals.

Reverse mortgage borrower must occupy home as primary residence and remain current on property taxes, homeowner’s insurance, the costs of home maintenance, and any HOA fees.  

This information is intended to be general and educational in nature and should not be construed as financial advice. Consult your financial advisor before implementing financial strategies for your retirement. 

7 Ways To Recession-proof Your Retirement Savings

If you’re concerned about the financial aspect of retirement, you’re not alone. A March 2023 survey into Americans’ financial concerns by Quinnipiac University found that 68% of people are concerned they don’t have the funds to live comfortably after stopping work. Of all the financial worries in the survey, retirement costs were second only to food prices. 

Recessions and periods of high inflation have a disproportionate impact on retirees. Most retirement accounts are invested in the stock market. Stock and fund prices fall during economic downturns, so the account loses value when you need it the most. 

Luckily, you can take steps to prepare for the worst-case scenarios so that your savings remain intact regardless of the country’s overall economic outlook.

Diversify Your Assets 

Diversification is an essential step for all well-balanced portfolios. It’s especially vital for retirement accounts because of the impact a loss of asset value can have on your quality of life. The Financial Industry Regulatory Authority (FINRA) explains that diversification involves putting your investment capital in uncorrelated assets and different asset classes. 

Uncorrelated assets don’t react to economic events in the same way. Some stocks, exchange-traded or mutual funds, bonds, or commodities may rise in value in an economic downturn or inflation. For example, precious metals and government-backed inflation-protected bonds (IPBs) are considered safe havens during uncertain economic times. Their value often increases or remains stable during market downturns. 

Diversification does take capital away from high-performance assets, but it brings more stability. Because uncorrelated assets increase in value during periods of inflation or bear markets, they cancel out losses from securities negatively impacted by a recession. 

Look For Ways To Reduce Expenses 

You can take steps to ensure your retirement income goes further by reducing unnecessary spending. Unnecessary expenses are costs for products or services you rarely use or that have cheaper alternatives with the same value. 

For example, many people have memberships with streaming websites, magazines, or music apps that they rarely use. If you’re in this category, you can cancel these recurring subscriptions if you don’t use them often or select one at a time to lower your entertainment costs. 

Cellular and internet bills are another target for spending reduction. High-speed internet and mobile data can be expensive. If you don’t use the data or don’t need fast internet speed, you’re overpaying for the service. By tracking mobile data usage on your phone, you can see how much you actually need and adjust your plan accordingly. You could also look at how fast your internet connection should be. 

Convert to a Roth Account 

A Roth IRA is a retirement account without upfront tax benefits. The money you deposit in a traditional IRA is tax-deductible, but you pay regular income tax on withdrawals when you retire. Roth IRA contributions aren’t tax-deductible, but you don’t pay income tax on the principle or any investment profits in the account upon withdrawal. In other words, investment returns from a Roth account are tax-free.

A Roth IRA won’t offer any added protection against inflation on its own. You’ll need to properly diversify and balance your portfolio just like any other type of retirement account. However, it will potentially give you more income in retirement because the withdrawals are not subject to income tax. 

You can convert a traditional IRA into a Roth. You’ll have to pay taxes on the converted amount, but any additional investment earnings after the conversion will be tax-free. Despite the short-term tax burden, you won’t lose a portion of your withdrawals to income tax in the long run.  

Hold Off on Taking Social Security 

You can receive Social Security when you reach 62 if you or a current or former spouse have paid Social Security tax for at least 10 years. However, you’re not required to take these payments until you reach age 70. One retirement strategy is to rely on your retirement savings upfront and defer Social Security benefits as long as possible. 

According to the Journal of Accountancy, you can increase your Social Security payments by up to 8% for each year you delay. In other words, by waiting a decade to take your payments, you earn 8% on the amount due. 

When planning your Social Security benefits, you should only deal directly with the Social Security Administration. Many scams related to Social Security involve tricking retirees into providing sensitive information that could give criminals access to retirement funds. 

Invest in a Deferred Annuity 

Technically, a deferred annuity is an insurance product. You pay a lump sum or make regular deposits. After at least a year, you receive regularly scheduled payments that include the principle and a modest return. 

An annuity can supplement income from Social Security or retirement accounts. Since you can arrange an annuity to provide predictable payments and specific times, it can also help with financial planning. 

Look For Other Income Streams 

While you may be finished with your primary career, it’s possible to seek other types of income. 

For example, you might consider renting out unused space in your home to a regular tenant or on a vacation rental site like Airbnb. While this option requires managing bookings and providing help to renters when necessary, it also allows you to earn from an asset that you already own without having to take a salaried or hourly wage job. 

You could also consider a part-time position to supplement your income. You could choose a consulting position related to your previous career or something you always wanted to do but were unable to try because of your primary career. 

Part-time jobs provide supplementary income that helps you stretch your retirement account withdrawal further. A post-retirement job can supplement Social Security benefits. You’ll have to pay Social Security taxes on your income, but you’ll still get benefits. However, if you earn more than the minimum amount ($21,240, as of 2023), the SSA will deduct $1 from your benefits for every $3 earned. 

Consider a Reverse Mortgage 

One final option is to consider a reverse mortgage. This type of mortgage allows homeowners to secure a loan using their property as collateral. Unlike a traditional mortgage, the homeowner receives payments rather than paying them. The homeowner retains the deed and lives in the home, and they still pay property taxes and insurance. 

The lender recoups their investment by selling the property after the homeowner stops living there or receiving repayment when the homeowner sells it. 

Reverse mortgages have specific qualifications:

  • This HUD program is limited to homeowners age 62 or older. Your home must be your primary residence and be kept in good repair.
  • The amount of money available to you is based on the value of your home and your age.
  • Although your mortgage and other debts are paid off, you still are required to pay your real estate taxes, homeowner’s insurance, and other conventional payments like utilities for as long as you own your home.
  • You must receive consumer information from a HUD-approved counseling source prior to participating in this loan program.

Like other mortgages, you need to complete specific legal steps. These include an application, approval, appraisal, underwriting, and closing. All reverse mortgages require a counseling session during which a third-party advisor helps you decide if this is the correct option for your retirement plans. 

You should look at the different reverse mortgage options and learn more about the process before applying. 

With careful planning and additional income from a reverse mortgage, part-time job, or investments, you can fully enjoy retirement regardless of the current economic environment. 

If you want to learn more, download this free guide or find a loan officer near you.

Reverse mortgage borrower must occupy home as primary residence and remain current on property taxes, homeowner’s insurance, the costs of home maintenance, and any HOA fees.  

This information is intended to be general and educational in nature and should not be construed as financial advice. Consult your financial advisor before implementing financial strategies for your retirement. 

How To Protect Yourself From Social Security Scams

Social Security fraud — where scam artists often pose as Social Security Administration (SSA) representatives — represents a growing threat. Scammers often ask older adults to confirm their SSA account details, before finding ways to access and steal hard-earned money.

Financial volatility can affect older adults in particularly negative ways. Inflation can reduce savings, further stressing your budget as you prepare to retire. The last thing you need is financial difficulty from a Social Security scammer.

What Are the Common Types of Social Security Scams?

Social Security scammers are devious. They will use several different methods to separate older adults from their money. Sometimes, they will directly impersonate a Social Security official. In other cases, scammers might attempt to steal from older adults without ever speaking directly with them. Phishing emails, text messages, and even paper mail are sometimes effective to trick unsuspecting older adults.

Fraudulent Phone Calls

Many scam phone calls don’t sound fraudulent at all. Sophisticated Social Security scammers can make calls sound sincere, even urgent. They will pretend to be Social Security representatives, often calling to alert you of a pretend issue with your account.

On the phone, Social Security scammers will say things that real Social Security employees never would. They might threaten to end your Social Security benefits unless you take immediate action. They might also request payment through gift cards or PayPal. If you ever suspect that a call might be fraudulent, hang up. Dial the Social Security Administration directly to verify the call.

Phishing Emails

Some Social Security scammers will use less direct methods to attempt scams. One popular method, phishing emails, are fake emails that often appear legitimate. Fraudulent actors create email addresses and official wording to make the email look like it was sent by the SSA.

Most phishing emails contain an attractive link. This link often sends you to a website, where you’re encouraged to submit personal information. Depending on the email, you might be asked to submit bank details, passwords, or Social Security numbers.

Paper Mail

Paper mail Social Security scams are particularly dangerous for seniors. Scammers will often mail fake documents, meant to look like real government letters, to older adults’ homes. Letters might make demands for money or personal information.

Paper mail Social Security scams are similar in many ways to other forms of SSA fraud. They are typically unsolicited and request payment through wire transfer or specific gift cards. Many letters are poorly made, and contain spelling or grammatical mistakes throughout.

How To Protect Yourself From Social Security Fraud

No matter your age, Social Security scams are still a threat. It’s important to be aware of popular Social Security tricks and how to defend yourself. Staying up-to-date on the latest forms of fraud can help minimize the chances of scammer success.

Here are a few ways to protect yourself against Social Security fraud:

  • Ignore unsolicited messages: Do not answer or maintain calls from people claiming to represent a government agency or the Social Security Administration.
  • Verify caller identities: Before continuing any conversation, make sure that the person you are speaking with is a verified representative of an agency. If you suspect fraud, you can hang up and call the agency directly to verify the caller.
  • Keep personal information private: Do not share any private information through a phone call, email, text message, or paper mail. This information includes usernames, passwords, security questions, bank information, and Social Security details.
  • Avoid unorthodox payment methods: Never transfer funds to a caller or email sender through a suspect payment method. Avoid purchasing gift cards, wiring checks, or sending money through social media if you have not verified their identity.
  • Pursue frequent, ongoing education: Learn more about recent Social Security scams and teach your family members how to recognize them.

Given the frequency of online Social Security scams, it’s also important to update your computer. Install a firewall and antivirus software on any device — phone, tablet, or desktop — that can access your Social Security account.

How To Report Social Security Scammers

When you suspect a Social Security scam, don’t wait. Reporting Social Security fraud helps protect yourself and others from similar losses.

Contact the Office of the Inspector General with details of the Social Security scam. Include details like the caller’s name, phone number or email address, their script, and any other useful information. File a report with the Federal Trade Commission if someone has used your Social Security details without your permission.

Other Scams That Target Retirees

Retirement is typically a period of financial security, where people reduce their workload and enjoy life. This makes retirees ideal targets for scammers who want to steal large amounts of money.

Scams targeting retirement-age individuals are on the rise. They can take many forms — including health insurance fraud and reverse mortgage fraud — and can create serious financial loss.

Medicare/Health Insurance Fraud

Scammers sometimes pose as Medicare employees to cheat retirees out of their savings. They will call an older adult without warning, often claiming that there is a problem with their health insurance coverage. To fix that problem, they say they need to confirm a few pieces of personal information.

If the older adult provides that personal information, a scammer can use it to access their finances and withdraw funds.

In other cases, scammers will call retirees pretending to sell discounted Medicare services. People who volunteer their bank information over the phone or email can quickly become victims of identity theft.

Internet Scams

There’s no shortage of internet scams that target retirees. Some use viruses that steal information from computers or smartphones. These viruses can enter a computer through a variety of methods, from email attachments to physical flash drives.

Others use fake pop-up messages that trick retirees into believing that their device has a problem. The pop-ups typically contain a virus, released after someone clicks the message. If the pop-up itself doesn’t contain a virus, it can still lock the device and prompt a call to a specific phone number. On the other end of that phone number is a fraudulent actor who tricks the caller into providing personal information.

Investment Scams

Older adults with access to retirement savings often want to invest — and scammers know it. They will operate a variety of investment schemes, meant to sound legitimate until retirees lose their money.

Ponzi schemes are perhaps the most common form of investment scam. Scammers ask retirees for an investment, promising high returns in a short time span. Any invested money goes to earlier “investors” to create the appearance of a successful company. Investors lose money when the scheme fails.

Many scammers also pretend to be certified investors. They will call and offer to invest a retiree’s money in promising stocks. However, they first ask for a deposit. Once the deposit is paid, the criminals vanish with the money.

Reverse Mortgage Scams

Reverse mortgage schemes are also a growing threat, particularly for older adults looking to access home equity. Dishonest mortgage brokers will commonly offer a reverse mortgage opportunity to older adults for an extremely limited time. Unlike an ethical reverse mortgage — with which buyers can supplement income through home equity — reverse mortgage scams force seniors into a hasty decision. Once the deal is done, they are locked into high-interest payments.

Education is the best defense against reverse mortgage schemes. Retirees should study reverse mortgages so they know what to expect from their interest rate, legal agreements, and total equity. Older adults should also consider all available reverse mortgage options before deciding on a provider.

Reverse mortgage borrower must occupy home as primary residence and remain current on property taxes, homeowner’s insurance, the costs of home maintenance, and any HOA fees.  

This information is intended to be general and educational in nature and should not be construed as financial advice. Consult your financial advisor before implementing financial strategies for your retirement. 

When Is the Right Time to ‘Right-Size’ Your Home?

Countless Americans are tightening their wallets due to increased monthly costs. Some people feel the strain of housing costs (including home insurance premiums and utility bills) while others have noticed their grocery and gas bills are going up. Inflation affects everyone but some people are impacted more than others. 

If you are eyeing retirement, you might be worried about how current economic trends could impact you after you leave the workforce. You aren’t alone. More Americans are considering adjusting their home sizes to meet their current needs. While this is often called “downsizing,” the reality is that these families are “right-sizing,” or moving into a house that accommodates their future plans. 

Is right-sizing for you? There are multiple benefits of moving throughout life. Learn more about this concept and how it can help you retire comfortably. 

What Are The Benefits of Right-Sizing?  

Regardless of your age, there are several benefits of right-sizing. Your needs and your finances change throughout your life and it only makes sense that you would adjust your housing to match these trends. Here are a few perks of right-sizing. 

Easier Upkeep  

Moving to a smaller property can help you save time, money, and energy on general upkeep. You will spend less time dusting, mopping, and cleaning because there are fewer rooms that need your attention. You can also spend less time landscaping if you move to a smaller plot. 

Right-sizing can benefit both older and younger homeowners. A younger homeowner might not have the skills or savings to make necessary repairs. Older homeowners might not have the ability or desire to tackle home projects (like climbing onto the roof to clean your gutters). Now might be a good time to look into a bungalow, townhome, or condo that is easier to maintain.  

Reduced Expenses 

Moving to a house that matches your budget can immediately lower your monthly costs. You will notice lower property taxes, lower monthly insurance rates, and lower utility bills. If you currently live in a neighborhood with a homeowner’s association (HOA), you can find a house with cheaper monthly fees — or no HOA fees at all. 

Some people save hundreds of dollars each month just by right-sizing their homes. This allows older homeowners to enjoy a low-stress retirement while helping younger homeowners grow their savings to prepare for life milestones like marriage, travel, children, and their own future retirement. 

More Flexibility 

Right-sizing can also give you the freedom to choose where you live. Consider moving to a coastal town where you can retire in peace. Find a cabin in the woods where you can commune with nature. It is easier to find properties within your budget when you don’t need a large home in your desired area. 

Cons of Right-Sizing 

While there are several benefits of right-sizing your home, there are a few drawbacks to consider. It’s up to you and your family to review your options and decide whether the pros outweigh the cons. 

  • You will have a smaller living space. Make sure you have enough room for your family to live comfortably. 
  • You might lose your largest real estate asset. There is always a risk that your home’s value could increase after you sell it, causing you to miss out on potential profits.
  • Your family will have to deal with the stress of moving. Packing and selling a house is exhausting and expensive – even if you are just moving down the street.     
  • This could mean giving up a family home. If you raised your kids in that house, selling means leaving a key part of your life behind. However, you will always have the memories with you. 

You don’t need to decide whether right-sizing is the best choice for your family immediately. Instead, give everyone involved in the decision time to process what a move means and how it can benefit the family. Within a few months, you can decide.  

When To Consider Right-Sizing 

Regardless of whether you are moving down the road or across the country, there are a few factors you need to consider when right-sizing. People of all ages can evaluate their current situations when making their future house plans. Use the following criteria to objectively determine whether right-sizing is the best choice for you or whether you can afford to stay in your current home.

You Spend Too Much on Housing 

First, look at your finances and calculate what percentage of your monthly income goes to housing (your mortgage or rent payment). The Department of Housing and Urban Development recommends spending no more than 30% of your monthly income on housing costs. If you spend more than 50% of your income on housing, it is considered a severe burden.

Right-sizing could bring your monthly costs below the 30% mark, freeing up your budget for additional savings or giving you spending money for hobbies, travel, and other treats.   

You’re Eating Into Your Savings 

Another indicator that you are living in a house above your means is if you are using your savings to cover basic costs. Most financial experts recommend keeping at least three to six months’ worth of expenses in your emergency fund. Do you find yourself pulling from your savings to cover your electricity bill? Are you spending more than you make each month?

This affects both new homeowners and people who are preparing for retirement. Living in a city like Seattle might seem glamorous, but make sure you can afford it.

Maintenance Is Becoming too Difficult  

If you feel overwhelmed with your home maintenance task list, it might be time to right-size. This affects homeowners from all walks of life. If you are building your career, you might not have the time and energy to take on weekend projects. If you are getting older, you might not feel safe shoveling the driveway or climbing on the roof. 

Even growing families might decide to right-size. A new baby can take away your time and budget to work on home projects. 

Your Home No Longer Suits Your Needs  

Finally, your home might have been perfect for you when you bought it, but what about now? Do you still need extra bedrooms if your kids no longer live with you or a home office if you no longer work? You might benefit from moving to a house that has fewer bedrooms and less square footage to match your current lifestyle. 

Also, evaluate whether you want a house that is easier to navigate. A home without stairs and without a steep driveway might be safer in the long run.

Alternatives to Right-Sizing  

Many people have strong connections to their homes and love where they live. If you know you need to right-size from a financial perspective but don’t want to move, consider other options. Here are a few ways to lower your expenses while staying in your home.

Take Out a Home Equity Line of Credit   

A home equity line of credit (HELOC) gives you cash based on the value of your home. It is a second mortgage that is often used to cover major expenses (like a significant home repair). You might qualify for a HELOC if you own your home outright or if you own a significant portion of your home. Talk to a financial advisor to learn more. 

Renting Out Space in Your Home 

If you have extra rooms because your kids moved out, consider looking for people to rent the space. You can either list the room on a booking site like Airbnb or look for long-term renters who sign a lease. 

While renters can provide a source of secondary income to cover your housing expenses, you also have to live with them. You might not like sharing communal areas with others or like your tenant. Plus, there’s always a risk that a tenant stops paying and you have to evict them. 

Refinancing  

Another option for lowering your expenses is refinancing your mortgage. If you take this route, the lender will look at the current value of the house and what you owe on it. They might be able to offer a lower interest rate and lower monthly payment on the property through refinancing. 

There may be some drawbacks to choosing this option. Refinancing could change your home insurance costs, which could actually increase your monthly expenses in some areas. 

Reverse Mortgage

With a traditional mortgage, you make payments to the lender. With a reverse mortgage, the lender makes payments to you. These payments could be a lump sum, a line of credit, or standard monthly deposits.

The main criteria to qualify for a reverse mortgage is age: you need to be 62 years or older. There are other requirements related to residency and equity for your home. However, this option is growing in popularity for Americans who are able to use it. Older homeowners don’t have to worry about moving and can receive regular payments no matter how volatile the market gets. This stability is highly valued by many retirees. 

This is just one way to adjust your mortgage to prepare for retirement.

Learn more about mortgage options to choose the best one for your needs, or find a reverse mortgage loan officer near you!

Reverse mortgage borrower must occupy home as primary residence and remain current on property taxes, homeowner’s insurance, the costs of home maintenance, and any HOA fees.  

This information is intended to be general and educational in nature and should not be construed as financial advice. Consult your financial advisor before implementing financial strategies for your retirement.