With no formal training in finance or accounting, the two of you nonetheless pride yourselves on discussing important financial matters and (after consulting your advisors), coming to your own conclusions. You’re both close to age 67, and after dealing with various health issues in recent months, you arranged to retire at the end of 2023 (several years earlier than originally planned). Fortunately, none of the medical challenges necessitate moving to a facility; it is very feasible for you to continue to “age in place”, and your home is fully paid for and in excellent repair.
The issue under discussion with your financial advisors is whether you should apply for (or defer applying for) social security benefits. You’ve been given several reading pieces about the so-called “tax torpedo”, referring to the fact that up to 85% of Social Security benefits can be counted as taxable income. On the other hand, while you have built up a very nice investment nest egg (even given the choppy market of late),and will have modest deferred compensation assets available for both of you, you want to be prepared to hire at-home healthcare help if needed.
Another reading piece that should prove of interest is an article that appeared in Kiplinger three years ago: ‘”In challenging times, federally insured home equity conversion mortgages offer an outside-the-box income option for those 62 and older,” Charles Rawl, CFP®, RICFP® wrote.
Consider using your own housing wealth as the “backup resource” in the event you need future in home medical care. With a reverse mortgage, there will be no monthly mortgage payments. In fact, the unused portion of your line of credit will continue to earn interest at the same rate as that being charged on the borrowed funds. Meanwhile, you can work with your tax advisor on either handling – or deferring – the Social Security “tax torpedo”.
As you “age in place”, you’ll be assured that, should home healthcare become a necessity, you have a funding resource already “in place”!