After retiring at the end of 2022 (at the age of 67), you began collecting Social Security benefits in 2023. Your wife retired at the end of last year, but she is not quite of age to qualify for a full benefit. Your plan was to wait until October of this year to “turn on” her “Social Security spigot”. Preparing your 2023 tax return, though, was a wake-up call, as you realized just how much of your own Social Security is being lost to taxes.
Your home is fully paid for and has been kept in good shape. Still, continuing past this year to defer your wife’s Social Security benefits would mean taking more money out of both your rollover accounts (which would trigger tax as well!). A couple of years ago, you inherited a piece of property, which could eventually be sold, but that would still not provide enough to allow deferring Social Security for very long. Is a mortgage line of credit on your residence your best option, you wonder?
Using your housing wealth as a source of regular income in order to defer Social Security benefits can be an option. But rather than borrowing money in the form of a home equity line of credit on a traditional “forward” mortgage, consider using a reverse mortgage. That way, withdrawals will not generate taxable income, and there will be no need to repay the loan until you have either moved out of the home (or until you have both died). You, of course, retain the title to your home so long as you continue to maintain it and keep the property taxes and insurance paid.
Later, should you end up selling the inherited property you mentioned, you might wish to use the sale proceeds to “replenish” your reverse mortgage equity, which is always credited with growth at the same rate as the interest being charged on the outstanding loan balance. Meanwhile, as your wife continues to suspend her Social Security benefit payments, she will be earning delayed retirement credits, resulting in a higher ultimate monthly Social Security payout once she reaches age 70.
As Charles Rawl, CFP®, RICP® wrote in Kiplinger, “The intelligent use of a reverse mortgage, particularly a federally insured home equity conversion mortgage (HECM) line of credit, could extend an individual’s or couple’s retirement resources in a way that more traditional strategies cannot.”
That April 15 reminder you got of the tax on Social Security benefits? It might point your way to a savvy retirement income management plan based on your own home.
https://mutualreverse.com/david-garrison
Readers, if you’d like to see what you might qualify for with a reverse mortgage in Indiana, or to download your Reverse Mortgage Guide Click Here(and scroll down).