For decades, your retirement planning was loosely based around the 4% Rule of withdrawals. Now, seven years in (two in full retirement), the two of you have been wondering about the long term sustainability of taking that 4% annually. Because a good deal of your money is in mutual funds, you follow articles by Morningstar, and a recent piece by Barbara Kohllmeyer seems to anticipate an economic slowdown. While you have absolutely no need for additional funds right now (both your home and your prepaid funeral expense plans are fully paid for and you have been very comfortable staying within your budget), you do not relish having to absorb any but the most modest cutbacks in your moderate lifestyle. Your wife is probably going to be receiving a small inheritance within the next couple of years, but you don’t want to base your income planning on that factor.
In basing your planning around the 4% Rule of income withdrawal, you seem to have considered only your investment assets, ignoring the equity built up in your home. Consider setting up a reverse mortgage structured as a “standby” line of credit. Yes, there will be some upfront cost, but the important thing is that in the event of an economic slowdown that affects your investments before your wife receives her inheritance, you will be able to readily access your housing wealth without putting further downward pressure on your portfolio. Meanwhile, whatever portion of your equity is not being used will be credited with growth at the same rate as the interest being charged on the outstanding loan balance.
Just as our national defense has a Ready Reserve Force on stand-by status, think of reverse mortgage funding as the Ready Reserve Force of retirement planning!
David Garrison, NMLS ID 1595194. Mutual of Omaha Mortgage, Inc. dba Mutual of Omaha Reverse Mortgage, NMLS ID 1025894. 3131 Camino Del Rio N 1100, San Diego, CA 92108. Indiana-DFI Mortgage Lending License 43321. Michigan 1st Mortgage Broker/Lender/Servicer Registrant FR0022702. These materials are not from HUD or FHA and the document was not approved by HUD, FHA or any Government Agency. Subject to credit approval. For licensing information, go to: www.nmlsconsumeraccess.orgEqual Housing Lender