In your very first year of retirement, you found the recent wild fluctuations in the investment markets downright terrifying. While you have never been a “Nervous Nellie” when it comes to your portfolio, having put money into your investment portfolio for as long as you can remember through all the ups and downs over the years, now that you’ve begun systematically withdrawing funds, the “vibe” has definitely changed. You’ve just finished paying off, not only the primary mortgage on your home, but also the second loan you took to finance the age-appropriate adaptations you had done to the property itself.
The plan has been for your wife to retire at the end of this calendar year, at which time a systematic withdrawal plan was planned out of her Teacher Retirement and annuity accounts. The original thinking was to postpone Social Security beyond the so-called Normal Retirement Age for each of you. You’re not so much concerned about paying for basic living expenses as covering some lifestyle luxuries you’ve been waiting to enjoy.
There’s a name for the particular brand of worry you’re experiencing – sequence of return risk. When the investment markets decline early in one’s retirement, even if it later stages a dramatic recovery, the longevity of one’s portfolio can be shortened in terms of being able to make periodic withdrawals of cash to support your lifestyle needs.
Like many who happen to retire just prior to a very volatile period in the market, you need a buffer, one that doesn’t involve taking assets out of the market just when those assets need to work their hardest for you. Consider “reversing the sequence” by using your housing wealth for support. In other words, with a reverse mortgage line of credit, you could defer tapping your retirement portfolio, instead supporting those “lifestyle luxuries” with periodic, tax-free* “draws” out of the equity you’ve built up in your home.
Important to understand is that, unlike the first and second forward mortgages you used to have, no monthly mortgage payments** are ever required on a reverse mortgage, provided you continue to pay real estate taxes, maintenance costs, and homeowners’ insurance. Should you later decide to make any payments, those amounts will lower the mortgage balance, add to the line of credit and grow at the same rate (plus1/2%) as the interest being charged on the borrowed equity”.
Rather than becoming “terrified” at recent turn of events in the market, you can shore up the sequence of returns, keeping your eye on the long game.
https://mutualreverse.com/david-garrison
*Please consult a tax specialist. **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. 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