While in general, you’re confident that you’ve planned well for retirement, you are concerned about the increasingly obvious rise in everyday costs of living. The two of you have always shared investment decisions, taking a conservative approach, continuing your pre-retirement 60% stock/40% fixed income model. With zero revolving debt except for a car loan, you’re just around six months shy of paying off the mortgage on your home (where you’ve decided to spend your retirement years). Just months shy of completing your first full year of retirement, you are now both receiving regular Social Security checks. Combined with pension income and very modest systematic withdrawals from retirement accounts, you’ve been able to cover lifestyle needs and maintain your “hybrid” life/long term care insurance policy.
Taking a realistic view of your portfolio choices going forward, your instincts tell you to skew more heavily towards fixed income, reducing the chance of big drops in the stock market. At the same time, you’re afraid to become more “conservative” at a time when your costs of living are undeniably rising. You’ve been reading predictions from different “gurus” and are in a quandary about which would be the next best steps to take.
One asset you’ve apparently overlooked in the planning is the equity built up in your home. (Given the rise in real estate values, that equity has probably grown substantially.) A reverse mortgage might become an element in your long term “portfolio planning”, with the un-borrowed portion of your housing wealth used as a surrogate for the “fixed income” part of your asset allocation strategy. The growth earned on the un-borrowed portion of a Home Equity Conversion Mortgage line of credit would be a “surrogate” for the “fixed dollar” portion of your portfolio, because the unborrowed portion of your credit line will grow at the same rate as that being charged on the loan itself.
While the reverse mortgage itself is a form of debt, it’s reassuring to know that it is a non-recourse loan. With no monthly mortgage payments* due, you will never be “upside down”: neither you nor your heirs will ever owe an amount greater than the value of the home itself. Once the reverse mortgage financing has been set in place, you might feel comfortable increasing the allocation to stocks in your investment accounts, in turn increasing your chances of keeping up with rising living costs.
https://mutualreverse.com/david-garrison
*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