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By next spring, when you will both be qualified to receiver social security benefits, you’re going to retire from long careers in education. You’re justifiably proud of the fact that you’re close to paying off your home, have no credit card debt, and have each accumulated a nice 403b nest egg (you plan to roll these into self-directed IRA accounts). While neither of you is a “stock trader”, you have been comfortable working with your financial advisor to choose and periodically rebalance your portfolios.
You will each be receiving a pension, but that will not totally support your needs. As you contemplate using both social security benefits and investments to augment your cash flow, you are more than a little concerned about depleting your assets too quickly, particularly since you will no longer be making those contributions through payroll deductions.
Consider “reversing the sequence” by using housing wealth for support. In other words, with a reverse mortgage line of credit, you could defer tapping your retirement portfolio, perhaps for decades, instead supporting your lifestyle with a combination of social security benefits and periodic, tax-free “draws” out of the equity you’ve build up in your home. Meanwhile, you’d continue managing your rollover accounts. Because even short term drops in the value of your investments at the start of retirement could be devastating, you’d be allowing those assets time to build.
Using the same logic, you might explore using a reverse mortgage to defer Social security benefits for one or both of you. Delaying Social Security benefits by just five years can increase benefits by as much as 30% for the rest of your life!
With three potential sources of support (pension, Social Security benefits, and investment draws), it might be smart to “reverse the order”, deferring Social Security and investment asset liquidation, while using your housing wealth as a main source of support as you begin your retirement
*Not Intended as Tax Advice. Consult a Tax Specialist.