…Is a “Standby” Reverse MortgageInvesting in anything (stocks, bonds, real estate) has its peaks and valleys. One strategy used to save up for retirement during your accumulation, or working, years is dollar cost averaging.Dollar cost averaging means you invest a set amount of money into the same investment portfolio for a set amount of time. For example, $100 every month for 3 years into Wal-Mart stock. This investment allows you the flexibility to buy MORE units when the market is DOWN (because stocks are worth less) and buy LESS of those same units when the market is UP (because stocks are worth more).The end result is to help your money grow during your working years in order to live comfortably during your retirement years.During retirement, however, you might find yourself with a REVERSE dollar cost averagingbecause you are no longer buying, but selling, so you sell MORE when the market is DOWN and you sell LESS when the market is UP.For example, at the age of 70, you are required to take a minimum income distribution of 3.7% if you have an individual retirement account or 401K. Eventually, reverse dollar cost averaging will bring down the value of your account–and make it harder for you to recover–had you not been taking cash flow from your investments during your retirement.The possible to solution in order to avoid a reverse dollar cost averaging?A Home Equity Conversion MortgageSpecifically, a HECM Saver, or “Standby” Reverse Mortgage (as coined by John Salter, Shaun Pfeiffer and Harold Evensky of the Journal of Financial Planning) whose unique features include:
Lower Up-Front Costs
A non-cancellable line of credit
Borrower’s control over, if and when, they use the line of credit
The income received from the reverse mortgage is tax-free, and the interest, when paid, may be tax-deductible.
A line of credit that can be paid back at any time without a penalty.In a previous blog post, I talked about the benefits of a HECM Saver as retirement insurance; check out this blog post for a more detailed explanation of the benefits of “standby” reverse mortgage.If a reverse mortgage is the right for you, contact us PS Financial Services via email at info@PSReverseMortgage.com or give us a call at (888) 845-6630. We do not pressure those who inquire, we simply believe in the benefits a reverse mortgage can offer seniors during retirement.