The new reverse mortgage laws also make these home loans more viable as an investment protection strategy, too. With the availability of taking out a one-time lump sum payment, receiving ongoing monthly payments or having access to a line of credit, a reverse mortgage for investment protection is becoming an increasingly favored approach for many older Americans.
A recent USA Today column on personal finance highlighted this emerging theme. One reader wrote in asking retirement contributor Robert Powell whether or not a reverse mortgage was a good idea in lieu of converting their IRA and Roth IRA.
Amongst the numerous considerations was the taxes that the couple would pay. Powell also suggested that the couple could consider using a reverse mortgage for investment protection, namely from the convenient line of credit it offers.
"As for the reverse mortgage, some experts suggest applying for a reverse mortgage with a line of credit as soon as possible," Powell wrote. "Why might you do this? Having a reverse mortgage with line of credit in place gives you the option of taking money out of your house instead of your IRAs when markets are down."
Powell was certain to offer some facts, in particular a citation from the Wade Pfau of The American College of Financial Services, which outlines six different ways home equity can factor into a retirement income strategy by using the benefits of a reverse mortgage.
Powell then cited a study published this year from Wade Pfau of The American College of Financial Services, which describes in detail six strategies for incorporating home equity into a retirement income plan through the use of a reverse mortgage.
Powell was certain to make it apparent that retirees should always consult with an experienced financial advisor before making any sort of large move such as taking out a reverse mortgage.
He concluded: "What Pfau's study did conclude without equivocation was this: 'A key theme is that there is great value for (people) to open a reverse mortgage line of credit at the earliest possible age,'" Powell wrote.