The HECM Saver and retirement planning

The HECM Saver is a relatively new version of the reverse mortgage. Its value is to help with financial planning and its greatest benefit is reduced closing costs. The Saver does not have the upfront mortgage insurance premium and therefore is comparable with closing costs found on traditional mortgages.

Here are some thoughts on how the HECM Saver can be used as a financial and retirement planning tool.

Delaying taking social security benefits

Social Security is, for many seniors, a major portion of their retirement income. The question of when to begin taking this benefit is the one that perplexes. Social Security options start at age 62 with the promise of higher premiums at 67 or 70. It is estimated that 70% of Americans take their Social Security payments too early*. This can end up having a sustainable impact on the senior, their spouse and sometimes even their dependents.

With a reverse mortgage, seniors can utilize the Credit Line option and supplement their income from years 62 to 67 or 70 and obtain maximum Social Security benefits. Once the benefits kick in, they can stop utilizing the credit line and enjoy the higher monthly income from Social Security.

A hedge against market volatility

I was speaking with a client the other day who mentioned that she is drawing 10% on her retirement fund, largely because she has lost a substantial amount in the market over the past few years. Most planners consider a 4% draw as the safest level to not risk running out of money.

When the market fluctuates, it is a real problem for seniors. They do not have the luxury of sitting it out and waiting for the market to return. If they are forced to take money out when the market is down, those are funds that can never be recovered by the market rising again.

Here again, the use of the HECM Saver line of credit can be effective. Instead of continuing to draw the same amount of money monthly from your 401K or IRA, draw a monthly amount from the line of credit and wait for the market to rise again. Once your accounts have returned to their previous amounts, you can suspend your use of the Line of Credit and continue to draw on your retirement fund at the proper percentage levels.

These are only two of the ideas that senior homeowners can utilize in their retirement planning. The reverse mortgage offers a world of opportunities.

One caveat: it is essential that, when exploring reverse mortgage options, you speak with a reverse mortgage professional who fully understands the complexities of the programs, how they would work in your specific scenario, and who can also make the details understandable to you. Having earned extensive experience in the Reverse Mortgage industry over the years, I’ve seen how important it is for seniors and financial professionals to have such a resource available to them—and how devastating it can be when they do not.

I would be happy to speak with any senior or financial planner who has questions or needs a scenario run to help them see how a reverse mortgage may be the right product to delay Social Security benefits or as a hedge against market volatility

*MetLife: The Right Time to Begin Social Security Benefits