A rule of thumb says retirees need 70 percent of their pre-retirement income to maintain their normal lifestyle. Some reasons for this include having fewer people to support, being in a lower tax bracket, having your mortgage paid off, and not having to save for retirement.
However, a few expenses will actually increase during retirement like the price of hobbies, travel, and healthcare. These expenses can sometimes put a strain on your finances if you’re not properly prepared.
So, where will this retirement income come from? Hopefully you’ve set up a retirement fund of some sort, not just the money stashed in your piggy bank or bookcase. Many individuals have set up a 401K, pension, IRA, or other investments for this purpose. Social security is another source but should not be too heavily relied on. Social security benefits average out to equal roughly 40 percent of your pre-retirement income. This still leaves another ~30 percent that needs to be covered by your other retirement investments.
Another option that can greatly increase your funds during retirement is a reverse mortgage. This type of mortgage allows you to use the equity that you have built up on your home, while still staying in your home for as long as you live. This equity can be paid back to you in the form of monthly installments, a lump sum, a line of credit, or any combination of the three. The best part is that you’ll never have to make another mortgage payment for as long as you live.
When performing your research, you’ll want to be sure to speak with a reserve mortgage counselor to ensure that is the best financial decision for you and your family.
About the Author: Annie Doisy is a Reverse Mortgage Specialist. She has been working in the mortgage industry for over 5 years, and regularly keeps a blog on topics ranging from retirement planning to senior benefits.