When you retire it is more than likely you will be attempting to live on income that is as much as half of what you had while you were working. Even if you have a pension very few employers today offer a cost of living increase that comes anywhere near the actual increase in the cost of living-many companies don’t even offer increases to their retirees. This leaves those who are retired struggling to make ends meet as the cost of even basic necessities such as food, clothing, utilities, insurance, heat and gas go through the roof. This forces many people to continue working into their 70s and even 80s in order to keep a roof over their heads. Others are forced to sell their beloved homes and move in with their children because they can no longer afford the cost of living on their own.
While it may seem feasible for some to return to work if only part-time there is an important issue to remember-the money you make working is taxable and will have an effect on the amount of Social Security income that is taxable. In addition the money from a job is taxable as well. This is where a reverse mortgage is advantageous-the funds you withdraw from your reverse mortgage loan are not taxable! Whether you use the funds to supplement your monthly income, take a trip, pay for a child or grandchild to go to college or make home repairs the funds are still not taxable. You will pay interest on the funds but the interest you pay may indeed be less than you would pay in taxes if you were to obtain the same funds from a taxable source. Even the distributions from a 401K Plan are taxable when you make withdrawals.
Instead of returning to work at a time you would prefer to relax and enjoy your retirement years, you can withdraw funds from your reverse mortgage to supplement your retirement income. These funds are not classified as income and thus are not taxable. This makes withdrawals from a reverse mortgage a wise choice as to meet additional financial obligations or simply make your life easier. There are no rules that place restrictions on how you spend the money from your reverse mortgage, so you are free to use it to pay bills, make home improvements, take a vacation or any other purpose you feel is worthwhile.
One very important thing to keep in mind is not to withdraw more from your credit line than you need in order to assure you have the least amount of money to pay back when you sell your home or the home becomes part of your estate after your death. That doesn’t mean you shouldn’t use it to make purchases of luxury items but you don’t want to overdo it. Not only will this leave a huge burden on you or your family later but it creates the potential risk that the funds in your account will diminish before you are ready to sell your home or it becomes part of your estate. Use the funds from your reverse mortgage to enjoy your retirement but exercise some caution as well.
A thirteen-year veteran of the mortgage industry, Robert Griffin specializes in reverse mortgages and has helped over 3000 Americans find financial security with a reverse mortgage. The owner of Griffin Financial Mortgage LLC, based in Fort Worth, Texas, his memberships include the National Association of Mortgage Brokers (NAMB), the Mortgage Bankers Association (MBA), the National Reverse Mortgage Lenders Association (NMRLA) and the Better Business Bureau (BBB). Robert Griffin is also co-author of “62 Senior Moments.” If you would like more information, please call (866) 683-3690 or complete our online Reverse Mortgage Information
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