Among a series of major decisions anyone must make in the decade leading up to retirement is what to do about any outstanding debt that could threaten the stability of fixed income and investment sources. One potential path through the process of navigating the debt may be a reverse mortgage, according to a new column published in the online edition of Entrepreneur magazine.
The column reads, “Debt and retirement are not a desirable combination.” This is true even for low-interest debt such as [traditional] Mortgage. And when you have a fixed income, you definitely don’t want to have debt with varying rates of interest (think adjustable rate mortgage). “
In general, not everyone’s tolerance for debt in terms of how it interacts with seniors’ current assets will be the same. However, exploring all available options to mitigate its impact on retirement stability is critical, and one such tool that can help with this is a reverse mortgage, the column describes.
This tool may be a form of debt, but – for the right borrower – it can actually enhance retirement stability due to the repayment structure.
The column reads “There may be instances where debt is acceptable in retirement.” “For example, a reverse mortgage may be a good decision depending on your situation. But, as a general rule, debt reduction should be a strong priority for the final years before retirement.”
In addition to the potential implementation of a reverse mortgage, there are seven other critical decisions to make in the decade prior to retirement, according to the column. These include making a general plan for your life; Determine your exact needs based on assets and living situation; Refocus your assets and income on yourself and/or your spouse in the event of child support; And avoid major life changes that can be especially devastating in the decade prior to retirement.
Others include spending time finding ways and boosting savings; rein in any “adventurism” in terms of your investment portfolio with the goal of isolating your investments from volatility; And make contingency plans in case something unexpected and financially confusing happens. Important can be the use of ‘reserve assets’, which has recently been used to describe reverse mortgages due to the market volatility caused by the pandemic.
The column reads “Be sure to build buffers that help you easily work around these changes.”
“A once-tested rule of thumb is to have six months of living expenses in liquid assets (some now recommend a year). While that is inconvenient, make sure your estate plan covers unforeseen situations such as a sudden death to you or your spouse.”
The column says that the more time it takes to plan in advance, the more a person will be able to fully enjoy retirement by reducing unnecessary stressors that may arise whenever possible. Including a reverse mortgage in the list of potential solutions can be an illustration of the product’s general acceptance as a retirement planning tool. However, recent data also indicates that older adults remain reticent about taking advantage of their home ownership.
Read the column at Entrepreneur.