Yahoo Finance: Reverse Mortgage Can Help Generate Steady Cash Flow in Retirement

A reverse mortgage can be a viable option for retirees to explore if they are concerned about generating sufficient cash flow to meet their needs and to support their lifestyle in retirement, and should be considered alongside other options related to Social Security benefits. This is according to a new informational video posted to Yahoo Finance.

“If retirement is on your mind, you’re probably wondering how to generate a steady stream of income once that time rolls around,” says video presenter Natasha Abellard. “Because we all know that just because you stop working, it doesn’t mean your expenses will go away. Nerdwallet suggests several ways to create a stream of income during your retirement years.”

The first recommendation revolves around a long-endorsed concept among retirement planning professionals: delaying the taking of Social Security benefit payments until later life.

“You should maximize your checks by delaying the start of your payouts,” Abellard says. “While you can start benefiting from Social Security at age 62, waiting until 70 is a better move as this is when benefits max out.”

However, if Social Security even at a higher level does not cover living expenses, then an option like a reverse mortgage is worthy of consideration, she says.

“A reverse mortgage is a loan that transfers a portion of your home equity into a monthly check,” Abellard says. “And while it might be tempting to place your money into safe investments, like bonds, certificate of deposits, or savings, this is not the best long-term option. About half of your portfolio should be invested in stocks, which can produce more income over time. The balance also recommends systematic withdrawals from a well balanced portfolio, to help meet your income needs.”

Of course, a monthly check is only one such option available to a reverse mortgage borrower. Other disbursement options – including a fixed- or adjustable-rate, a lump-sum distribution, line of credit, term annuity, tenure annuity or another combination of payment options as well as a determination of the timing and pace at which the funds can be withdrawn – were not touched on in the video.

However, the presentation of a reverse mortgage option alongside such a commonly-cited retirement tactic like delaying Social Security benefit payments may be a welcome occurrence for those who try to tout the potential benefits of a reverse mortgage loan to senior borrowers.

Watch the video at Yahoo Finance.

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