The New Savage Number: How Much Money Do You Really Need to Retire?

Chapter 14. HOW TO TURN YOUR HOME INTO YOUR PENSION

The credit crunch and real estate crisis have destroyed the myth that your home is an inexhaustible piggy bank. Suddenly there's a new awareness that home prices may actually decline for an extended period of time. That's a problem that may hit hardest for those in retirement, who had counted on selling their homes and downsizing to raise cash for their retirement years. The family home might represent a good portion of your retirement fund.

Even though current market values may have declined, strategies such as reverse mortgages, installment sales, and private annuity trusts can create a regular stream of income to support your lifestyle. You invested in your home over the years. Now it can pay you back. Or a reverse mortgage might be the answer to purchasing a new smaller home, freeing you from future mortgage payments.

Reverse Mortgages

For many seniors, a reverse mortgage is the answer to a prayer. It allows you to withdraw money from your home equity, tax free, with no requirement that it be repaid until you die or move out of the home. There is no way you can be forced out of your home as long as you keep paying your property taxes, insurance, and maintain the property. That promise is the key to making a reverse mortgage acceptable to seniors who worry about tapping into their home equity.

There are now two uses for a reverse mortgage. The first is for people who want to remain in their home for the foreseeable future. For them, ...