Why a Reverse Mortgage Can Be an “Unexpected” Source of Retirement Cash Flow


Relying on a single source of cash in retirement, when an older person is very likely to rely on a fixed income, is generally a pitfall for retirees to avoid. This is especially true in times of economic shock, as many are currently experiencing due to the ongoing COVID-19 coronavirus pandemic. For this reason, finding an “unexpected” source of cash in retirement could be beneficial in diversifying the sources of cash to which a retiree has access, and for many people, such a source may be a reverse mortgage.

That’s according to The Motley Fool columnist Selena Maranjian, in an article that recommends finding as many alternative and attractive sources of money as possible in retirement.

“It’s worth creating multiple sources of income for yourself in retirement, as one may grow over time while another shrinks,” writes Maranjian. “For example, you could generate the money you need through a part-time job during your first few years of retirement, giving it up at some point.”

Of the five potential sources highlighted in the column, one is a reverse mortgage, allowing a borrower to tap into the equity in their home.

“Another way for your home to provide unexpected retirement income is with a reverse mortgage, where you borrow money (which you can receive in the form of monthly income) – using your home as collateral,” she writes, “As an added bonus, the payments you receive are often tax exempt.”

There are certain intricacies specific to a reverse mortgage that a senior should consider before taking one, and being aware of both the downsides and the potential benefits will go a long way in finding a potentially alternative source of cash flow. cash flow that is both sustainable and that can have a positive impact on the financial situation of an elderly person.

“A reverse mortgage usually doesn’t have to be paid off until you live in your home, such as when you die or move into a retirement home or care facility,” she writes. “At that time, it was often paid by selling the house. For some, this is a big inconvenience, because it is difficult or even impossible to leave the domicile to the heirs. For others, the disadvantages are worth it. Educate yourself on reverse mortgages, if you’re intrigued, and weigh the pros and cons.

Other potential sources of alternative sources of cash flow include dividend-paying stocks; a health savings account (CSH); use your accommodation by renting out part of its space; or even a part-time job to make ends meet.

Read The Motley Fool review.

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