Originally published at Forbes.
Now that we understand how reverse mortgages work, we can go into greater depth on the potential ways an HECM reverse mortgage can be used within a retirement income plan. For now, I want to focus on the big picture categories.
A reverse mortgage could be used:
- as a backup source for liquidity and spending,
- as an annuity alternative, or
- as a hedge to protect the value of one’s home.
The following table provides an organizational framework for thinking about potential uses. They are ordered from uses that spend available credit more quickly to those that may never tap the line of credit. The table groups the uses into four general categories of how reverse mortgages are often utilized: debt coordination for housing; portfolio coordination for retirement spending; a resource to fund retirement income strategy enhancements; and as insurance for various retirement contingencies.
I will go into greater detail on each category in later posts.
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