Baby Boomers Retirement Solution

You do not lose your home to the government. You remain one hundred percent owner of your home. When you die, your children still get all of the equity in your home.

And it is not expensive.

In recent years, the government has made reverse mortgage loans very user-friendly and affordable. Now called a Home Equity Conversion Mortgage (HECM), it is a great tool to satisfy all the objectives we have covered.

A reverse mortgage will:

  • Secure your home
  • Allow you to maintain your financial self-sufficiency and your pre-retirement standard of living
  • Enable you to pass on wealth to your family
  • Make it possible to create a rainy day fund

Theory Behind The Solution

As a financial problem solver, I begin with the end in mind. What is the end goal?At the end of the process, will we end up where we want to be?

By design, retirement meets our financial needs and objectives by depleting the funds we have saved just for this season of life. I know it runs counter to the notion of always having abundant savings at hand, but think about it. We saved through all our employment years for retirement so that we can now deplete what we have saved. And, to complicate things, we hope to not outlive our retirement funds. After saving for so long, it is not easy to change our mindset from “saving” to “depleting,” but that is exactly the way retirement works.

Fundamentally, our retirement goal is very simple. At retirement, we want to begin using our savings to live on, while at the same time securing our home, ensuring that our income does not run out, remaining in control of our finances, enjoying life, and hopefully having something to leave our family.

That’s exactly what a reverse mortgage loan does. It secures your home while allowing you to use the equity to increase your spendable income.

Let me try to explain how this works and how easy it really is. I tell my clients to think of their assets and income as “buckets.” Each bucket is filled with money. I love the mental picture of these buckets because I can visualize a full bucket of money, a depleting bucket of money, and an empty bucket.

In my explanations, I narrow it down to three basic assets buckets: a saving bucket, a Social Security/pension bucket, and a home equity bucket. Although many retirees have several types of investments and sources of possible retirement income, I keep it as simple as possible since these are the three categories most assets fall under.


Retirement savings are your 401(k), your IRA, and other types of savings that are drawn on once retired. These funds are, for the most part, liquid. This means they can be converted into cash quickly with minimal impact to the value.

Each month you deduct steady income from these savings accounts. The negative aspect of drawing funds from qualified retirement savings, except for a ROTH IRA, is that these funds are taxable when you draw from them as income, reducing your spendable income. And furthermore, when you draw on the funds, the balance is being depleted. If you have other sources to draw from, it is my suggestion to withdraw as little as possible out of your savings account. Why? Keeping a higher balance will allow compound interest to work and build up the balance. If you keep depleting your savings, it can result in the retiree’s biggest retirement fear—once your savings are gone, they’re gone. My solution will reveal other sources so you can maintain your savings.

Pension or Social Security income

Your pension and Social Security income are fairly straightforward. They are regular payments made during a person’s retirement from their past employer or from Social Security. Once you start collecting, you get the same amount every month for life.

Home Equity

Equity is the difference between your home value and the amount you owe on the home. Equity continues to grow, or appreciate, regardless of how much is owed on the property. The concept of growth regardless of equity is one of the most valuable aspects of real property. The negative side of equity is that it is not liquid by nature. Equity is an asset that remains in your home. It’s locked, and you cannot use the equity without converting it to cash. You can convert it to cash by selling the home and paying off any loans, or you can convert it to cash by getting a new conventional home loan with a cash-out refinance or a home equity line. The problem with refinancing or getting a home equity line is you’re getting a bigger loan, and the higher loan will cause your payment to go up. And if you sell your home, you create another problem—finding a new place to live and paying all the extra costs of moving.

Three Asset Sources But Only Two Income Sources

While there are three assets sources—savings, Social Security, and home equity—only two of them, savings and monthly Social Security, will provide you with spendable income that you can draw from. You do not have access to your home equity without selling your home or refinancing it.

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  1. Excellent article. Written in a practical easy to understand style. It is a great read for anyone looking for answers about how they will be able to afford to retire!

  2. Thank you for all the tips to access resources that enable us to retire.

  3. reverse mortgage is not for everyone. first you make sure you can afford to pay all property tax and home insurance.

  4. I am a baby boomer and trying to figure out how to retire. The bottom line Steve Gulino points out is that a reverse mortgage will add $2,000 a month in money I can spend and I can stay in my house until I die, never make a house payment and my kids get the equity in the house when I pass. This is fantastic!

  5. what a great synopsis and will share this with others!

  6. Call me a naysayer, or call me someone with a true life experience with reverse mortgages. My inlaws had a reverse mortgage. The husband died about 4 months into the mortgage The wife (my mother-in-law) continued to live in the home, payment free, for another 4 years. Then, dementia set in, and she moved in with us. We attempted to sell her home (located 200 miles away), but could not since the housing market had crashed. She was upside down on the reverse mortgage (and the bank refused a short sale from qualified buyers).

    My sister in law asked to move into the home and live there. Nope, not allowed.

    We then tried to rent out the house until the market corrected. Nope, also against reverse mortgage rules. With no other recourse, we notified the bank that Mom was walking away and that the bank should foreclose. Then began the 2 year ordeal of the bank “stalking” my wife and the other children demanding payment, or help selling the house. Although none of their names were on the mortgage. The stress on my wife was incredible. We asked not to be called. We talked to supervisors. Nothing seemed to work. Finally, after 2 years, they stopped calling.

    By the way, the bank still owns the house. It sits vacant and is decaying away, and has never been put on the market for sale. It has been 5 years since Mom moved out.

    So remember, reverse mortgages are good ONLY if you live there. When you move out, you must sell the home.

  7. So much not said in this article. We purchased our recent home in 2012. It was a foreclosure in a Florida retirement community. The previous owner’s husband had died and she took out a reverse mortgage. I felt terrible that we were buying a house that an 80 year old lost. After more research, I discovered the reason so many people lose their homes. Remember that it is said your home value will still increase. But in a down market, your value will decrease. Not only is there mortgage insurance to pay for, the interest on this mortgage loan starts to accrue immediately. Imagine having a mortgage loan and never paying the interest for 10-20 years. Now imagine all that interest and a lower value. If you wanted to sell the house you would not be able to cover the cost of the interest added on to the loan.No one should have a mortgage in retirement unless they have the savings to pay it off. If you can’t afford to stay in your home a reverse mortgage is not going to solve your problem. Because of your bad luck or poor planning, you will be in a better position to live in a rental, smaller home or with family. In other words, get your ducks in a row before you retire.

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