Baby Boomers Retirement Solution

Spendable Income by Receiving Income From All Three Sources

The beauty of a reverse mortgage is that you convert your third source, your home equity, into additional monthly spendable income. In most cases, you can increase your spendable income between $1,000 to $2,000 a month.

How does a reverse mortgage increase spendable income and savings?

Depending on your age and the value of your home, a reverse mortgage will give you around 50 percent of your home value. If your home value is $600,000, you can get a reverse mortgage for approximately $300,000.

With the funds from the reverse mortgage, your existing home loan is paid off. Not having a mortgage payment will increase your spendable income by whatever your mortgage payment was. If your mortgage payment is $1,800 and you get a reverse mortgage, you will increase your spendable income by $1,800 because you no longer have to make that payment.

Depending on the amount you qualify for on a reverse mortgage, you can receive funds in addition to paying off your existing home loan. These additional funds can come to you in a cash lump sum, a credit line, or monthly payments made to you. These additional funds can be used for anything you want—home repairs, travel, college, savings, or even to spoil your grandchildren.

Keep in mind that with a reverse mortgage, you never make a monthly payment on the funds you receive regardless of whether funds are used to pay off the existing loan or you get the funds in a lump payment, a credit line, or monthly payments.

Depletion of Assets, Buckets of Money, and Death

Let’s go back to my bucket illustrations. We know that retirement is when we shift from building our assets to depleting our assets to live on. But what bucket do you pull money from first? And what are the pros and cons of pulling from each of the different buckets?

When a person dies, 99 percent of the time, his or her assets are liquidated by their family, combined into cash, and distributed per the instructions in their will or trust.

To analyze this a little more closely, let me ask you the same questions that I ask my clients.

“When you die, if all of your asset buckets, including your home, are liquidated, converted to cash, put into one estate bucket, and then distributed, does it really make a difference if you depleted your savings bucket or your home equity bucket while alive?”

Almost all my clients agree that it doesn’t matter in the long run which bucket is depleted while they are alive as long as the other objectives are not compromised. Specifically, they want a secured home to live in and income to live on and not run out.

Retirement Security

The other question I ask is: “What makes you feel secure?”

The number one reply is, “Knowing my money will not run out before I die.” And the number two reply is: “That I will have a place to live.”

Logically speaking, home equity or a paid-off house equals security. But really the security we want is not the equity in the home but what that equity yields—no mortgage payment and a place to live.

Old school retirement planning said our equity is more important than our savings. Today I disagree with that statement. If you have your home secured, I would rather see you secure your savings before you secure your home equity.

Leaving an Inheritance

The objective of passing on wealth has always been a traditional core retirement objective. Most of us would like to leave something to our children and grandchildren. With a reverse mortgage, you can still pass on wealth through the equity in your home.

Remember, you remain one hundred percent owner of your home when you get a reverse mortgage. And your home continues to appreciate in value. This appreciation retains much of your equity, even after the depletion with a reverse mortgage.


With every idea, especially financial ideas come the “naysayers”—all the people who try and convince you not to move forward in an area that is outside their comfort zone.

If you Google “reverse mortgage loans,” you will find as many naysayers as there are believers. The naysayers have three similar oppositions to reverse mortgage loans:

  • When you get a reverse mortgage loan, you are increasing debt.
  • Reverse mortgage loans are too costly.
  • Your heirs might not get your house.

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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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