Should you incorporate home equity into your retirement-income plan?

A recent article on Marketwatch.com discusses a body of research showing that homeowners of all stripes should consider using a reverse mortgage in conjunction with their portfolio-withdrawal strategy.  According to the research, such loans, where you borrow from the equity in your home, can help you preserve your nest egg, leave a legacy, or both.

reverse mortgageThe story is based on in-depth research project by Wade Pfau, a professor of retirement income at the American College of Financial Services in Bryn Mawr, Penn, in which he compares and contrasts ways to incorporate home equity into a retirement income strategy along with the traditional portfolio.

According to Pfau,  “Strategic use of a reverse mortgage can improve retirement outcomes.”  Read the full story by Robert Powell on “How to use a reverse mortgage to protect your retirement income.”

A reverse mortgage is as a loan available to homeowners who are 62 years or older that allows them to convert part of the equity in their homes into cash,  monthly term or tenure payments or a line of credit.  The difference in a reverse mortgage vs a traditional mortgage is that instead of the borrower making monthly payments to a lender, the lender makes payments to the borrower.

A detailed guide on how a reverse mortgage works can be found on reversemortgage.org