According to a Fast Facts report from the Social Security Administration, nearly 9 out of 10 individuals age 65 and over receive social security benefits, and it is the primary source of income for the elderly. Retirees may not be able to continue to rely on receiving their full benefits from this program in the future, however, as the Social Security and Medicare Boards Trustees report that the combined trust funds could be depleted by 2034.
Where Will the Funds Come From to Finance Your Retirement?
In addition to concerns about the stability of Social Security benefits, interest rates are running close to 1% or less for basic savings accounts, and fewer companies offer traditional pension plans. There is also the constant risk and threat of the loss of value from direct investments in the stock market, as well as loss of investments in 401(k) plans that have account balances invested in stocks, bonds, mutual funds and other investment products.
This is why so many folks nearing retirement age are rightfully concerned about how they will be able to afford to stop working and still pay their bills in their advanced years.
Using Real Estate and Investment Properties to Fund Retirement
Due to so many financial uncertainties, many individuals are searching for other options to help them fund their retirements. One popular choice is to look for ways to invest in real estate to fund retirement plans and expenses. One of the most popular online searches in recent years has been how to generate retirement income using a reverse mortgage.
Reverse Mortgages Increase Cash Flow without Generating Income
The idea of creating retirement income directly from the proceeds of a reverse mortgage is a bit of myth. Rather than directly generating income, a reverse mortgage allows homeowners age 62 and over to be able to tap into the equity that they have accrued in their home.
This type of mortgage can provide the owner a lump sum that can be accessed through a credit line, or, that can be paid to the owner in monthly installment payments while allowing the owner to continue to live in the home. When homeowners with a reverse mortgage receive a monthly payment, they do have an increase in their monthly cash flow, but this money is not actual income.
A reverse mortgage is still a loan, and the home will typically be sold to pay the loan once the homeowner passes or no longer lives in the house.
Homeowners that apply for and receive a home mortgage can use the funds for whatever they wish. They can use the money to supplement their sources of income, pay their bills, make home repairs, start a business, take a vacation, or even pay off medical bills or other debt.
Investment Property Can Increase Cash Flow and Generate Income
One choice that is growing in popularity is for homeowners to take the proceeds from their reverse mortgage to then buy a second property as an investment. Purchasing additional homes with the intention to rent them out and use them as investment properties is becoming increasingly common, especially when the home is located near popular vacation destinations and tourist attractions. Homeowners can choose to rent the entire property out, either as a long term, or short term lease, or, they may even choose to live in part of the home, as a live-in landlord, and rent out the rest.
While the prospect of financing your retirement can be a bit intimidating, reverse mortgages and other real estate investments can provide you with real options that allow you to relax and stop worrying, maintain your standard of living, and embrace your new found freedom when you retire.