Ways to Ease the Pressure of a Cash Crunch
The New York Times, October 14th, 2009
MANY retirees are in a cash crunch — with a lower income stream from their investment portfolios, personal expenses that are higher than expected, or both.
While
most assets can be used to generate liquidity, deciding what to do
requires careful deliberation; there are many pitfalls. Here are the
most commonly used approaches for people who find themselves coming up
short during retirement, and an analysis of their pros and cons.
CASH FROM YOUR HOME Mortgage rates are so low that many financial planners
say the best way to raise money is to take out a conventional mortgage
or a home equity line. But reverse mortgages, which allow homeowners
who are at least 62 to borrow against the equity in their homes and
receive regular monthly payments, are often seen as a last resort. Some
financial planners even advise retirees to sell their investment
portfolios or cash in their life insurance policies before taking out a reverse mortgage.
Unlike
traditional mortgages or home equity lines, a reverse mortgage requires
no payments until the borrowers die or no longer use the home as their
primary residence. Then the mortgage must be paid in full. Closing
costs, fees and interest rates are also generally high, reducing the
amount of money that borrowers can leave to their heirs. Yet if
retirees have exhausted other options, a reverse mortgage may be worth
considering, especially for those with high medical expenses, said
Alicia H. Munnell, the director of the
Center for Retirement Research
at Boston College. “If you’re not planning on leaving your house to a
child, then this is an option, rather than depriving yourself during
your lifetime,” she said.
Read more of this article.About Reverse Mortgages: Learn all about reverse mortgages at NewRetirement.com
Professional Financial Advisors: Find out what a financial advisor can do for you at NewRetirement.com.