When it comes to planning for your retirement, you are most likely to fall into one of two camps.
Either it is so far away that it is something you have no intention of thinking about right now, or you are already retired and planning is no longer an option.
Fortunately, if you fall into camp one, it is not too late to prevent yourself from joining camp two if you are ready to start preparing now.
Some suggest that this is a golden age to be a retiree. After all, today’s Americans live longer, retire earlier and have better health and fitness than ever before. However, that is only one side of the coin.
Social security payments are dwindling, pension funds are failing and the American Health Care Act that is set to replace Obamacare will put still more financial pressure on retirees.
The answer is in the equity
For many of us, there is a simple solution, yet it is one that we are almost afraid to talk about. Property values remain buoyant across the USA and most of those who are approaching retirement age are sitting on six figure sums when it comes to the equity in our homes. Many lenders are offering reverse mortgages – financial products based on equity release that are specifically aimed at retirees.
While there are plenty of advantages to the reverse mortgage option, there are certain conditions you must meet, meaning it is not an option for everyone. However, it is not the only way to release equity from your home. A 15 year conventional mortgage could still be a possibility later in life, and is a great way of consolidating other debts into one convenient payment at the lowest possible interest rate.
Or you could consider downsizing. As the kids leave home, do you really need all those bedrooms to keep clean and such a large garden to maintain?
Many of us have a reluctance to release the equity from our homes, for reasons that have nothing to do with financial management principles. There is an almost instinctive feeling that paying off the mortgage is one of those rites of passage we must complete to feel we have fully lived the American Dream.
We might also have a blinkered determination that our homes should be there for our children after we are gone as the key part of their inheritance. Thus, when we ask “how can I best finance my retirement?” – we actually answer the completely different question of “How can I leave as big a legacy as possible?”
Make no mistake, this can be the golden age for retirees that so many people talk about, but the increased complexity of today’s financial landscape means that it can only be yours with planning, thought and, most of all, objectivity.