Be Like Debbie!

How a Reverse Mortgage Helped Debbie

Learn how a Reverse Mortgage Helped Debbie Preserve her Retirement. Debbie just turned 65 when she made the decision to find out about reverse mortgages. She had lost her husband to cancer two years earlier. She had no family left and was an only child. She had never had children and was closest to her former in-laws, but consequently had no reason to be concerned about creating a legacy estate to leave behind. The house she owned was worth $450,000 and she owed $210,000. Her payment was just over $2000/month, of which $400/month was tax and insurance.

She was still working as a computer programmer for a healthcare establishment, taking home almost $3250/month after deductions. Her husband’s death had left her with $200,000 in additional liquid assets. Her 401K was worth approximately $145,000 and she had the option of applying for Social Security with a benefit payment of $1240 per month.

She sat down with her financial planner and came up with the following solution: She chose to do a reverse mortgage with a small line of credit of $23,000. That meant the $2000 per month house payment went away immediately. She liked her job and thought she could count on working there another 5 years. Since she only needed $400 per month to set aside for taxes and insurance now, she could maximize the catch up allowance on her 401K. That would conservatively allow the 401K balance to hit $300,000, by the time she retired. Meanwhile, at an assumed 5% average return, the $200,000 her husband left should grow to just over $268,000. By postponing Social Security until age 70, her benefit would go up to $1886 per month as well. Lastly by age 75, the small line of credit from the reverse should likewise have grown to approximately $38,000. She planned on using this only in case of emergency and to preserve her retirement nest eggs. Smart! Be like Debbie!