Study Shows Unique Feature of HECM Line of Credit with SS Planing Increases Your Retirement Income

Couple consideringThe SS Delay Case Study,  by Thomas C. B. Davison, MA, PhD, CFP®, NAPFA Registered Financial Adviser, shows how you can create an 85% increase in the odds of your money lasting for your entire lifetime. Maximizing your retirement income from Social Security (SS) has several options based on your particular situation. For example, if you are a couple there are ways to use the two SS benefits to a great advantage. For a single person there are less alternatives. However, in most cases the maximization plans involve some form of delaying SS benefits to let them gain in monthly payout value.

What if there was only a 5% chance that your money would last a lifetime?

building-blocks 2Delaying Social Security can significantly boost lifetime retirement income but creates a shortfall while waiting for the benefit to build. Below is a link to the case study that used a Home Equity Conversion Mortgage (HECM), commonly know as a Reverse Mortgage, with the unique Line of Credit option to partially replace early Social Security benefits and delay draws from retirement acclunts. You can see from this example how the synergy between the unique Line of Credit that a HECM loan offers works with a SS and Retirement Draw Delaying strategy to increase your retirement income. The study started with a typical retirement program where the client begins Social Security at age 62. The Monte Carlo analysis of that retirement plan showed a success rate was only 5% of succeeding for the full lifetime.

Probability of Not Outliving Your Money Jumped from 5% to 90%

Happy Couple 1The success rate jumped to 90% by delaying Social Security to age 70 and delaying retirement account draws in combination with using a HECM reverse mortgage to fill in the income gap. The study was designed to test if using a reverse mortgage could show a positive impact, and did! The unique features of the HECM Line of Credit that make it perfect for this use include that it is easy to qualify, that there are no required monthly payments to hamper your cash flow, draws are tax free, and that the amount of money you have access to in the line of credit grows over time.

Tax Free Feature Increases the Value

Besides adding to the retiree’s available resources with the growth benefit, an important aspect is that the reverse mortgage draws are tax-free. For a retiree in a high tax bracket this is a substantial benefit.

Review the Study for Yourself

SS Delay CoverGet a free copy of the SS Delay Case Study,  by Thomas C. B. Davison, MA, PhD, CFP®, NAPFA Registered Financial Adviser, and Partner Emeritus, Summit Financial Strategies, Inc. which shows how to increase the chance of your retirement income lasting your lifetime. The SS Delay Case Study describes in detail the methodology and demonstrates the affect of the reverse mortgage’s impact on your retirement income.

You can download a pdf file of the SS Delay Case Study and the PowerPoint slides by clicking here.