Need More Money in Retirement

The Budget and Benefits Check Worth Doing First

Before looking at any product, it helps to check what a household may already be entitled to. This step costs nothing and changes nothing that cannot be changed back.

Social Security timing. For someone who has not yet claimed, waiting to claim generally increases the monthly benefit. The Social Security Administration publishes the current figures at ssa.gov, and its staff can explain how the claiming age affects a specific record.

Benefits programs. Several programs exist for older adults with limited income, including Supplemental Security Income (SSI), Medicare Savings Programs that can help with Medicare costs, and the Low Income Home Energy Assistance Program (LIHEAP) for heating and cooling bills. Eligibility rules vary by program and by state. Benefits.gov is a federal starting point, and the Consumer Financial Protection Bureau points to benefitscheckup.org for state and local programs that help with utilities, fuel and home repairs.

Property tax relief. The CFPB notes that many localities have programs to help with property taxes, and it suggests checking with the county or town tax office. Depending on where the home is, relief may take the form of an exemption, a deferral (putting off payment until later) or a freeze. The local county assessor or tax collector can say what applies.

An expense review. Going through recurring bills, subscriptions and insurance policies is a low-barrier first step. Sometimes a policy can be repriced or a service dropped.

Options That Do Not Involve the Home

If the budget check still leaves a gap, some options leave the house out entirely. Each one trades something.

Part-time or flexible work. Some retirees return to work a few hours a week. The trade is time and energy for income now. For someone who claims Social Security before full retirement age, an earnings test can reduce benefits while they work; the Social Security Administration publishes the current limits at ssa.gov.

Withdrawals from savings. A withdrawal rate is simply how fast savings are drawn down each year. A higher rate brings more cash now and leaves less for later. The order in which accounts are used can also matter: taxable accounts, tax-deferred accounts such as a traditional IRA, and tax-free accounts such as a Roth IRA are taxed differently. A tax professional can explain how that order affects a particular household.

Annuities. An annuity is a contract with an insurance company that turns a lump sum into a stream of payments. An immediate annuity starts paying soon after purchase; a deferred annuity starts later. A fixed annuity pays set amounts; a variable annuity's payments depend on investments. Terms, fees and surrender charges vary widely from contract to contract.

Help from family. Some families share costs, help with a bill, or make a private loan. That can work well. It also brings its own conversations about fairness, expectations and what happens later, and those conversations are easier when they are open.

Your Home as a Resource: Five Ways to Use Equity

For a homeowner with equity, the house may be the largest resource there is. Equity, according to the CFPB, is the amount the property is worth today minus what is owed on it. There are five main ways to use it. Each is described in more detail in the guide to turning home equity into cash.

Selling or downsizing. The owner sells, uses the proceeds, and moves somewhere less expensive. This can lower costs for good. The trades are disruption, moving costs and leaving a familiar neighborhood.

A home equity loan. This is a lump-sum loan secured by the home and repaid in fixed monthly installments. The trade is a new monthly payment.

A home equity line of credit (HELOC). This is a revolving credit line secured by the home, drawn as needed up to a limit. It usually carries a variable rate and requires ongoing repayment, and the lender can reduce or freeze the line. The CFPB notes that these loans depend on income and credit.

A cash-out refinance. The existing mortgage is replaced with a larger one, and the owner takes the difference in cash. The trade is a new loan term and a continued or larger monthly payment.

A reverse mortgage. The federally insured version is the Home Equity Conversion Mortgage (HECM), governed by 12 U.S.C. § 1715z-20 and HUD regulations. The CFPB describes it as a home loan for homeowners 62 and older with no monthly mortgage payments. Interest and fees are added to the balance each month, so the amount owed grows over time. The borrower must keep living in the home as a principal residence, pay property taxes and homeowners insurance, and keep the house in good condition. The loan comes due when the last borrower, co-borrower or eligible spouse dies, sells or moves out. The CFPB states it plainly: "A reverse mortgage loan is not free money."

The statute defers repayment while the homeowner remains in the home. In its words, the mortgage must provide "that the homeowner's obligation to satisfy the loan obligation is deferred until the homeowner's death, the sale of the home, or the occurrence of other events specified in regulations of the Secretary." The CFPB also warns that a borrower could face foreclosure if they run out of money for property taxes, insurance or other housing costs.

Before a HECM can be made, the borrower must receive counseling from an independent third party. HUD's HECM program page lists a counselor roster and the number (800) 569-4287. Federal rules also limit the origination fee, and the lender discloses it. The details of how a reverse mortgage works are worth reading slowly.

Which Option Actually Fits Your Household?

No single option suits every household. A few honest questions can narrow things down:

• How long is the plan to stay in this home?
• Are there heirs who hope to inherit it?
• Could a new monthly payment be handled comfortably, now and in ten years?
• Would a lump sum, a line of credit, or a stream of payments fit the need best?
• Is the need short term, such as one repair, or ongoing?

That last question matters. The CFPB cautions that if a health issue or another event may cause a move soon, a reverse mortgage is an expensive way to cover a short-term cash need. For someone who feels house rich, cash poor, the answers to these questions can point in very different directions.

Different professionals handle different parts of the picture:

• A fee-only financial planner looks at overall income, savings and spending.
• A tax professional can explain withdrawal order and the tax side of any choice.
• A HUD-approved housing counselor is required before a HECM. The statute requires the counselor to discuss options other than a HECM, "including other housing, social service, health, and financial options."
• An attorney can review documents and explain how a loan affects a spouse or an estate.

Advertising for reverse mortgages and other home equity products can oversell the benefits or play down the obligations. The FTC notes that nobody has to buy other financial products, such as an annuity, to get a reverse mortgage. The full loan disclosures, not the ad, show what a loan costs and what it requires.

What to Do Next

Putting it on paper is often the most useful first step. A simple list of monthly income and monthly expenses shows the size of the gap and where it comes from. It is something to bring to any professional.

From there, a few steps cost little or nothing:

• Check for benefits. Benefits.gov and the CFPB's resources at consumerfinance.gov are starting points for programs a household may not have claimed.
• Call the county tax office. It can say what property tax relief exists for older homeowners locally.
• Talk with a HUD-approved housing counselor. Counseling is a resource for anyone weighing a home equity option, including a reverse mortgage. The FTC notes that agencies usually charge a fee for HECM counseling, that it can be paid from the loan, and that no one can be turned away for being unable to pay.
• Meet with a fee-only financial planner for an overall picture.

Golden Roof Equity publishes plain-language guidance on each option named here, from money out of your house without selling to the basics of a reverse mortgage. Personal guidance about a specific household comes from a licensed professional or a HUD-approved counselor who can see the whole situation.