In trying to shore up finances as a senior prepares to enter retirement, one option that can help a senior to avoid a financial crisis in the period preceding retirement can be a reverse mortgage. This is according to Mike Piershale, president of Piershale Financial Group in Barrington, Ill. in a new article at Kiplinger.
Taking immediate action on finances as someone prepares for retirement is essential, and includes pivotal first steps including the true recognition of a person’s financial situation, the establishment of a budget, and taking further steps, if necessary.
“If you’ve made cuts and your monthly income still isn’t enough, you’ll need to figure out a way to cut your fixed expenses and/or increase your income,” Piershale writes. “This could include anything from switching a newer car to an older one to “eliminate a payment to getting a night job at the local grocery store.”
In addition to tackling debt and potentially finding a way to bring in more cash, consideration of a reverse mortgage is also a viable option, particularly for someone who may not be able to relocate or delay taking Social Security benefit payments without some kind of other solution in place.
“[In those cases], you may want to investigate a reverse mortgage,” Piershale says. “You essentially get a loan from a lender, often in the form of a monthly payment during your retirement years, with your home as collateral. The loan doesn’t have to be paid back until you pass away or no longer live in your home.”
That’s not to say that a reverse mortgage doesn’t contain some risks or potentially some other attributes that may not be right for a particular senior, he advises.
“Reverse mortgages do have drawbacks, for example, requiring your heirs to sell your home, unless they can afford to pay off the loan,” Piershale writes. “So, while the pros and cons should be investigated before deciding, they can be another source of predictable retirement income.”
Remaining stagnant or doing nothing can also be a risk for some, Piershale says, since there are more active – albeit risky – methods that can help someone grow his or her savings. This is how a financial advisor can come into play if someone finds these kinds of strategies difficult to implement.
“As you get on track financially, it will be critical to continue sticking with your budget,” Piershale writes. “Failure to monitor expenses in the past may have contributed to your financial crisis today. If you have difficulty either implementing or sticking to a budget, you may benefit from working with a financial professional.”
Read the original story at Kiplinger.