The old notion that reverse mortgage should be the last resort when you need money seems no longer true today. Below are four ways reverse mortgages can improve your retirement income plan.

Coordinate your expenses with your portfolio

When you are retiring, one of the biggest risks is enduring a period of negative stock market returns in the early years of retirement while making withdrawals from the investment portfolios. When you are retiring, you can be forced to sell investments at inopportune times since you need to use the portfolio to fund living expenses. However, a reverse mortgage can help to save for retirement as a reverse mortgage can help you to mitigate this risk because they have a feature called standby line of credit. Factors like the size of your mortgage, interest rates and your age at the time of loan origination are on what your line of credit depends upon. To protect against adverse portfolio returns early in the retirement, you can use this line of credit as a buffer. You can coordinate your reverse mortgage based on what the market environment dictates and spend between your portfolio.

Bridge income for delaying Social Security benefits

Delay claiming Social Security benefits for as long as possible up to the age of 70 is what many financial planners recommend. If one claims the Social Security benefits as early as age 62, it will leave them a potential eight-year window without having a stable source of non-portfolio income. Setting up a reverse mortgage to save for retirement with a term payout that lasts eight years is an idea one can consider in this particular scenario. It can act as a bridge income to replace all or a portion of the income Social Security would have provided.

Contingency fund for the unexpected expenditure

You may run into unexpected expenses in your retirement. Your health may take a turn for the worse or a dear family member might need financial support or a sickness or an injury might require long-term care, there are endless possibilities. The reverse mortgage is here to save for retirement and these situations. Having access to reverse mortgage line of credit could make a tremendous difference in such instances. A reverse mortgage is typically more suited to pay for in-home care than nursing home care in regards to long-term care costs. This can happen because if you are in a nursing home for more than a year, you might not be allowed to keep a reverse mortgage open.

Funding to pay taxes for Roth IRA conversions

Reverse mortgages can help the ones who are retiring to roll over their traditional IRAs or 401(k)s to Roth IRAs. To create a tax-free income source for the future, in this process you pay the taxes upfront. 70 and a half is the age when IRS required minimum distribution begin. Roth IRA can also help the people who have retired but are not 70 and a half years old yet. By taking systematic distributions from the traditional IRA, paying the taxes and then converting the proceeds into a Roth IRA. You can then spread out the tax consequences and possibly save significant taxes in the long run.