How Can You Leverage Retirement Accounts in a Down Market?
When the stock market is down, retirees can feel financially vulnerable. If you are in this situation, you may feel that you have no way to fix it….In fact, it may seem as though you have to sit back and wait for the market to recover. In the meantime, you still need to take your minimum distributions, along with any additional funds you need to get by each day.
With that in mind, there are some steps you can take to help you through this time. One amazing strategy, which is often over looked, is to leverage your retirement accounts through the use of your home equity. How? A reverse mortgage line of credit loan. I can almost hear your thoughts. “A reverse mortgage loan is just for poor people”, or “Reverse mortgage loans are scams”. I hear it all the time. However, I am here to tell you that both of those statements are absolutely false. Now, if you are open to this option, read on!
First, let’s look at how this loan works. The reverse mortgage loan provides borrowers with a portion of the value of their home. This money can be used for anything. The strategy I mentioned earlier is for those who are willing to leave these funds in a line of credit. So, no splurging on new cars. No shopping sprees. No exotic vacations. OK, you can do those things if you want! But you will need to have funds in the line of credit for this to work.
The reverse mortgage line of credit loan has a growth rate which is applied to the funds that remain in the line of credit. This means that, the longer you leave these funds in the line of credit, the more you will have access to when you need it. So, when do you need it? The strategy is to pull from the reverse mortgage loan funds when the market is down, rather than pulling from your 401K’s and other retirement accounts. Because the reverse mortgage loan funds are not taxable, you can pull less than you would if you pull from your taxable accounts.* That is just one of the benefits, though. Once the market returns to normal, you can pay back what you have pulled from the reverse mortgage loan line of credit using the aforementioned retirement accounts. Because the reverse mortgage loan is a home loan, you may also be able to take advantage of a tax write off for the interest portion.* At the same time, you do not have to sell off those precious retirement accounts while the market is down.
If you’d like to see an example of this strategy, using historical figures, please ask! You can email me at: [email protected]
*Please note that we are not financial planners or tax specialists. Therefore, we recommend that you get advice on this subject from one or both of these advisers.
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