A reverse mortgage is one possible option for a person aged 62 or older who has experienced a job loss as a result of the COVID-19 coronavirus pandemic, but the viability of the option is highly dependent on the individual situation of the senior in question. This is according to Liz Weston, a certified financial planner, expert and syndicated finance columnist in a new column at the Los Angeles Times.
Following up on a previous column offering advice to a senior who lost their job as a tour guide because of the pandemic, a reader related surprise that Weston did not name a reverse mortgage as a potential solution for that senior, who considered bringing on a roommate to create additional cash flow on a family home owned by that reader and a sibling for 65 years. When asked if she didn’t recommend a reverse mortgage to that reader because she thinks reverse mortgages are “a bad idea,” she indicated that was not representative of her thoughts.
“[A reverse mortgage is] not necessarily [a bad idea],” Weston writes. “The person in question owned the home with a sibling, and the sibling did not live in the home, which could complicate the process of getting a reverse mortgage.”
While not necessarily the “go-to” option in that scenario from her perspective, Weston does acknowledge that a reverse mortgage on that home — providing that the equity is sufficient — could potentially help alleviate some of the financial stress that the pandemic has placed on that individual looking for additional options.
“If there was substantial equity in the home, however, a reverse mortgage could pay off the existing mortgage and might be worth the effort,” she says. “One way to investigate this option is to talk to a HUD-approved housing counseling agency.”
On the broader issue of retirement, Weston also describes the benefits inherent in delaying social security payments beyond the initial age of eligibility for a reader who started taking her own benefits at 62, and whose husband plans to retire when he turns 69 next year..
“By waiting to start benefits, your husband gets delayed retirement credits equal to 8% for each year he has waited past his full retirement age,” Weston says. “Spousal benefits don’t qualify to share those credits, but survivor benefits do. When one of you dies, the smaller of the two checks you receive as a couple goes away and the survivor receives the larger of the two benefits. The survivor’s check will be larger because your husband waited to apply.”
This emphasizes why it’s important for a larger earner in a couple to delay taking social security benefits for as long as possible, Weston says.
“The higher earner’s benefit determines what the survivor will have to live on, often for years and sometimes for decades, after the first spouse dies,” she writes.