Cash flow challenges in retirement

One of the biggest challenges that many retirees face is not having sufficient cash flow to fund their living expenses. Many people spend their careers saving for retirement, but when that time comes, they realize that the savings they worked so hard for might not be sufficient. Having a plan in place is vital to ensure that you can meet your monthly expenses, year after year. A plan will also provide you with the security of knowing you can potentially enjoy your retirement stress-free. Rest assured, there could be a number of options available to ensure your cash flow needs will be met.

What factors are putting pressure on cash flow?

As we get older, expenses can add up quickly. General monthly bills, home repairs, and healthcare costs can be quite costly. Not to mention the fact that retirement should be a time to enjoy life, travel, help our loved ones, and do all the things that we have worked our entire careers to experience.

Why is cash flow an issue for retirees?

While we’re working, we’re in the “accumulation phase” of our financial lifecycle. We’re earning an income, spending some of it, and putting some away for the future. Once we retire, we begin the “decumulation phase”, where we begin to spend some of that money we put away. If we didn’t save enough, or if we had to stop working before, we planned to, we might not have enough of a nest egg to maintain the standard of living we became accustomed to during our working years

Part-Time Work

More and more seniors could be looking to part-time and non-traditional jobs to support their cash flow in retirement. Starting a small business, working from home, or offering freelance services can provide a great source of income. Many find pleasure in staying active and providing their knowledge and services to the community. These types of jobs will allow you to make your own hours and be your own boss, allowing for more freedom than could be found with regular employment.

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Annuities

Moving some savings to an Annuity is a retirement strategy many seniors look to. Annuities pay a fixed monthly amount, usually over five to ten-year terms. Annuities can provide the security of knowing exactly how much your investment will pay over the chosen period. This guaranteed monthly income can offer a great deal of comfort to retirees who are trying to calculate a precise monthly budget. Before purchasing an annuity, talk to your financial advisor to ensure you’re aware of all the fees and other important terms and conditions.

HELOC

A home equity line of credit may be an option for some retirees. A HELOC works as a revolving loan that is secured against the equity in your home, and you can borrow from it and then pay it back as many times as you wish, similar to a credit card. While interest rates on this type of loan are generally lower than other bank loans and lines of credit, there are stringent qualifying criteria associated with HELOCs . Credit scores are checked, and income sources and debt-to-income ratios are considered. Because of this fact, many retirees who don’t have a regular income source may not be eligible.

Reverse Mortgages

If you own your own home and are over the age of 55(age requirement can vary depending on state and products), you may be eligible for something called a reverse mortgage. This type of mortgage is borrowed against the equity that you have built up in your home. Most reverse mortgage lenders allow for a maximum borrowing amount of up to 55% of the total value of your home (depending on qualifications), and these funds can be used to pay for anything that you wish.

One of the benefits of a reverse mortgage is that there are very few restrictions to qualifying. You don’t need a great credit score or hefty income to be eligible. While the interest rate for this type of loan can be slightly higher than a HELOC or traditional mortgage, no monthly payments need to be made (obviously you need to pay property tax and insurance). The interest is simply added back onto the borrowed amount, and the loan only needs to be repaid when you decide to move, or when you (or eligible co-borrower or non-borrower spouse) pass away.

Many 55 years or older (age requirements can vary depending on state and products) are opting for a reverse mortgage to help supplement their retirement income. The ease of being accepted, combined with the amount of money they can unlock from their home, make it a SMART CHOICE for many.

There could be a number of options available to ensure you could have sufficient resources to maintain your standard of living in retirement without stress and worry. Retirement is meant to be the time in one’s life where you can kick back and relax after years of hard work. Finding the cash flow solution that’s right for you will allow for this.

Could a reverse mortgage be the right solution for you or your loved one to fund in-home care? Click here and I will be delighted to help you determine whether this option could work for you.