“If only I had a little more cash.  I could delay my Social Security (SS) claim and get more money per month in the long run”.

I heard that the other day and, of course, said – “Is that real?”  The tidal wave of 1946- born baby boomers turn 65 this year, but are not qualify for the full amount of Social Security benefits until age 66.  Retirees who claim Social Security this year will get approximately 93% of their full monthly benefit.  If the retiree could delay their social security claim,  what would that mean?

Of course I am no Social Security expert, but DO live in the computer age.  And so I logged in to the Social Security website:  http://www.ssa.gov/estimator.   Here’s what a “typical” statement says:  “The amount you receive when your first start your benefits sets the base amount you will get for the rest of your life.”

Oooh – that raises another question:  How long is “the rest of my life”?  Again compliments of a web search, I found that Boomers turning 65 this year are expected to live until they are 85.2 years old - an average, of course;  some will live longer some, some less.  But it gave me a target for calculations.

So here’s what comes next.  The SS web software doesn’t allow me to query for just anyone, so I couldn’t model a 65 year old.  But here’s what I could find out – and of course, the amounts will vary depending on the retiree’s earnings during his lifetime. 
For my test case,  we’ll call “Joe”,  Joe was eliglble for full benefits at age 66. At 66, the monthy benefit would be $2,379.  If Joe needed to claim SS at age 62, then his monthly benefit would be $1,717.  But wait ! – if Joe could defer his claim until age 70, then his monthly benefit would be $3,167.   What a difference!  So, doing the math,  if Joe retired at 65, and if he could delay filing his social security claim until 70, he would receive a substantially greater monthly benefit, more than $700 per month.  

For that 5 year period,  Joe would need access to approximately $143k --- that’s no small change – replacing the income he would receive from SS if he began to receive his monthly benefit.  But what if he only wanted to defer his SS claim until he reached age 66.  Then he would need access to just $28k.

So where do you get $28k or even $143k?  One resource may be right under your roof --- Your home can be used to qualify for a Reverse Mortgage.

What is a Reverse Mortgage? --  a financial tool  -- a loan, insured by the US Government, that allows borrowers 62 and older to access a portion of the equity in their home, without selling, giving up title or making monthly payments.  The loan is repaid when the borrower no longer lives in the home.

The loan is called a “Home Equity Conversion Mortgage” (HECM) and comes in two “flavors” with variations in each. In October 2010, the government introduced the “HECM Saver”.  The loan has substantially lower closing costs with corresponding access to a little less equity.  The prior type of Reverse Mortgage still exists and is now called the “HECM Standard”.

Under both loan program, fixed interest rate start at just under 5% and adjustable rates start at above 2%.  Under the “Saver” loan, the government has nearly eliminated the 2% upfront government-mandated Mortgage Insurance Premium (MIP) which was capped at $12,510.  This represents a HUGE SAVINGS in closing costs for access to about 20% less equity than available under the Standard program.

Is this a good idea?  Truthfully, “it depends”.   One factor is your personal longevity --- if living longer is part of your gene pool and your health is good,  it definitely is worth a look.  
Every borrower would benefit from an analysis of their personal situation.  I specialize in turning “gobbledygook” into “AHA – now THAT makes sense!”  I focus on education first (these articles are a start) and explain the variety of choices and details.  If you would like a no-obligation consultation, please contact me at my office at  (650) 591-4430.

Judy Schwartz
Reverse Mortgages Only