Taking out a reverse mortgage could help increase retirees’ annual income by 30% when done in conjunction with a few other retirement planning steps, according to a recent Wall Street Journal article.
But when it comes to tapping home equity for retirement planning purposes, doing so could put an extra $7,800 to $9,700 in retirees’ pockets each year, Jonathan Clements writes in the recent WSJ article.
In a hypothetical scenario, Clements projects the annual retirement income of a couple — a woman and a man who are both 62 years old — who own a $300,000 home with no mortgage and have $500,000 in savings.
Using a 4% withdrawal rate, the couple’s $500,000 would generate $20,000 in first-year retirement income, and their Social Security benefits would add another $22,000, totaling an annual retirement income of roughly $42,000. More here.