Reduce Investment Draws and Increase Cash Flow
Mrs. Y
has always been a very disciplined saver/investor and has approx.
$500,000
in a
401(k). She
withdraws
$4,000
per month to supplement her retirement income. Mrs.
Y
pays approx
$5,000
per year in taxes on a total of
$48,000 401(k)
funds used for retirement income.
Mrs. Y
owns
a town home with an estimated value of
$550,000.
Her mortgage is approximately
$100,000 with monthly payments of $900 per month.
In addition to paying off her current mortgage with
a Reverse Mortgage, Mrs. Y,
age 80, will benefit
in the following
ways.
Reverse Mortgage benefits:
1.
Increased Cash Flow
Mrs. Y will use a Reverse Mortgage to pay off her current mortgage.
With
no mortgage payment Mrs. Y's cash flow will increase by
$900
per month, or
$10,800
per year.
2.
Llifetime Income Payments:
Mrs. Y will
supplement her retirement income with non-taxable lifetime income
payments from a Reverse Mortgage receiving
$2,000
+
per month*. (Alternately, she could take less monthly and
leave funds in a line of credit for emergencies without having to
draw extra from her 401(k).)
3.
Tax savings:
Mrs. Y only needs to take out the required minimum of about 5.35%*
annual distribution this year from her
401(k)
which amounts to about $26,800*.
By reducing her
401(k)
distributions from
$48,000
to
26,800*,
she
will save an estimated
$1,500+
per year in taxes*.
4.
Preservation
of Capital:
By
reducing her
401(k)
withdrawals from
$48,000
to
$26,800*,
Mrs. Y's Reverse Mortgage will also help preserve her retirement
fund. Her
401(k)
is projected to continue growing at 7%* and, if needed, could be
used to generate additional dividend income.
Summary:
A Reverse Mortgage will lower Mrs. Y's taxes, preserve her 401(k), and increase her annual cash flow by about $15,100, ($1,500 per year in taxes + $10,800 in mortgage payments + $2,800 more from the RM than she gave up in 401(k) distributions).
*This
is an example that may not currently have the same criteria.
Results will vary based on borrower's age, current interest
rates, home value and FHA maximum limits. Ask me to quote a
similar scenario for you or one of your clients.
