Most of us have been taught over the years how to save money and why we need to save money, especially the need to start saving money at a young age.  The concepts of saving money are almost all that you hear about when it comes to financial planning and financial management.  Our whole society is built on saving money and finding ways to save, invest, and make money on our money. 

However, have you ever considered the fact that when you retire, you transition from saving money to now spending your savings?  Think about that for a minute.  Most people earn less income in retirement and therefore you need to spend part of your savings to cover expenses in retirement.  Which means, you are no longer putting money into savings but in fact you are withdrawing money from your savings and other retirement accounts.  This ultimately means you are in a spending mode and no longer a savings mode.  As a matter of fact, the government forces us to spend down our retirement accounts (401k, 403b, and IRAs) once we reach a certain age.  This is called Required Minimum Distributions (RMDs) and these begin at age 72 today.  This means that when you turn 72, you are required to take out a certain percentage of your retirement savings each year (Roth IRAs are excluded).   

The challenge is that nobody teaches us how to spend our savings and retirement accounts safely and strategically when we reach this point in life called retirement. This needs to be a fundamental shift in one’s mindset and most people are uncomfortable spending their savings that they have worked so hard to save.  However, isn’t that the reason why you saved in the first place, to spend it at a later point in life? 

So, with all this being said, have you considered the fact that when you make a mortgage payment, you are saving money in an account that we call home equity?  Yes, that is right.  Part of your mortgage payment is principal (unless you have an interest only mortgage payment) and that portion of your payment is paying down your loan balance and therefore increasing your home equity.  Additionally, if your home value goes up, your home equity grows too.  As a matter of fact, most American’s largest asset today is the equity in their home.

Now, think about this for a second…if you are in a spending mode in life (meaning you are spending down your savings and retirement accounts), why are you putting more money into your home equity by making mortgage payments?  This is why a reverse mortgage can be such a powerful financial tool because it allows you to stop making mortgage payments when you already have a significant amount of equity in your home!  Additionally, not only does it allow you to stop making mortgage payments, but it also allows you to access some of the equity in your home that you have been saving over the years. 

Remember, you need to shift your mindset in retirement and understand that you are no longer in a saving mode in life and you are in a spending mode.  So, when you retire, you need to learn how to spend your savings accounts and retirement accounts safely and strategically with the goal of making them last as long as possible.  If there was a financial tool that allowed you to achieve this goal, wouldn’t you want to learn more about it?  Well, there is, it is called a Home Equity Conversion Mortgage, also known as a reverse mortgage which is one of the best financial products on the market today.