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Consider a reverse mortgage to make up for inadequate savings 2010-02-10 Some seniors, finding that their retirement savings are inadequate, are turning to reverse mortgages to generate cash. The number of reverse mortgages issued is rising, government data shows. In its fiscal year 2011 budget, the Department of Housing and Urban Development noted that the Federal Housing Administration's reverse mortgage program, called the Home Equity Conversion Mortgage, has "grown steadily in recent years, to a volume of $30.2 billion in fiscal year 2009." HECMs are popular among retirees because of their FHA backing. The interest rates on HECMs can be lower than on uninsured reverse mortgages, and seniors who have a HECM can take heart in the fact that the government will pay the balance of the loan if the issuer defaults. And if an older person's savings are inadequate - as is the case with Forbes writer Mary Ellen Egan - a reverse mortgage can help meet that savings shortfall. Egan writes that, because of savings mistakes earlier in life, she is "scrambling like mad to catch up." Savings laggards do have one thing working in their favor, Egan notes: There is a catch-up provision in the government's 401(k) rules that allows extra contributions of $5,500 per year once a person turns 50.  |
