No. of Recommendations: 3
The earlier you get have a reverse mortgage, the more the miracle of compound interest works against you.

Just a couple of point to consider.

1) Don't forget inflation. A $24,000 reverse mortgage will not be worth very much if you live into your 90's after 30 years of even mild inflation.

2) Look into just who(probably you!) pays for maintenance. After years of inflation, a new roof may cost more than you are getting paid.

3) You will be buying a house in a hurricane prone area that may affect your ability to get a reverse mortgage without getting some very expensive insurance. You will also be locked into buying the insurance so that if in ten years they quadruple the rates you will have no alternative but to buy it.

4) If you do decide to take that $1.1 million out of your retirement account to buy the house, consider moving to a state with no income tax for that tax year. This could save you some from paying the state income taxes on it. During that year you could travel with the money that you save but you should check with a tax advisor on just what the residency restrictions are.

5) If you do get a reverse mortgage, you should probably look at waiting to get a reverse mortgage until you have more or less depleted your other funds. If you are spending $50K (in addition to social security) per year then the $670K will last you how long? At least 15 and maybe up to 20 years or more! You will get a lot more on the reverse mortgage at 80 than you will at 60 and the house will probably appreciate some more by then. This would also give you more flexibility in case you need to go into assisted living or one of you passes away before then.

6) Run the numbers, if instead you leave the $1.1 in retirement accounts and buy the $800K house with 20% down(say with equity from your current home) then with a 30 year FRM, then the mortgage payment would be about $4000 per month or $48K per year. If you add in the $24K per year in income that you want, then you would be withdrawing $72K per year. Even if you invested the $1.1 million in something very conservative like government bonds, you should have the house almost paid off by the time the $1.1 million is depleted. Say it lasts 25 years, then you would be getting a reverse mortgage at age 85(if you are still alive) which should pay you lots more, especially since the house will likely have appreciated more during the extra 25 years.

7) TOTAL = $80,800 and no rent or house expense And much of it not taxable! Wow, there are only so many cruises or trips to Europe that you can go on and when you get into your 70's you will start slowing down. If it were me, I would take a hard look at living on a smaller budget and retiring five or ten years earlier. There is a dang good chance you will not live long enough to really enjoy your money. Lets see, you were talking about retiring at in 14 years when you are 59 you are 45 now. That means that there is roughly a 9% (ouch!) chance that you will not live to be 59 and a 25% chance of not living to 69(double ouch!). I calculated this by using the table(where I used the male column) at ;

http://www.ssa.gov/OACT/STATS/table4c6.html



Greg
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