Reverse Mortgage Retirement

Will it really be enough? Many people figure that a part-time income will be sufficient to meet expenses during retirement. But tread carefully here. Sure, you’ll have a social security check coming in, but will that be enough to make up the difference? (Hint: If you’re living paycheck to paycheck now, as many Americans do, your honest answer will have to be “no.”) If you’ll come up short, consider other income sources, such as a reverse mortgage to tap your home equity, and downsizing to reduce your expenses.

Will you really command as much in the job market as you think? That survey by Merrill Lynch reported that 56 percent of those who plan to work during retirement plan to move into a completely new career. If this includes you, move carefully. As a new entrant to a new field, you’re unlikely to earn as much as in your old job. That’s fine, of course--as long as you aren’t planning on bringing home the same paycheck as before.

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Are you sure you can make a new business fly? The Merrill Lynch study found that 13 percent of those surveyed planned to start their own business when they “retire.” Again, be careful here. Many new businesses require a year or two before they generate positive cash flows (and some never do at all), so be prepared to cover your income needs during that time.

Do you really think you’ll work forever? At some point you will stop working, either because you want to or you have to. And at that point you will need other income sources to fall back on. This means it’s extremely important to stash away what you can now into tax-advantaged retirement savings plans, such as 401(k)s and IRAs.

THE BOTTOM LINE: Working during the retirement years is an appealing option for many people but if that’s your intention, be realistic about how much income a working retirement could bring in. Plan for that lifestyle just as you would any other retirement goal and recognize that may need to support your lifestyle with money you save today using retirement accounts.