FNTN

Don't get caught with your pants down over your pension and getting into debt!

The state of many people’s pensions is starting to cause alarm on several fronts. First of all with ever increasing job losses as the global economic recession continues, it is invariably older workers who find it most difficult to regain employment. This has two effects; first they can end up having to borrow money to make ends meet, meaning that as they near their retirement age their debt increases. Then, secondly, by not being in employment they are either unable to continue contributing in to their pension funds at the levels they were able to when employed; or, worse, stop contributing to their pension fund altogether. The net result of which is an increased threat of debt in retirement.

Use cash from your home to avoid debt in retirement.

One way you can make up a short-fall in your pension pot or raise cash to clear debts in your retirement is to release any cash tied up in the equity on your home. In the USA, just considering the over-65s who have no mortgage they are literally sitting on hundreds of billions of dollars worth of assets. Even if you are still paying off your mortgage, so long as the value of your home now is considerably more than the amount still owed on the mortgage – then you too could have home equity worth hundreds of thousands in cash!

Releasing home equity.

There are a few ways that you can release the equity on your home; in the USA this most commonly means you opt for a reverse mortgage or sell your home to an investment company, who then allow you to carry on living in it. Even if you don’t begin your retirement in debt a protracted illness or the need for long-term care could plunge you into debt. Again, releasing your home equity could well raise enough cash for you to comfortably pay off those bills annually.

A couple of points worth considering about releasing home equity.

If you have a family and were considering leaving your home to them, then obviously that would no longer be an option if you seek to get a home equity loan. Also, depending on the value of the property you currently have equity tied up in and the value of a smaller property you could move to – then simply down-sizing might be another option for you to consider.

No safe pension nest egg? Consider a home equity loan to bridge the gap.