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Low interest rates lead retirees to seek cash in reverse mortgages 2009-12-28 Rates on savings accounts and certificates of deposit are at near-zero levels, The New York Times reported recently, and some retirees are finding liquidity in reverse mortgages. The instruments, available only to people over 62 with a significant amount of equity in their homes, are a source of quick cash that can be useful when credit is tight and rates of return are low. Many seniors rely on government bonds and high-interest savings accounts, but the rates on most secure investments are extremely low at the moment. It's all part of the government's strategy to help banks restore their balance sheets, PIMCO chief executive Bill Gross said to the Times. "The government's plan [is for banks] to pay savers nothing and allow [the banks] to earn a nice, guaranteed spread," he was quoted as saying. That leaves fixed-income retirees in the lurch, though. Eileen Lurie, a 75-year-old interviewed by the paper, said she had applied for a reverse mortgage to offset declines in her investment returns. The cash received through a reverse mortgage is tax-free, the Times reported, and has no impact on Social Security or Medicare payments. "A reverse mortgage is one way of making a very large asset produce income," Peter Strauss, a lawyer, was quoted as saying.  |
