Pick up a dictionary and look up the word stimulus and you’ll see- something that incites to action or exertion or quickens action, feeling, thought, etc.: The approval of others is a potent stimulus. Synonyms for that word include incitement, motive, provocation, stimulant.

The stimulus package signed by the President on February 18th was meant to do just that, stimulate the economy. It is an ambitious plan of federal spending and tax cuts meant to awaken our economy and save/generate new jobs. The stock market initially dove 400 points but then came back last week only to drop the last 2 days and the Dow is still not back to the number it was at back in early February when the package was signed. Where’s the approval of others, the incitement?

So who is it stimulating? Certainly not our nation’s seniors. Their portfolios are not increasing in value if the market can’t move off February lows, their homes are not all of a sudden magically increasing in value. News today that added to more anxiety and confusion is that some financial brokers may be worried that annuities won’t be able to provide the guarantees that many folks were sold on when they purchased them recently. About a dozen insurance providers have been downgraded and the fear is they may not be able to keep their promises of guaranteed returns on their annuity products, with some claiming a 7% increase in value each year. So what happens if they can’t meet that guarantee, do those clients get a bailout, do they get their initial investment back? Where is the certainty in any of this anymore?

A reverse mortgage provides that certainty. If its a couple of thousand bucks a month until you die in a lifetime tenure payment, then that’s what you will get with a reverse mortgage, guaranteed by the MIP paid by the borrowers, not by the taxpayers. Regardless of your home’s value increasing or decreasing, you will continue to get the amount promised you until you move away or pass away. If you want to make sure that you have access to a certain amount of money by the time you are, say, 75, you could put a big chunk of your cash flow under your mattress, hope no one finds it or throws it away. You could purchase a CD with a 2.36% return- and each year you have to elect to roll it back in or cash out (paying taxes on your growth- diminishing your hefty 2.36% growth) or better yet, secure the reverse mortgage. The margins on a reverse mortgage are higher than the return on the CD mentioned here which means the growth on cash left in your reverse mortgage credit line will grow faster than CD ever could plus you wouldn’t pay taxes on any of the money you take from your home’s equity (since its not income).

In addition, whatever cash flow you had access to before you secured your reverse mortgage can be added to the cash flow available from that reverse mortgage. It takes cash to make cash with an annuity or CD. All it takes is equity to get the reverse mortgage and there’s often way more equity than cash available for a large portion of those 62 and over.

Let’s take another look at a scenario based on April 7 rates for a 70 year old homeowner in a $300,000 home. That person has access to $170,000 in cash from their home’s equity, or almost 57% of the home’s value. That $170,000 will safely grow to $208,000 in 5 years if left alone. That cash will be available if the home increases or decreases in value and its backed by HUD, the same place where stimulus packages are created- the US of A.

Before you lose another night’s sleep over how you are going to come up with the cash to continue to live out your days with dignity and maintaining a quality of life, consider a reverse mortgage to supplement your cash flow needs. The opposite of stimulus (antonym) by the way is discouragement.

A Few More Related Articles of Interest:

75% of boomers fear full retirement.

Staggering numbers of folks dipping into 401K savings.

New potential lending limit increase for HECM reverse mortgages.

Reverse mortgage lending limit makes new Stimulus Bill

Response: What is a Reverse Mortgage and are They Always Good?