So you read the words “mortgage” and “math” and think… ugh, this is going to be complicated. But remember that this is plynty, and your financial plan is easier to understand by using lifelong cashflow™. A Home Equity Conversion Mortgage (HECM) is really just another tool to increase retirement income, decrease retirement expenses, or even both.

Yes, you will need to look at a number of factors to see if it is the right tool for you. However, this is your life and your plan — it is worth taking the time to work through this. To get started, as we mentioned in the first post in this series, we assume you are at least age 62 and have at least 50% equity in your home.

Looking at someone else’s finances will give you an idea of key items you should consider before you begin evaluating your own situation. As one example, let’s meet Jane:

  • Single and age 62, Jane has no pension and no other savings.

  • If she takes Social Security at age 65, her payment are $1,797/month; they would be $2,571 if she waits until age 70.

  • She currently receives an annual salary of $65k, which includes a good health plan. Her goal is to keep working until age 65, when she qualifies for Medicare.

  • While in fairly good health, Jane does take medication for high blood pressure and osteoporosis, and wears glasses. She is concerned about those costs for the future.

  • Based on her current expenses and lifestyle, Jane estimates she’ll need about $2,000 a month in guaranteed income.

  • Her condo is completely paid off, and is currently valued at $250k. Jane likes her neighborhood, is active in the community, and her condo (with some small modifications) should allow her to age in place.

  • Jane has no children and, while much beloved by various family members, does not expect they would contribute much beyond basic help (e.g. running errands) as she ages.

Since she will be unable to live solely on social security, Jane needs a strategy to make up the difference, plus have some room for the unexpected. Based on the value of her home, she qualifies for a HECM of $581 per month, which would result in a total guaranteed monthly income of $2,378 at age 65. On balance, it appears that making a HECM part of her financial plan is a good choice.

But Jane still has a bit of work to do: what happens if she loses her job before age 65? Or becomes ill/disabled? These issues, and factors such as her other debts and taxes, will also impact her decision as to whether and when to apply for a HECM.

Now it’s your turn to make some calculations. The best — and easiest way — to do this is through the plynty app. If you want to first take a closer look at some details associated with HECMs, plynty has a HECM Fact Sheet available, which includes: additional information on loan costs and interest rates; the types of payout options and ways to use the funds to your best advantage; and the terms under which the loan becomes due.

Your retirement plan is not just about calculations — it is first and foremost about living your best retirement life.