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Kiplinger: What Retirees Need to Know About 3 High-Cost Financial Products

Reverse Mortgages

You could run out of money. You can take your payout as a line of credit, monthly payments or a lump sum. In recent years, the majority of borrowers have opted for a lump sum, according to a recent report from the Consumer Financial Protection Bureau.

Peter Bell, president of the National Reverse Mortgage Lenders Association, says there's no evidence that lump-sum borrowers are spending the money frivolously. Many younger borrowers are using reverse mortgages to pay off their existing mortgages, which frees up money for other purposes, says Bell. But borrowers who withdraw all of their available home equity upfront "will have fewer resources to draw upon to pay for everyday and major expenses later in life," the CFPB says.

And the younger borrowers are when they tap their home equity, the greater the risk they'll run out of money. According to the CFPB report, in 2011, nearly half of borrowers were in their sixties; in 1990, less than 20% were.

(iStock)

More From Kiplinger:
QUIZ: Are Annuities Right for You?
10 Least Tax-Friendly States for Retirees
10 Things You Must Know About Social Security



The opinions expressed are solely those of the author and do not necessarily reflect the views of Comcast.

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