Life Events

Maximizing Retirement Income: Understanding the Relationship Between Reverse Mortgages and Social Security Benefits

Maximizing Retirement Income: Understanding the Relationship Between Reverse Mortgages and Social Security Benefits

In the realm of retirement planning, reverse mortgages have attracted attention as a potential financial tool for senior citizens looking to supplement their income. However, it is essential to understand how reverse mortgages can impact other sources of retirement funds, particularly social security benefits.

This article aims to delve into the intricate relationship between reverse mortgages and social security, providing insights to help individuals make informed decisions regarding their financial well-being during retirement.

How Reverse Mortgages Affect Social Security Benefits

Credit: designer491/Getty Images

Reverse mortgages can impact Social Security benefits in two main ways -- asset-based calculation and means-tested programs. Social Security benefits are typically calculated based on income, but the funds received from a reverse mortgage are considered a loan, not income in the traditional sense.

This means that reverse mortgage proceeds do not directly affect Social Security in terms of income-based calculations. However, these proceeds can indirectly impact benefits if they are not managed appropriately.

Supplemental Security Income (SSI) and Reverse Mortgages 

Supplemental Security Income (SSI) is a means-tested program designed to provide financial assistance to low-income individuals. Unlike standard Social Security benefits, SSI agents take both income and assets into account when determining eligibility and benefit amounts.

The proceeds from a reverse mortgage can be considered an asset, potentially affecting an individual's overall eligibility for SSI or the amount they receive. It is crucial for individuals receiving SSI to understand the potential impact a reverse mortgage could have on these benefits, and to weigh whether the reverse mortgage amount will be enough to offset the possible loss.

Examples of How Social Security Benefits May Be Affected

To illustrate the potential impact of reverse mortgages on social security benefits, let's consider the following scenarios:

a) Asset-Based Calculation - The funds received from a reverse mortgage are not counted as income, which means they do not directly affect an individual's income-based Social Security benefits. However, if the reverse mortgage proceeds are deposited into a bank account, thereby increasing the individual's overall assets, it could potentially impact means-tested programs like SSI.

b) Means-Tested Programs - As noted, if an individual's assets, including any reverse mortgage proceeds, exceed the eligibility limits for means-tested programs, such as SSI, a recipient's benefits could be reduced or even discontinued.

How to Protect Social Security Benefits When Considering a Reverse Mortgage

Credit: Fran Polito/Getty Images

While a reverse mortgage can provide additional funds for retirement, it's essential to take steps to protect your Social Security benefits. Here are a few strategies to consider:

a) Careful Management - Instead of depositing the reverse mortgage proceeds into a bank account, consider using them for specific expenses or investing in assets that are not counted as resources for means-tested programs.

b) Seek Professional Advice - Consult with a financial advisor or a reverse mortgage specialist who can provide guidance on optimizing your financial situation, while considering the impact on your existing Social Security benefits.

c) Explore Alternatives - Assess alternative retirement income strategies, such as annuities or investment portfolios, that may complement your Social Security benefits without affecting eligibility for means-tested programs like a reverse mortgage could.

Pros and Cons of Reverse Mortgages for Social Security Recipients 


Supplemental Income - Reverse mortgages can provide the extra funds an individual or couple needs to enhance retirement income, allowing Social Security benefits to stretch further.

Flexibility - Reverse mortgages offer flexible payment options, enabling borrowers to choose lump sums, regular payments, or a line of credit, depending on their needs.

Non-Recourse Loan - Reverse mortgages are non-recourse loans, meaning the borrower's estate is not responsible for repaying any deficit if the loan balance exceeds the home's value upon the borrower's death.


Potential Impact on Some Benefits - Reverse mortgages, if not managed carefully, can affect eligibility or reduce benefits from means-tested government programs like SSI.

Costs and Fees - Reverse mortgages come with various costs, including origination fees, closing costs, and mortgage insurance premiums. These should be considered when evaluating the overall financial impact of this financial product.

Home Ownership and Equity - Reverse mortgages gradually decrease the homeowner's equity, potentially limiting heirs' inheritance or options for future housing.

Credit: shapecharge/Getty Images

Reverse mortgages can provide financial flexibility for seniors during retirement, but it is crucial to understand their potential impact on Social Security benefits before applying. By seeking professional advice, and exploring alternative retirement income strategies, individuals can protect their Social Security benefits while potentially leveraging the perks of a reverse mortgage.

Ultimately, it is essential to weigh all of the possible financial outcomes before making a decision. Consider personal circumstances and long-term financial goals in order to make an informed decision that aligns with your personal needs and objectives in your golden years. 

Contact our team at Watermark today if you have any questions about applying for a reverse mortgage of your own.
If you would like to reach out to David for a complimentary consultation, call today at (866) 502-8339.  

Feature Image Credit: Ariel Skelley/Getty Images

share this post
Search for matches...
David Gittelson

David Gittelson

Reverse Mortgage Advisors David Gittelson (Reverse Mortgage Specialist NMLS 224312) started his career in the lending and finance industry in 2001 and has supported close to two billion in transactions through hundreds of trusted professionals. In the early 2000's David used Reverse Mortgages to support his client's cash management and retirement strategies in collaboration with the client’s tax and financial advisers and continues today with even better products and solutions to support trusted advisers whose clients are fifty-five years and older.

Reverse Mortgage Advisors
0 reviews


Recommended Professionals

In the face of economic uncertainty, TaxBuzz is the industry's most up-to-date tax information.

Join 60,000 who get our weekly newsletter. No spam.

We know tax and accounting issues are complicated.

Do you have additional questions on this topic for this author?

Related Posts

Latest Posts