Maximizing Retirement Income: How Reverse Mortgages Can Delay CPP, OAS, or RRIF Withdrawals

Maximizing Retirement Income: How Reverse Mortgages Can Delay CPP, OAS, or RRIF Withdrawals

Are you approaching retirement and wondering how to make the most of your available income sources like the Canada Pension Plan (CPP), Old Age Security (OAS), and Registered Retirement Income Fund (RRIF)? In this blog post, we'll explore a strategic financial approach that involves using a reverse mortgage to help delay CPP, OAS, or RRIF withdrawals. By doing so, you can potentially enhance your financial security and enjoy a more comfortable retirement.

Understanding Reverse Mortgages

Before we delve into the strategy, let's briefly recap what a reverse mortgage is. A reverse mortgage is a financial product designed for homeowners aged 55 or older. It allows you to access a portion of your home equity without selling your property or making monthly mortgage payments. The loan is repaid when the home is sold, typically when you move out or pass away.

The Reverse Mortgage Strategy

1. Supplementing Income

One of the primary reasons to consider a reverse mortgage in retirement is to supplement your income. By unlocking the equity in your home, you can receive a lump sum, regular payments, or a combination of both. This additional income can help you maintain your lifestyle and cover essential expenses without the need to dip into your CPP, OAS, or RRIF funds.

2. Delaying CPP and OAS

The longer you delay applying for CPP and OAS, the more your monthly benefits will increase. Both CPP and OAS benefits increase by a certain percentage for each month you delay taking them, up to a maximum of 70 years old for CPP and 70 or 75 years old for OAS. By using a reverse mortgage to cover your expenses, you can potentially delay these benefits, resulting in larger monthly payouts when you do decide to apply.

3. Managing RRIF Withdrawals

If you have funds in a Registered Retirement Income Fund (RRIF), you are required to withdraw a minimum amount each year, starting at a certain age. These withdrawals are considered taxable income. Using a reverse mortgage to cover living expenses can help reduce the need for larger RRIF withdrawals, thereby potentially lowering your taxable income and preserving more of your retirement savings.

4. Flexibility and Control

One of the advantages of the reverse mortgage strategy is that it provides you with flexibility and control over your retirement income. You can choose when and how much to withdraw from your home equity, tailoring the approach to your specific financial needs and goals.

Collaborating with a financial advisor to assist you in evaluating your specific financial situation, reviewing your retirement objectives, and determining if a reverse mortgage is the appropriate solution. Together, we can make well-informed decisions that are in line with your long-term financial security."

In conclusion, using a reverse mortgage to delay CPP, OAS, or RRIF withdrawals can be a strategic way to maximize your retirement income, increase your benefit amounts, and better control your financial future. By tapping into your home equity, you can enjoy a more comfortable and secure retirement, while maintaining the flexibility to adjust your strategy as needed.

Terms used

CPP : Canada Pension Plan

OAS : Old Age Security

RRIF: Registered Retirement Income Fund