Invest Reverse Mortgage Proceeds in Savings Accounts
March 1st, 2009
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Make your reverse mortgage work for you as beef up your savings. A reverse mortgage will allow you to tap the equity in your home to use however you see fit. Why not use the funds to invest in one of the following types of low-risk accounts:
—If you don’t want anything fancy, you can always park the proceeds from your reverse mortgage in a regular savings account, which is FDIC insured up to $250,000. Savings accounts are ideal for funds that you may need to get your hands on quickly. Interest rates on savings accounts won’t knock your socks off, but at least you won’t lose sleep at night worrying about that money being gambled away in the stock market. If you’re comfortable doing your banking over the Internet, consider a high yield savings account that may offer a better interest rate.
—Money market accounts usually have a higher rate of interest than regular savings accounts. They also may have a minimum balance requirement (often $1,000) and limit monthly withdrawals to about three to six transactions. A money market account may allow you to write a certain number of checks each month. Money market accounts are FDIC insured.
—Certificates of deposit (CDs) can be purchased for a period of only a few months or several years. Individual banks set their own CD rates and update them daily. Make sure you won’t need your money during the term of the CD or you’ll be hit with penalties for cashing out early. You can also put your money in more than one CD to take advantage of the best CD rates and stretch out maturity dates. CDs also are FDIC insured.
You can find current interest rates on CDs, money market accounts, and regular savings accounts at MoneyRates. Online banks often have higher interest rates because they have fewer costs associated with doing business. You also may be able to qualify for better rates if you have several accounts at the same bank.
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March 2nd, 2009 at 5:15 pm
Not sure why you would want to take a protected asset like the money in your reverse mortgage credit line and invest it in something that may not be there tomorrow. First of all, any money you pull out will accrue interest and second of all you won’t have to pay taxes on any money you use from your credit line. This is a very bad example of someone not knowing the product. Why would you put money that is accruing interest into an account of any type that you would pay taxes on, which in effect is lowering the return. You say make sure you won’t need the money, well thats the perfect reason to leave it ALL in the credit line, there are no penalties and no taxes and you will find guaranteed growth there.
Your article is confusing.
March 2nd, 2009 at 5:54 pm
While this is generaly good advice, seniors need to be very careful that their savings deposits do not exceed any limits for medicare/medicaid or Tax Deferrals.
June 25th, 2009 at 11:31 pm
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