Equity Release and Retirement Planning Explained

People are living longer – life expectancy is constantly rising, and as of 2020 stands at 79.3 years for men and 82.9 years for women. And that means it’s more important than ever to properly plan for your retirement years.

If you own your home, equity release could be one option of improving your financial stability as you make your budget for once you’ve stopped working. Our guide takes you through the options available.

Can Equity Release Help With Retirement Planning?

Equity release schemes can unlock either a cash lump sum or monthly payments to help you plan for retirement. There are no limitations on how you use the money, so it can be used for debts or living costs.

When planning your retirement, equity release can be a useful way of generating extra income or financial support, either through a lump sum or regular payments.

Continue reading to get the full equity release and retirement planning details.

Looking for other information on Equity Release? This guide has info on 'Equity Release to help with Retirment Planning' We have also writen extensively about:

• - How safe are Equity Release schemes?
• - Releasing Equity for new property
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• - Equity release schemes tax implications

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Equity Release: Retirement Planning – Financial Security

Equity release is becoming more popular due to lower interest rates, and it can be a good idea if you need extra money to keep yourself secure once you’ve retired. The state pension age is increasing, due to reach 68 by the year 2028 and constantly under review. So you need to make sure that when you do decide to retire, you’ve enough money to get by.

If you choose to release equity from your home, you can do it in three ways.

Equity Release: Lifetime Mortgage

A lifetime mortgage will set you up with a cash lump sum, and you’ll keep your home. You won’t make repayments until you’ve gone into full-time care or you’ve passed away, and you can then use this lump sum to pay off debts, or towards a new income stream such as a second home for renovation or rental.

Equity Release: Drawdown Lifetime Mortgage

You could also choose a drawdown lifetime mortgage. This works in much the same way but, rather than being given the lump sum, it’s essentially a credit allowance that you can draw money from as and when you need it. The benefit of this is that you’ll only owe interest on what you’ve borrowed, rather than the whole amount, which protects more of your estate in future.

Equity Release: Home Reversion

Finally, if you’re over 60 you could instead choose home reversion. Here you’ll sell your home but retain the right to live in it. Again, you could take a cash lump sum, although some reversion plans will instead offer regular payments. If having these regular payments into your account would make it easier for you to budget, then this may be a favourable option for you.

Equity Release: Retirement Planning – Hobbies and Holidays

It’s worth remembering that retirement planning isn’t always about financial security. You may be in a healthy financial position with a pension (see the government pension guide) that has set you up for retirement. That’s when you might want to consider equity release to fulfil a life’s dream, whether that’s a new hobby that requires an initial investment, or a holiday home where you can regularly relax.

Whatever your circumstances, equity release loans could help you fulfil your retirement plans and ensure you have financial security or the means to really enjoy your retirement years.

How Can Money Savings Advice Help You With Releasing Equity?

Here at Money Savings Advice, we have partnered with some of the UK’s leading Equity Release brokers. They have already helped thousands of people get the best Equity Release deal and they can do the same for you.

Choosing an independent adviser means they won’t recommend a scheme unless they are sure it is in your best interests. Their advice is also regulated by the FCA, which gives you an additional layer of protection.

If you would like to speak to one of these brokers who can provide you with a ‘whole market quote’ then click on the below and answer the very simple questions.