Can a reverse mortgage replace a pension?

The classic three-legged stool of retirement income has been Social Security, a pension and retirement savings.

Employers have moved away from offering pension plans with their defined benefits to offering defined contribution plans in which employees contribute from their salary and the employer may offer a matching contribution to a 401(k).

Is the three-legged stool now a two-legged stool?

Maybe not when seniors decide to tap the equity in their home with a reverse mortgage.

They aren't for everyone, but they could become increasingly important as a source of retirement income over time.

For most seniors, it's a good idea to delay taking Social Security until at least full retirement age. For couples, it may make sense for the higher-earning spouse to wait until age 70 to claim benefits. Social Security retirement benefits increase by 8 percent for every year they are delayed up to age 70.

The federal government is in the process of eliminating some Social Security claiming strategies, like being able to file and suspend, allowing one spouse to claim a spousal benefit at full retirement age while the other earns delayed retirement credit.

The Maximize My Social Security website points out that: "People born on or before May 1, 1950, will be the least affected, although if they plan to suspend their retirement benefit and still allow others to collect auxiliary benefits based on their record (that is, spousal and child benefits) during suspension, they must request benefit suspension no later than April 29, 2016."

Work with a private consultant like Maximize My Social Security or Social Security Solutions if you need help sorting things out.

There's not one right answer for everyone. Although you can get a reverse mortgage at 62, for most seniors it will make sense to wait, since the monthly interest expense gets added to the loan balance each month.

For those without a pension plan, retirement savings become the front line in financing the early retirement years. For seniors worried about outliving their retirement income, a qualifying longevity annuity contract can make sense.

Spending time estimating your retirement income needs, including health care expenses, is a good first step. If you don't know what you'll need, it's hard to decide how to tap your sources of retirement income over your lifetime.