Reverse Mortgages as a Retirement Tool

It is no secret that the baby boomer generation is entering retirement with troubling financial circumstances.  On average baby boomers are carrying more debt, less savings, and fewer guaranteed retirement pensions than previous generations.  Need proof?  SEE HERE or HERE.

The Home Equity Conversion Mortgage (HECM), also known as a ‘reverse mortgage’, may offer a solution for those retirees who have not accumulated enough retirement savings but have substantial equity in their homes.

The Journal of Financial Planning has done a great job of devoting space to research around the topic of using reverse mortgages as a retirement tool.  In the February 2017 issue THIS ARTICLE was featured in which the author compares the usage of a reverse mortgage to an immediate annuity as a funding vehicle.

For those interested in learning more about the basics of a reverse mortgage the author does a nice job summarizing key points in the section entitled ‘The HECM Product’.

In addition, through analysis the author finds that reverse mortgages can generate higher levels of retirement income for couples when compared to the income generated from an immediate annuity.  The opposite is true for individuals.

I hope you find it an interesting read!  Please feel free to contact me if you want to learn how a reverse mortgage can fit into your retirement plans.

Pfau Makes Case for Emergence of Reverse Mortgage

The prevailing reputation for reverse mortgages in our society is not healthy.  Stories of elderly abuse, high fees, and financial deceit are wrapped into the memories of many of our nations aging population.  However, over the past few years the Department of Housing and Urban Development has significantly overhauled the program by instituting measures that prevent financial abuse and reduces the fee structure on these loans.

Over the past couple years I have studied the reverse mortgage programs and given my financial planning background have recognized that the reverse mortgage could help solve many of forecasted problems with underfunded retirement plans by eliminating a mortgage payment for many Americans in retirement (studies show that today’s baby boomers are entering retirement with more debt and less retirement savings than any other age cohort in our history).

Wade Pfau, a personal financial planning expert who often contributes to the Journal of Financial Planning, wrote a piece back on November 30th for the Wall Street Journal making the case for how the reverse mortgage can help household bridge the financial gaps in retirement.  SEE HERE to read the entire piece.

If you have any interest in retirement planning then its worth a read.

Alt’s to reverse mortgages

I got an email over the weekend from Terry Donahe, CFP(R), a financial planner in Lake Oswego and instructor at the University of Portland Pamplin School of Business.  He has put together THIS ARTICLE discussing alternatives to reverse mortgages.  It is a valuable read if you have thought about such a program.

Reverse Mortgages and the 2008 Housing Bill

As I’ve written about multiple times in this blog the 700-page 2008 housing bill has many differnet provisions embedded in the law.  Although I don’t do a lot of reverse mortgage business I wanted to at least provide a link to an article which summarizes how these loan products were impacted by the 2008 housing bill. 

Here is a link.