The 4% Rule VS the 6% Rule

Here is the remaining piece of the summary on a study regarding the use of reverse loans to leverage retirement funds.   The original article is very lengthy and detailed, but if someone would like a copy of it, please contact me.

“Additionally, under the “term plan first” method, a client’s net worth could be $429,500 higher at 15 years, Wagner says.

The second strategy is reverse mortgage “term advances over the spending horizon.” While expected net worth under this scenario is less than the first strategy, Wagner says, the loan balance at 15 years is smaller and the 30 years spending success rate is several points higher.

Under this strategy, if the client’s portfolio is invested 70% in equities, the “term advances over the spending horizon” plan would give a 83.2% chance of success of withdrawing 6% annually over 30 years, and at 15 years the client’s net worth could be $282,800 higher.

Reverse mortgages can benefit retirees by supplementing their retirement portfolios with additional funds, however, common misconceptions surrounding the loans continue to be a challenge—one that financial planners must acknowledge in their discussions with clients.

“Today, very few Americans in retirement or about to retire have entered into a reverse mortgage,” says Wagner. “Some clients will resist the use of these products because they consider their home as sacred. However, a reverse mortgage may be considered as another financial planning tool with no stigmas attached to its use.” ‘
Written by Jason Oliva [2]

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