June 2013

Reverse Loan “Saver” Option

This is an ideal option to consider whenever a senior is forced to withdraw money from their retirement portfolio and possibly be subject to penalties or tax consequences.   Financial planners are naturally concerned with protecting their clients principal funds in their investments.

But what if they begin to draw them out too often, risking the possibility of outliving their savings?   Wouldn’t it make more sense to use funds from a Reverse loan to address this situation and leave their investments in place?

The following article discusses that and was written by a well known Financial Planner.

Financial Planning Guru: Reverse Mortgages Can Be Insurance Policy
Posted By Elizabeth Ecker On June 20, 2013 @ 6:32 pm In News,Reverse Mortgage | 7 Comments

Reverse mortgages can be used as an insurance policy under the Home Equity Conversion Mortgage Saver program, financial planning expert Harold Evensky tells the Journal of Financial Planning in a Q&A [1].

Citing a paper [2] he published recently on the use of the Saver reverse mortgage as a financial planning tool, Evensky explains how his mind was changed on the use of reverse mortgages.

“Up until very recently, pretty much like every other practitioner, I wouldn’t touch [reverse mortgages] with a 10-foot pole,” Evensky tells the Journal of Financial Planning. “What changed that was a year or so ago when a new product came out called the [HECM] Saver, which is very analogous to a home equity loan, a HELOC. The difference is, with HELOCs, as we learned the hard way, there’s nothing guaranteed.”

Advocating the use of the Saver essentially as a standby home equity loan, Evensky explains the way borrowers can keep the reverse mortgage as an option for times when their retirement portfolios are underperforming.

“When markets recover and get better you pay it off again, so it’s not designed to be a leverage investment strategy; it’s not designed as a credit strategy,” he says in his response. “We see it simply as risk management, “insurance” against a volatile market allowing investors to remain invested through those volatile times.”

The study, which ran hundreds of simulations of retirement portfolios led the researchers to conclude the use of reverse mortgages is effective in almost all cases.

“…our conclusion was, anyone who qualified for it should consider doing it. And there’s a high probability, based on our simulations, that most investors would never have occasion to draw on it, but as I said, we see it as an insurance policy.”

View the original Q&A [1].

Written by Elizabeth Ecker [3]

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Home Equity On the Raise

At last we are finally seeing some positive gains in home equity.   After years of loss, the Real Estate market is enjoying some tremendous gains with values increasing on homes throughout the Untied States.

The following article discusses what that can mean for a senior who has been unable to apply for a Reverse loan because they didn’t have enough equity to qualify for it.

“Senior Home Equity Rises Nearly $50 Billion in Q1

Posted By Jason Oliva On June 13, 2013 @ 5:03 pm In News,NRMLA,Reverse Mortgage | No Comments

Senior home equity is on the rise, increasing $49.5 billion in the first quarter of 2013, according to the latest National Reverse Mortgage Lenders Association (NRMLA)/RiskSpan Reverse Mortgage Market Index [1] (RMMI).

The quarterly increase in senior home equity was driven by an estimated $45.1 billion increase in the aggregate value of senior housing and a $4.4 billion decline in mortgage debt held by seniors, notes NRMLA.

“Today’s report continues a positive trend for the American housing market and for senior homeowners,” said NRMLA President Peter Bell.

Rising home equity and returning home values could signal that seniors will have more financial resources available to them during retirement, and that a reverse mortgage could help cushion retirement security for many senior homeowners.

“With proper planning, using a reverse mortgage to access that equity is one option to help fund living expenses, home maintenance costs, or health care needs,” added Bell.

The first quarter of 2013 marks the fourth consecutive quarter the RMMI has posted a gain, rising 1.5% from last quarter’s reading [2] to a level of 155—the index’s highest level since first quarter 2009.

While the index has risen four months in a row, the estimated $3.25 trillion aggregate value of home equity owned by seniors eligible for reverse mortgages is still 19% below its peak level of $4 trillion in the fourth quarter 2006.

Analyzing trends in the home values, home equity and mortgage debt of homeowners age 62 and older, the RMMI is updated on a quarterly basis and tracks data beginning at the start of 2000.

Since the RMMI’s starting point, the collective home equity of Americans 62-years and older has grown by 55%.”

Written by Jason Oliva [3]

 

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Home Health Care Industry

Every day, 10,000 people are turning 65 years old and many of them are unprepared to “age in place” due to a lack of retirement funds or frankly, poor planning.

The “Boomer” generation may be healthier than their parents were, but the fact of the matter is, they are still going to age regardless of how active and health conscious they may have been over their lifetime.

Needs for services which are being offered to an aging population, are growing each year and the projection is for this industry to expand enormously in the next four years to meet the oncoming wave of the “Boomers”.

Below is an article that discusses this in a little more depth.

Aging in Place to Drive $130 Billion Home Health Market

Posted By Jason Oliva On May 23, 2013

“As aging-in-place continues to be the preferred lifestyle for many older adults, the home health care industry is forecasting a swell of baby boomer proportions.

By 2017, the the home health care market is expected to surge to a $130 billion industry, according to a MarketsandMarkets report [1].

Valued at $90.9 billion in 2012, the market for home health services is poised to grow at a compound annual rate of 7.5% each year until 2017, as it offers a cost advantage to patients by reducing their hospital spending, the report finds.

Segmented on the basis of products, services and telehealth, factors such as rising incidences of chronic diseases and increasing healthcare costs look to fuel the market’s growth in the coming years.

However, cuts in Medicare reimbursements to home health agencies and risks to the safety of home health workers are factors limiting the growth of this market, according to the study’s authors.

The United States “dominated” the home healthcare market in 2012 and is expected to maintain its position in the coming five years, notes the report.

A rising aging population, technological development for various home use, as well as increasing awareness of the importance of home care services look to contribute to the U.S. market growth.

Canada, on the other hand, it expected to experience steady growth for many of the same reasons as the U.S., including increasing awareness for home care and a rising prevalence of lifestyle diseases such as diabetes, obesity and cardiovascular diseases.”

Written by Jason Oliva

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