Last month Bloomberg published an article discussing the positive changes to the HUD Reverse loan program and how their image is beginning to be seen as not only positive but as a viable option for additional funds to manage retirement portfolios and extend those funds into the future.
By using a Reverse loan Line-of-Credit when funds are needed in a “down” market in lieu of withdrawals from a portfolio, possible tax consequences could be avoided and the funds left in place for later use when the market recovers.
Here is a copy of the summary of the article as it appeared in Reverse Mortgage Daily.
Bloomberg: Reverse Mortgages a Boon for Boomers
Posted By Jason Oliva On May 19, 2014
Last year’s program overhaul and newer research are helping reverse mortgages overcome stigmas of the past and become widely viewed as effective financial tools when planning for longevity, Bloomberg reports.
This combination of factors have transformed the perception of reverse mortgages from a “pariah in financial planning circles’and tools of last resort, to strategies for retirement planning, the article writes:
Recent studies on reverse mortgages have boosted their reputation in long-term financial planning, such as those conducted by John Salter, a Texas Tech University professor, CFP and occasional reverse mortgage researcher.
Using what they dubbed as a “standby reverse mortgage,, strategy, Salter and his colleagues revealed that the use of a reverse mortgage can improve the chances of financial sustainability of up to 30 years when based on simulated retirement portfolios.
In a “falling market,” the standby reverse mortgage was tapped rather than the individual’s portfolio, with the retiree repaying the money when the market recovers.
Under this strategy, which is based on a home valued at $250,000 and supports a 5% withdrawal rate, there is a 90% profitability of the money lasting 30 years, according to Salter.
The article also touched on recent research from Ibis Software CEO Jerry Wagner, which introduced the “6% rule”  when outlining the spending success of reverse mortgages.
Read more Ell at Bloomberg. Written by Jason Oliva..
The statistics are showing that more people are remaining alone and unmarried in the United States and many of them have no children or significant “other” in their lives. This has a lot of implications when it comes to how these “singles” will enter their elder years and face the challenges of failing health and maintain their financial independence.
One area that needs to be considered, is the question of retirement and how to plan for it when a person lives alone and is single.
I will be posting two parts of the following article, written by Steven M. Greenwood, P.C., a specialist in retirement planning. firstname.lastname@example.org
Retirement Planning for Singles
“There’s a growing trend among the nation’s retirees – unexpected singlehood.
A March report by BMO Financial Group’s BMO Retirement Institute (http://tinyurl.com/c75r4r4) explains why more seniors are finding themselves living alone in their golden years, and it offers some advice on how to deal with it. I encourage you to download the report and share it with clients.”
Singlehood Is on the Rise
‘According to a 2011 U.S. Census Bureau report, 43% of people ages 65 and over are single, either due to the death of a spouse (27%), divorce (12%), or simply because they never married (4%).
These numbers are sure to rise as baby boomers reach retirement age, especially among women, who tend to outlive men by a large margin and whose salaries and pensions tend to be lower than those of men.
Single retirees have a 40-50% higher cost of living compared to married couples, and single women tend to have half the money saved for retirement than that of couples in the same age bracket.
Trying to maintain the same standard of living on one person’s pension instead of two can be daunting. There are also potentially additional expenses that a newly single person can incur when a spouse is no longer there to help with cooking, cleaning, household maintenance, or other necessary functions.”‘
I will post the reminder of this article on Monday, July the 11th.
Here is part 2 of an article that was published in Reverse Mortgage Daily, discussing how more Financial Advisors are beginning to look at the Reverse loan as an additional method of managing their client’s investments from being drawn down.
“Statements from those like Evensky, who are highly regarded in the financial planning community, have the potential to reach an largely untapped market. And some lenders may already be seeing an immediate benefit.
“We have already begun to market to the younger demographic, and this article has strengthened our message,” says Mike Gruly of 1st Financial Reverse Mortgages. ”The fact that the message comes from a respected member of the financial planning industry instead of the lending industry itself attracts more serious listeners, and is creating more serious dialogue.”
The dialogue is something originators have long worked toward, but have seen little success with as recently as late 2011.
Numerous financial planners told RMD in September  that they either didn’t know enough about reverse mortgages to recommend them to their clients, or that outdated information about reverse mortgages was drawing them against the loans as a retirement tool.
Today, however, the conversation has a different tune as originators have research with data to back up the idea of marketing to younger borrowers who have greater savings and higher home equity.
“This offers different possiblities but for a different customer, and a customer who might be amendable to a financial planner,” financial columnist Scott Burns told RMD after writing about the Sacks and Sacks research.
The Saver is a win-win for retirees, Evensky told Financial Advisor magazine.
“When markets regain their strength, the mortgage can be paid back,” Evensky told Financial Advisor magazine. “Our studies indicate this will significantly increase the survivability of the portfolio in retirement.”
Written by Elizabeth Ecker