Strategies to Extend Retirement Savings

I shared part of an article in the previous post that discusses a recent paper that was prepared and published about how using money from a Reverse mortgage is a strategy that more Financial Advisers are considering for their older clients.

And of course, each situation is different depending on the age and assets of seniors and their personal concerns.   Most often they are worried about running out of money and not being able to remain in their homes and have the funds to pay for any services they may need in the future.

The article provides three different scenarios for consideration and how a Reverse mortgage might be used in each situation.

New Paper Spells Out Reverse Mortgage Strategies for Financial Planners

“Because reverse mortgages do not offer a one-size-fits-all solution, the authors note that it is useful to think of these products as being used differently by three homeowner profiles: individuals whose retirement plans are well-funding, those whose plans are constrained and others who are under-funded.

Those fitting into the “well-funded” description, the authors note, may use a reverse mortgage line of credit as a standby or emergency fund; their Monte Carlo success rate is high (over 85%), indicating they may rarely face a spending shortfall during retirement.

Meanwhile, constrained clients are those who typically have Social Security or a pension and a “medium-sized” investment portfolio. This group, according to the authors, has a Monte Carlo success rate ranging from 65% – 85%, indicating higher chances they will need to cut future spending due to underperforming financial markets.

“Their plan may have no cushion to absorb unplanned-for events such as higher medical costs or greater longevity,” write Davison and Turner. “Constrained clients may especially benefit from using a reverse mortgage in concert with their investment portfolio or other assets.”’

 

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