Every day 10,000 people are turning age 62 and many of them are underfunded for retirement. As the “Silver Tsunami” of Boomers begin to retire or attempt to retire, they may not have the funds for their later years and this is a serious national concern, about to take care of this aging population in the next ten years.
Financial Advisers after may years of resistance to the idea of using a Reverse loan as part of retirement planning, are beginning to see the wisdom in utilizing this option to extend the longevity of a retirement portfolio.
The Journal of Retirement recently published an article about how using funds from a Reverse loan is an excellent strategy manage and extend retirement funds and provided three examples of individuals and how a Reverse mortgage could give them a retirement advantage.
My previous two posts cover the first sections of the article and this post will provide the remainder of it.
“The Under Funded Client”
Posted ByJason OlivaOn In Data,HECM,News,Retirement,Reverse Mortgage
“Lastly, there are under-funded clients—those who may need cash flow immediately and may obtain a reverse mortgage as a last resort only after exhausting all of their other resources. This group’s Monte Carlo success rates are low, perhaps 60% or less.
“These clients may have the greatest need for a reverse mortgage,” the authors write. “However, it can be demonstrated, using Monte Carlo simulation, that under-funded retirees with home equity that is equal to, or greater than, their relatively low level of invested assets can gain a tremendous boost from the use of an RMLOC [reverse mortgage line of credit]. The challenge may be to maintain a strong financial discipline and to use the reverse mortgage judiciously to their greatest long-term advantage.”
An important conclusion of the article is that reverse mortgages can help with a retiree’s three basic concerns: enhancing sustainable spending, serving as an emergency fund, and even boosting estate sizes, according to Davison and Turner.
“Overall, the major positive surprise is the value reverse mortgages can add to the lives of retirees, both those who already look forward to a satisfying retirement and those who are not as well prepared financially but will make it through,” Davison and Turner write. “This bodes well for a country with a rapidly expanding and aging retiree population.”’
Most people are completely unprepared to retire because they haven’t planned very well for it or frankly the rescission dug a big hole in their investments. And it’s amazing to know that 10,000 people a day are turning 62 and in most cases, totally unprepared for retirement and this giant group of Boomers is referred to as the “Silver Tsunami”.
As they age and move into their “Golden Years”, their number one concern is running out of money. People are living longer and the reality of out-living your savings is frighteningly real.
However, more Financial Advisers are suggesting to their clients to consider using a Stand By Reverse mortgage to extend the longevity of their savings and investments and it’s a very smart move.
The Dallas Morning News featured a column recently that discussed this important strategy for making, money, last.
Here is part 3 of a summary. The other parts of this article can be found in my previous, 2 posts.
Reverse Mortgage Line of Credit: A ‘Powerful’ Retirement Tool
Posted ByJason OlivaOn October 26, 2015 @ 5:01 pm In News,Retirement,Reverse Mortgage
“In another scenario, Burns notes a couple that recently lost their jobs before they retired. The couple, aged 65 and 67, has $2,000 per month in Social Security benefits; only $70,000 in savings; and own a home worth $200,000.
“If they do nothing, their lifetime consumption will be $20,000 a year in constant purchasing power,” Burns writes. “But if they take out a reverse mortgage line of credit, their lifetime annual consumption will be $25,900 a year. That’s a 29.5 percent increase.”
In a previous column, Burns wrote about what he calls “the thinness of wealth,” specifically about how 80% of all households have more money in home equity than they do in their combined financial assets and retirement accounts.
“Think about that—80 percent,” Burns writes. “It tells us that whether it is a reverse mortgage, downsizing, right-sizing, renting or living in a trailer, our shelter decisions will make the difference between retirement squeeze and retirement comfort.”’