I have found it to be so encouraging in that Financial Advisers and the industry in general are beginning to use a Reverse mortgage as part of retirement planning.
Almost every day, there is another positive article or professional study about the FHA loan and the recent changes to it, that it not only safer, but much more affordable as well. Plus the benefits of using it as part of a retirement plan.
Advisor Magazine published an article earlier this month, stating why Advisers need to become educated and open to their use in retirement planning for their clients who are near retirement, as a viable method of extending retirement funds.
The number 1 fear that just about everyone has, is running out of money as they age and unfortunately, far too many people are underfunded in their retirement plans and it’s important that Advisors are reasonably knowledgeable about the loan program, so that they may discuss it with their clients.
Having what could be called a “Stand By Reverse Loan” could possibly make a significant difference on how much money will be accessible for a someone after they retire and possibly reduce the worry of running out of funds to support one’s self.
I’m going to share part of a summary article in this post, with the remainder of it in a follow up post, due to it’s length. Plus I will also provide a link to the article itself in the event anyone one to read it in it’s entirety.
Advisor Magazine: Leverage Housing Wealth with Reverse Mortgages
Posted ByJason OlivaOn February 3, 2016 @ 6:54 pm In HECM,News,Retirement,Reverse Mortgage
“A slew of research and commentary in recent years have encouraged consumers as well as other financial professionals to take a fresh look at reverse mortgages, following the implementation of program changes such as the Financial Assessment, upfront draw limitations and updates to the non-borrowing spouse policy.
Furthermore, concerns that American retirees will fall woefully short of having enough savings to live on during retirement have also generated a keen interest among financial planners, retirement researchers and even a Nobel Laureate, to analyze how housing wealth could effectively fit into the equation for many retirees, according to the Advisor Magazine article written by reverse mortgage industry veteran Shelley Giordano.
Giordano, who also chairs the Funding Longevity Task Force, a group comprised of distinguished members of the financial planning community, writes that advisers who ignore the recent changes made to reverse mortgages “will fail to appreciate how the prudent use of housing wealth in the distribution phase can contribute to cash flow survival and even improve the overall bequest” for retirees and their heirs.”
Look for the remainder of the summary in my next post and be sure to contact me if you have any questions.
After years of bias against the use of a Reverse loan for retirement planning, it seems that Financial Planners are finally becoming more open minded about them and less hostile about their use.
When I first began my profession as a consultant 14 years ago, I thought that they would be open to the consideration and alternative of using a Reverse loan for some of their clients. But I was totally incorrect, as I was met with nothing but negativity by the members of NAIFA (And others in that profession) in which I was a member of on more than one occasion.
I would attend their meetings and certainly offer my support by paying my dues and being part of their Young Advisors Team but it was definitely an “Old Boys Club”, with just a few women members. Everyone was polite but not interested in what I had to share and needless to say, it was discouraging to be met with nothing but walls….
It was extremely frustrating to met an Advisor with a smiling demeanor and attempt to engage them in a conversation, but they barely concealed their negative attitudes when I would introduce myself to them as a Reverse Loan Consultant.
And I have to say, that typically they were always older men. Set in their way of doing business and they certainly didn’t have the time or interest in anything I had to share that could possibly be a benefit for their clients.
However, I did create a few relationships during that period of time because at the least, they “liked’ me, they just weren’t interested in what I had to share with them, as they had already made up their minds that a Reverse loan was not a good option in any scenario for their clients.
And their negative reaction was due to the lack of education and understanding about the FHA loan program for seniors. But it seems that in the last few years, the financial planning industry is beginning to consider their use for retirement planning as an additional and crucial element for their clients.
Their own trade magazine Financial Advisor has published some very positive articles and studies supporting the use of Reverse loans for retirement planning along with “The past year alone saw a plethora of reverse mortgage commentary from the financial planning community, including articles and blog posts on the “new” Home Equity Conversion Mortgage (HECM), as well as research papers published in prominent trade journals such as the Journal of Financial Planning and the Journal of Retirement”.
So after so many frustrating years there has been a shift in attitude and the younger and newer members of this industry, want to learn about Reverse mortgages and how they can extend the life of an existing retirement plan.
A professional “corner has been turned”. Retirement planners are now receiving the necessary education to help them determine whether or not, using the funds from a Reverse loan is a viable option for their clients as they move into their retirement years.
And personally, I am finding that now when I speak with one, they are sincerely interested and open to the suggestion and ask me questions as well.
What a difference….
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.”’