The 4% Rule and Financial Planners

An interesting study was recently completed by Jerry Wagner of Ibis software, illustrating how by using a reverse loan in lieu of drawing down on a retirement portfolio, one can extend the spending horizon by many years.

The study is quite lengthy and involves charts and graphs to make his point and rather than try to share it here, I will provide a copy of a summary of his study.

The use of reverse loans for funding longevity and preservation of investments, is gaining greater acceptance among Financial planners, Estate Planning attorneys and CPA’s.

It is not the loan of “last resort”, but a safe and affordable method  to assist people  to move into their retirement years by leveraging the funds they have through the use of a reverse mortgage.

Study Touts Reverse Mortgage Benefits to Financial Planners

Posted By Jason Oliva On December 30, 2013 @ 6:53 pm In News,Retirement,Reverse Mortgage

“A recent study [1] aims to help financial planners realize the merits of using reverse mortgages to supplement their client’s portfolios.

The study, published by Jerry Wagner of Ibis software, a reverse mortgage software provider, was included in the Journal of Financial Planning, an industry publication for financial planners.

Deviating from what financial planners have known as the 4% rule, which determines the spending success of an individual’s portfolio throughout the course of a 30-year retirement, Wagner introduces what is known as the 6% rule, outlining a portfolio’s spending success when it becomes supplemented by a reverse mortgage.

The study affirms that with a 30-year spending horizon and a first-year withdrawal of 6%, reverse mortgages can provide “spending success” levels of 88-92%, writes the study’s author Gerald Wagner, Ph.D., who is also president of Ibis Software.

“A financial planner’s goal is to be able to sit down with a couple (or person), review their portfolio and other income sources, and create a plan that is both logical and explainable,” Wagner says.”

I will share the rest of the article in my next post.


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