In yet another financial-planning focused headline, real estate publication Inman News picked up on the reverse-mortgages-are-no-longer-a-last-resort trend in an article this week by syndicated columnist Tom Kelly.
The article’s subheading: “How blending product with other investments can boost retirement income,” mirrors recent coverage in other publications geared toward financial planning professionals.
Barry H. Sacks, a real estate tax attorney in San Francisco, and Stephen R. Sacks, professor emeritus in economics at the University of Connecticut, researched ways to further enhance a senior’s finances by adding home equity via a reverse mortgage. In a recently published study, the authors found that a reverse mortgage can be powerful tool when used within a coordinated strategy rather than a “last resort” after exhausting the securities portfolio.
The model shows that the retiree’s residual net worth (portfolio plus home equity) after 30 years is about twice as likely to be greater when an active strategy is used than when a conventional strategy is used.
“It’s so important that financial planners have begun to ask the question about what’s possible with reverse mortgages,” said Martin J. Taylor, president of Bellevue, Wash.-based Stay In-Home, a reverse mortgage lender. “While they have often been known for solving desperate situations, they have a variety of uses in long-term financial planning.”
…The authors emphasize that a reverse mortgage is not necessarily a useful vehicle for every retiree who has substantial home equity. A retiree whose primary source of retirement income is a securities portfolio and who also has substantial home equity must decide early in retirement whether to live within the safemax limit set by his or her portfolio. This decision is a fundamental component of overall retirement planning.
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