Using home equity as part of their retirement planning was never part of the equation for Older Generations according to Financial Planning.
Older generations considered the home something to be preserved, paid off free and clear before retirement and left to heirs as a legacy. However, many in the industry feel it’s time to reconsider and a reverse mortgage as an integral part of a client’s long-term portfolio and to figure out strategies for leveraging clients’ homes that go beyond basic reverse mortgages
“Historically, the previous generation was dead set against ever using the house to fund retirement,” says Brad Davis, vice president of retirement income solutions for Nationwide Financial. And financial planners often view their job as asset preservation rather than the drawing down of assets. “When advisors talk to clients about assets for retirement, home equity really hasn’t been part of that discussion,” says Sandra Timmerman, director of the MetLife Mature Market Institute (MMI).
In the past many advisors have viewed reverse mortgages as complicated and expensive, used primarily by seniors in lower income brackets as a last-ditch solution says FP.
Yet seniors have a sizable portion of their net worth tied up in their homes. In today’s economy, even affluent clients may need to reconsider utilizing their home equity as a resource. “A lot of affluent people have been hit hard by the stock market crash, lost their shirts investing in real estate or perhaps their golden parachute or retiree pension has evaporated,” says Barbara Stucki, PhD, director of the Reverse Mortgage Initiative for the National Council on Aging. “What may at one point have seemed like a secure future may seem less so now, and they may need to fall back on assets [such as the home] they once would not have considered using.”