Financial advisors will be of greater help to their clients if they focus on a broad array of tools, including taking out a reverse mortgage, a Boston College study released in April finds.
The study, conducted by the Center for Retirement Research at Boston College, analyzed the point at which a person of retirement age falls short of his or her retirement “target” when several different tools are used: delaying retirement, taking out a reverse mortgage and controlling spending.
The study assumes reverse mortgage retirement income is used either by a homeowner without a mortgage who takes the maximum loan amount and receives lifetime payments over the course of the loan or by a homeowner who has a mortgage, in which case the loan is used to pay off the existing mortgage or is received as a lump sum.
Under a base case scenario, 74% of households fall short of their retirement target at age 62. The study finds that with a reverse mortgage, that age increases to 67. When compared with other potential solutions however, including controlling spending and investing 100% in “riskless equities,” the reverse mortgage delays that age more than the other mechanisms for each age group (see chart).
View the study findings.
Written by Elizabeth Ecker