Inman News: Reverse Mortgages No Longer Last Resort

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.

Kelly writes:


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.

View the original article.

Written by Elizabeth Ecker

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  • Mr. Kelly is great on real estate issues but the application is not just to portfolio assets but also to self-directed portfolio assets contained in tax deferred defined contribution retirement plans including both qualified and those which are not and also portfolio assets held in pass through vehicles generally.  The primary differences between  these scenarios are the tax rates particularly on pension distributions versus other types of payouts.
    The article by Drs. Sacks is a proof that reverse mortgages are helpful in this regard.  It does not demonstrate how diversified the benefits might be.  

    It is being said that the latest article by Dr. Salter and Mr. Evensky will have much broader application and call into question the issue of why financial and retirement planners are not considering HECMs in all retirement planning.  Of course the expectation is there are many occasions where obtaining a HECM early in retirement could be counterproductive.  The important thing is that it is being seen as a standard retirement product to be considered in all retirement planning where home equity is available.

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