WSJ: Reverse Mortgages No Longer “Wild West” of Financial Planning

Until recently, reverse mortgages were considered the “Wild West” of retirement planning, writes a Wall Street Journal article published this week. But today, many more planners are using them to create a stream of income or a cushion against market declines. 

WSJ speaks with two financial planners including Harold Evensky, co-author of a study at Texas Tech that has brought reverse mortgages into recent headlines. The article writes: 

“Using your nest to help with your nest egg is becoming a more common way to round out a financial plan during retirement.


Even after the bursting of the housing bubble, the biggest financial asset many retirees have is their home. But because that money is tied up in the equity of the house, it’s an investment that has been difficult to count on as a source of income.

Reverse mortgages have long been an option. However, until recently, they were the Wild West of retirement planning. High upfront costs, poor disclosure and dodgy sales pitches made them an option that many advisers avoided.

Now, with the introduction of reverse mortgages backed by the Federal Housing Administration in late 2010, more financial planners are adding them to their tool kit.

Primarily, they’re using them as a way to provide a steady stream of tax-free income that can last the rest of a retiree’s life. They can also be used as a way to provide a cushion against a big, but temporary, drop in the markets….”

Read the full article at

Written by Elizabeth Ecker

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  • It is obvious that the journalist is not overly familiar with HECMs.  What is pleasantly surprising is that it is financial advisors who are providing a positive response to HECMs.  The journalist seems lost in the details although he gets a whole lot right.

    It is also obvious Mark Cortazzo has yet to fully comprehend the arguments about the use of HECM proceeds early in retirement presented by the Sacks brothers.  If a senior is going to work part-time, then Social Security benefits could be subject to reduction of those benefits before 66.  He seems overly focused on budgeting and not enough on planning.

    Mark provides an excellent example where a reverse mortgage can help avoid costly penalties for early distribution of pension benefits.  It is obvious the clients in his example received a very valuable result by having their mother get a HECM over trying to help her from their personal assets.

    The article was very positive with but a few historical, product, and recommended use issues.  What was so great about it is that the financial planners spoke to more affluent borrowers while the reverse mortgage specialist showed how the product works and what its payouts might be.  

    The only drawback to the payout presentation is that upfront costs, interest rates, and ongoing MIP were not presented.    

  • Can a RM be split so that half (or some fraction) of the funds are used for monthly cash flow and the balance be available as a line of credit?

    • Not with a fixed HECM but with any adjustable rate HECM the borrower can take part upfront, another part separated for monthly or tenure payouts, and the remainder set aside as a line of credit. With an adjustable rate HECM, the choice of how to take the funds is solely up to the borrower. However, with a fixed rate all of the available proceeds must be taken at funding.

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