Forbes: Reverse Mortgages Can Help in Divorce

As divorce becomes more common among older couples, reverse mortgages can be financially useful tools, especially for divorcing women, Forbes reports.

While the overall divorce rate has been declining, it is on the rise among older generations, with “grey divorce” identified as a significant 21st century trend.

For those divorcing at age 62 and older, reverse mortgages can represent a new strategy for making divorce settlements last as long as possible, writes Forbes, as they are becoming “basic financial management tools, rather than just last-resort methods to increase cash flow.”

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An example the article suggests is using a reverse mortgage to provide cash funds during retirement could save divorced individuals from having to sell temporarily depressed investments.

Reverse mortgages can also delay drawing from Social Security and help pay off a traditional mortgage or other debts, rather than using taxable withdrawals from a 401(k) or other retirement investments.

Read the Forbes article.

Written by Jason Oliva

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  • “save divorced individuals from having to sell temporarily depressed investments.” I don’t agree with Forbes on this one. How much time does a senior have to HOPE depressed investments recover? Then add up all the upfront costs of a reverse mortgage and the accumulating compound interest and MIP. Sounds like a big gamble to me.

  • Mr. Jackson,

    Divorces are never as simple as people think they should be. As a tax adviser, the best advice I give is not to divorce if at all possible. Too many people do not recognize the sheer misery it brings for a significant period of time and with children the time period can be intolerable as I have seen with numerous clients.

    The reason why you see no analysis on the Social Security delay strategy is that the payback timing is horrendous. See my RMD article with some examples at http://rmdaily.wpengine.com/2012/01/06/using-hecms-to-increase-social-security-benefits/

    No one has supplied any examples or data to counter the article. They have nothing to show why it is wrong. Over a year ago, Dr. Salter stated he was looking into the issue. Nothing has been seen of that study to date. It may still be coming but it is clear why it is not easy to give a strong, positive spin on it. It is a risk loaded strategy with a slow payback period.

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