Reverse mortgages have cultivated an aura of mistrust and skepticism over the years, mostly as a result of a generally misinformed public. But knowing how these financial products can play a vital role in retirement income planning can alleviate the most common fears about reverse mortgages, according to a recent TIME Money video segment.
“Reverse mortgages have had a bad reputation in the past,” said Wade Pfau, professor of retirement income in the Ph.D. in Financial and Retirement Planning program at The American College of Financial Services, during the video segment, which was published by MSN.com. “People do believe that you do lose the title of your home. That’s just not true.”
Pfau, who has published a series of articles and research on the use of home equity in retirement income planning, most recently released the book “Reverse Mortgages: How to Use Reverse Mortgages to Secure Your Retirement” (Retirement Researcher Media, 2016).
A cornerstone of Pfau’s research—as well as other reverse mortgage research—emphasizes that the strategic use of home equity early during retirement can significantly improve a retiree’s chances of not running out of money short of a 30-year retirement period.
This concept of home equity use rejects the long-held conventional wisdom of getting a reverse mortgage as a last resort, only after all of there assets and income have been depleted.
“The conventional wisdom was that the reverse mortgage is a last resort when someone has run out of options,” Pfau said to MSN. “That’s not really the time to consider a reverse mortgage. I think it’s a retirement income tool that has to be considered as part of the entire household balance sheet.”
View the TIME Money video on MSN here.
Written by Jason Oliva