NY Times: Five Year Retirement Plan Should Consider Reverse Mortgage

A recent New York Times article offers a concise 5-year countdown-to-retirement plan, with the final year of the timeline being the time to –cautiously – consider a reverse mortgage.

Offered as a way to make ends meet if you’re planning to stay in your current home, reverse mortgages are a “fourth- or fifth-tier line of defense,” according to financial planner Jennipher Lommen of Santa Cruz, Calif., who is quoted in the article.

“If you are concerned about running out of money in retirement, ‘they can be a good resource,” she says. “But you’ll need to continue to maintain the home and pay the property tax, and you have to understand what will happen if you leave the home. The bank may get it, not your heirs,’” states the article written by Peter Finch.


The article compiles interviews with financial planners, retirees and economists who agreed that the five-year mark is when many people begin to panic about their retirement plans. It’s also a crucial window to make sure your post-work years are sufficiently covered.

At five years out, experts recommend seeing where you stand financially and looking at overall asset allocation. Four years before retirement is the time to plan where you want to live in the future. A retirement community? Your current home? If a community with care options for later in life is your preference, experts recommend speaking with a financial planner before purchasing any pricey long-term care insurance.

Whether or not you decide you want to stay in your current home, three years before retirement is the time to make updates to your house, either for yourself or new owners.

“You might also look at refinancing your mortgage or even opening a home equity line of credit, which will be easier to do while you’re still earning income. Your goal should ultimately be to reduce debt, not take on more of it, but a line of credit could come in handy in an emergency,” writes Finch.

Also during this year is the time to prioritize and reflect on what you want your day-to-day life in retirement to include.
Two years before you officially retire is the time to plan for “tax-saving opportunities” available in early retirement, and, along with considering a reverse mortgage, you should take another look at your investment portfolio the year before you retire.

Written By Maggie Callahan

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  • Strange but on Monday a prospect reached out to my wife about a HECM. Based on telephone conversations, it seemed the woman qualified. Her home had a LTV of about 35% based on the balance due on a forward mortgage. What she failed to tell my wife was that she was in default on her monthly mortgage payments.

    That evening my wife got a fax showing that the home had been sold in foreclosure in a trustee’s sale for which there are no right of redemption. The next day it was learned that the home had been sold to a third party for an amount exceeding the balance due plus all costs related to the trustee’s sales.

    It seems the woman had not been advised on cash flow needs in retirement. She knew she needed cash so she went to her family but the pledges that were made to her could not be timely kept. So then she remembered hearing about HECMs so that is when the prospect reached out to my wife.

    The prospect had no idea about processing time for a HECM or much else. Now the prospect has no home and will only see a small amount of the equity she had in the home. Why? Because she failed to look into reverse mortgages until it was too late.

    Cash flow planning for retirement should include cash reserve planning and other crucial matters such as HECMs. Such planning should not wait until the senior has exhausted all other sources of cash.

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