Recent changes to the reverse mortgage product and borrowing guidelines have prompted academic researchers, financial advisors and members of the media to look at reverse mortgages in a new light. And increasingly, those in the know are recommending reverse mortgages as a tool that can extend the life of your nest egg, and may significantly increase the odds that you’ll have enough money for the rest of your life. Here are a few recent articles on the subject.
Journal of Financial Planning: “Historically, many seniors and financial planning professionals have viewed reverse mortgages negatively and considered their use only as a last resort. However, the three legs of the traditional retirement ‘stool’ (Social Security benefits, pensions, and personal savings) have been considerably weakened…Current and future retirees need to re-examine their views and consider including a reverse mortgage as a part of their retirement plan.”
—David W. Johnson, Ph.D., and Zamira S. Simkins, Ph.D., “Retirement Trends, Current Monetary Policy, and the Reverse Mortgage Market,” 2014. Journal of Financial Planning 27 (3).
Boston College Center for Retirement Research: “Accessing home equity will become increasingly important in a world where retirement needs are expanding. People are living longer and face rapidly rising health care costs—and the retirement system is contracting – Social Security replacement rates are declining and employer-provided pensions have shifted from defined benefit plans to 401(k)s where balances are modest. Reverse mortgages offer a mechanism for tapping home equity for those who want to stay in their home.”
—Alicia H. Munnell and Steven A. Sass, “The Government’s Redesigned Reverse Mortgage Program,” January 2014
Journal of Financial Planning: “A reverse mortgage may be considered as another financial planning tool with no stigmas attached to its use.”
—Gerald C. Wagner, Ph.D., “The 6.0 Percent Rule,” Journal of Financial Planning 26 (12)
Wall Street Journal:“Some financial advisers think that even relatively affluent retirees could benefit from reverse mortgages—using them as an income stream that could help them lower their tax bills or avoid ill-timed sales of other investments.”
—Matthew Heimer, “Retirees Get Creative with Reverse Mortgages,” August 19, 2013
Jane Bryant Quinn: “I’ve got a financial proposal that is probably going to surprise you. Take out a reverse mortgage at age 62, even though you don’t need the money. In fact, take it especially if you don’t need the money. There will never be a better time…”
—“A Great Reverse Mortgage Idea: Take a Credit Line Now,” August 15, 2013
The New York Times: “Many baby boomers will need to consider how their homes—and the value locked inside—will help finance their retirement years.” Reverse mortgages “could become an integral part of many retirees’ financial plans, especially those who are short on cash but do not want to move.”
—Tara Siegel Bernard, “Rules for Reverse Mortgages May Become More Restrictive,” July 12, 2013
This article is intended for general informational and educational purposes only, and should not be construed as financial or tax advice. For more information about whether a reverse mortgage may be right for you, you should consult an independent financial advisor. For tax advice, please consult a tax professional.
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