Category Archives: HECM Refinance

10 REASONS why you should consider a HECM if you don’t have a mortgage (and more so if you do).

Think of all the things you’ve WANTED to do.

DO THEM, without payments.

  1. Get a new car without payments.
  2. Remodel the house without payments.
  3. Take a real vacation without payments.
  4. Consider solar without payments.
  5. Buy a vacation house without payments.
  6. Put money in your account without payments.
  7. Get a new air conditioner without payments.
  8. Get a line of credit that earns significant money without payments.
  9. Pay off credit cards and other nagging debt without payments.
  10. Take a vacation from stress without payments.
  11. (Editor’s note: If you have a mortgage, HECM pays it off first.)

Take a “ride” on this webpage.

Consider talking to a veteran (licensed) loan officer to answer your questions. See “information” tab on home page.

“I wish I had known about this before I had taken out the home equity line of credit.”

When developing a new television spot, Reverse Mortgage Funding decided to take page out of the Cola Wars handbook, inviting real consumers to take “the HELOC Challenge.”

Decades after Pepsi famously dared soda drinkers to see whether they preferred its flagship product over Coca-Cola in a series of iconic commercials, RMF undertook a similar experiment with Home Equity Conversion Mortgage-eligible borrowers. But instead of two cups of cola, the borrowers received information about a traditional home equity line of credit (“Product A”) and a HECM line of credit (“Product B”).

All the participants know upfront are the facts presented, and that they’re being asked to compare two types of home equity loans. And just like the participants in a recent RMF-supported study conducted by the National Council on Aging, they ended up liking the reverse mortgage far better than the HELOC.

In the two-minute commercial, an announcer explains that participants were told some of the basic differences between the two products, including the “flexible payment options” available for HECM lines of credit — echoing another recent RMF ad — and the government insurance feature.

“Product B almost sounds too good to be true,” one participant says in a voice-over.

“That was a no-brainer,” says another.

The commercial then transitions into the big reveal, showing the stunned faces of participants who overwhelmingly selected the reverse mortgage product over the traditional HELOC.

“I wish I had known about this before I had taken out the home equity line of credit,” says one participant.

“I haven’t heard yet any reason why I shouldn’t pick this product,” says another.

The ad also shows the homeowners admitting that they had negative or incomplete impressions of the reverse mortgage prior to attending the focus group, but that the side-by-side comparison — minus the name — helped them become better informed.

“I don’t think I ever, for some reason, fully understood that a reverse mortgage was, in fact, line of credit,” says one man, shortly before a graphic reveals that 85 of 88 focus group participants selected the HECM line of credit over the HELOC.

The results certainly weren’t surprising to RMF, according to chief marketing officer Jean Noble. The Bloomfield, N.J.-based lender had been conducting similar focus groups around the country since 2016, and after hearing an enthusiastic response from participants, Noble and RMF decided to bring the groups into viewers’ living rooms.

“You’re sitting behind the glass, and they’re like: ‘This product sounds phenomenal!” Noble said. “What better way to debunk the myth of the product by having real people take this HELOC challenge and airing it on TV?”

The filmed spot came from a series of focus groups in Rochester, N.Y., and the participants knew that they could potentially end up in marketing materials or corporate training videos. But they weren’t paid for their time, Noble said, and the reactions were completely genuine.

RMF first began airing the commercials Monday as part of a “soft launch” on cable networks such as CNBC, CNN, and the Smithsonian Channel. And while it’s still too early to determine firm results, Noble said consumers have responded positively on RMF’s website and social media pages.

“This is a great awareness campaign with something completely different than we’ve ever executed before,” Noble said.wq

Consider now, talk to a 12 year HECM veteran loan officer. Access through “Information” tab on home page here. Thanks for taking the HELOC challenge.





4 Percent Retirement Rule Is Broken — Next up?

By Dave Copeland on January 10, 2018

For decades, the mantra of retirement advisers has been that people need to start saving early and often for a happy retirement.

But it’s only been in recent decades that they have turned their attention to how to best manage those savings once you’re no longer accumulating wealth and living off the proceeds of a life’s work.

The focus on making sure you don’t run out of money before you run out of years started in 1994, when William Bengen developed the “safe withdrawal rule,” more commonly known as the “4 percent rule.”

Editor’s note: Since that, a lot of folks have lived longer and ended up in virtual poverty because they had a problem using home equity to finish well. The HECM Reverse Mortgage was designed for that, and people in retirement mode should know that the thinkers believe you should use home equity to support early in retirement and complete the cycle using home equity resources. Fifty thousand American senior homeowners attest to their home equity support each year. More are expected to join that group as they grow older and wiser in retirement mode.

The “4% rule” doesn’t work.

It is our conclusion that home equity is fair game and should be used more often than it is. More economists and financial planners are dealing with reality. Americans are not carrying enough savings and pensions into retirement to cover the risk of running out of resources. More information on the home page under the “Information” tab.


Restart your conversation in 2018. Frequently Asked Questions about HUD’s #HECM62 Mortgages

The Home Equity Conversion Mortgage (HECM) is FHA’s reverse mortgage program, which enables you to withdraw some of the equity in your home.  The HECM is a safe plan that can give older Americans greater financial security. Many seniors use it to supplement Social Security, meet unexpected medical expenses, make home improvements and more. It is smart to know more about reverse mortgages, and decide if one is right for you!

Or, if you prefer, call or email Warren Strycker, senior veteran mortgage lender representative to review your thoughts about this amazing product. Call 928 345-1200 or email Strycker is responsible for this information webpage, where informational articles investigate the HECM Reverse Mortgage. Strycker recommends the HECM to get your affairs in order.

1. What is a reverse mortgage?

A reverse mortgage is a special type of home loan that lets you convert a portion of the equity in your home into cash. The equity that you built up over years of making mortgage payments can be paid to you.  However, unlike a traditional home equity loan or second mortgage, HECM borrowers do not have to repay the HECM loan until the borrowers no longer use the home as their principal residence or fail to meet the obligations of the mortgage.  You can also use a HECM to purchase a primary residence if you are able to use cash on hand to pay the difference between the HECM proceeds and the sales price plus closing costs for the property you are purchasing.

2. Can I qualify for FHA’s HECM reverse mortgage?

To be eligible for a FHA HECM, the FHA requires that you be a homeowner 62 years of age or older, own your home outright, or have a low mortgage balance that can be paid off at closing with proceeds from the reverse loan, have the financial resources to pay ongoing property charges including taxes and insurance, and you must live in the home. You are also required to receive consumer information free or at very low cost from a HECM counselor prior to obtaining the loan.

3. Can I apply for a HECM even if I did not buy my present house with FHA mortgage insurance?

Yes.  You may apply for a HECM regardless of whether or not you purchased your home with an FHA-insured mortgage.

4. What types of homes are eligible?

To be eligible for the FHA HECM, your home must be a single family home or a 2-4 unit home with one unit occupied by the borrower. HUD-approved condominiums and manufactured homes that meet FHA requirements are also eligible.

5. What are the differences between a reverse mortgage and a home equity loan?

With a second mortgage, or a home equity line of credit, borrowers must make monthly payments on the principal and interest.  A reverse mortgage is different, because it pays you – there are no monthly principal and interest payments.  With a reverse mortgage, you are required to pay real estate taxes, utilities, and hazard and flood insurance premiums.

6. Will we have an estate that we can leave to heirs?

When the home is sold or no longer used as a primary residence, the cash, interest, and other HECM finance charges must be repaid.  All proceeds beyond the amount owed belong to your spouse or estate.  This means any remaining equity can be transferred to heirs.  No debt is passed along to the estate or heirs.

7. How much money can I get from my home?

The amount varies by borrower and depends on:

If there is more than one borrower and no eligible non-borrowing spouse, the age of the youngest borrower is used to determine the amount you can borrow.

8. Should I use an estate planning service to find a reverse mortgage lender?

FHA does NOT recommend using any service that charges a fee for referring a borrower to an FHA-approved lender.  You can locate a FHA-approved lender by searching online at or by contacting a HECM counselor for a listing.   Services rendered by HECM counselors are free or at a low cost.  To locate a HECM counselor Search online or call (800) 569-4287 toll-free, for the name and location of a HUD-approved housing counseling agency near you

9. How do I receive my payments?

For adjustable interest rate mortgages, you can select one of the following payment plans:

For fixed interest rate mortgages, you will receive the Single Disbursement Lump Sum payment plan.

 10. What if I change my mind and no longer want the loan after I go to closing?  How do I do this?

By law, you have three calendar days to change your mind and cancel the loan.  This is called a three day right of rescission.  The process of canceling the loan should be explained at loan closing.  Be sure to ask the lender for instructions on this process.  Mortgage lenders differ in the process of canceling a loan.  You should ask for the names of the appropriate people, phone numbers, fax numbers, addresses, or written instructions on whatever process the company has in place.  In most cases, the right of rescission will not be applicable to HECM for purchase transactions.

Consider HUD secretary Ben Carson’s support of the HECM reverse mortgage on these pages.

Expensive homes and the reverse mortgage

By Jack M Guttentag  — (The Mortgage Professor)

(TNS)–As a federally insured reverse mortgage program under the Federal Housing Administration, the home equity conversion mortgage program is not designed to help the wealthy. In calculating maximum draw amounts, the highest property value it will recognize is $625,500 (new limit $679,650.00). If your house is worth $1 million or $10 million, you can’t draw more than the amounts available on a home worth $625,500 (new limit $679,650.00). Further, although higher value properties reduce the risk of loss to the FHA, the mortgage insurance premium is the same for a property worth $1 million and one worth $625,500 (new limit $679,650.00).

This does not mean, however, that owners of pricey homes can’t use the HECM program to their advantage. They can, and I’ll explain how in this article.

The key question, which is the same for all senior homeowners, is whether the withdrawable amount available on an owner’s house can make a significant difference in her lifestyle. If the answer is yes, the case for the HECM is as strong when the house is worth $1 million as when it is worth only $679,650.00. The reason is that the owner of a pricey house, who has excess equity upon entering the program, will retain it when leaving the program, whether by selling the home, moving out of it permanently or dying.

An owner with excess equity whose intent is to leave the equity to her estate, can do exactly that. What she cannot do is convert all equity into spendable funds for her own use unless she decides at a future time to downsize by selling her existing house and paying off the HECM. She can then buy a less-pricey house with a new HECM, converting the excess equity into investable funds.

Here are three examples of 65-year-olds looking ahead 12 years who own a million dollar home but have different needs.

Sam Wants to Eliminate a Monthly Payment
Sam is 65 with a home worth $1 million that has an outstanding mortgage balance of $300,000. His objective is to rid himself of the monthly payment by paying off the balance with the HECM, while retaining as much of his equity as possible. The HECM he selects is an adjustable with an initial rate of 2.975 percent and origination fee of $3,500. This combination of rate and fee will result in the lowest HECM debt after 12 years, which was his target period.

Sam’s equity after 12 years is the value of his home at that point less his HECM debt. Assuming an annual appreciation rate of 4 percent, which is the figure that the U.S. Department of Housing and Urban Development uses in calculating draw amounts, Sam’s home will be worth about $1.6 million. His HECM debt will be anywhere from $532,000 if the initial rate of 2.975 percent remains unchanged for 12 years, to $884,000 if the rate immediately jumps to the maximum of 7.975 percent. Sam’s estimated equity, therefore, will be somewhere between $717,000 and $1,072,000. This is the amount Sam would realize if he sold the house and paid off the HECM at age 77, and it is also the amount that would go to his estate if he died at that age.

Let’s now assume that Sam is alive and kicking at 77 but no longer needs the house with the HECM. As is the case with many seniors, he wants to downsize. So he sells the house and pays off the HECM, realizing (on the most conservative assumption) about $717,000. If his new house costs $600,000, he can draw about $358,000 on a purchase HECM at age 77, and will pay the balance of $242,000 out of his sales proceeds. That would leave at least $475,000 for investments.

Sue Needs Additional Income Now
Sue selects an adjustable HECM at 4.725 percent with a $6,000 origination fee that offers the largest tenure monthly payment—one that lasts as long as she lives in the house—of $1,844. Sue uses less equity than Sam over 12 years because her draws are spread out over the period rather than upfront. Her equity at the end of the period is between $1 million and $1.2 million. Sue has the same option as Sam to downsize by paying off the HECM and taking out another one to purchase a less costly home.

Sheldon Wants Protection against Running Out of Money
Sheldon selects the same HECM as Sue because it generates a larger credit line over 12 years than any of the other available HECMs. The line at that time will range from $671,000 to $1,113,000, depending on what happens to his HECM interest rate. This is the amount Sheldon will be able to draw in order to invest in income-earning assets. After this draw, Sheldon would still have equity of anywhere from $451,000 to $908,000. As with Sam and Sue, Sheldon could also downsize if that was where he wanted to go.

In sum, seniors with houses worth more than $679,650.00 retain their excess equity when they take out a HECM reverse mortgage, and if they decide to downsize at some point, they can convert the equity into investable funds. No two seniors, of course, are exactly alike, and each requires a plan that is hand-tailored to their needs, their preferences and their outlook. My HECM calculator was designed for that purpose.

tributed by Tribune Content Agency, LLC.

©2016 Jack Guttentag


Rules Have Changed For Buying a House with a HECM Reverse Mortgage

By Jack M Guttentag  — (The Mortgage Professor)

December 30, 2017

When I wrote about purchasing a house with a HECM reverse mortgage earlier this year, a major issue faced by borrowers was whether to pay a penalty insurance premium in order to maximize the cash draw on the HECM. A few months after the article was written, HUD eliminated the option of paying a lower premium if the borrower drew less cash. The upfront mortgage insurance premium is now 2 percent of property value regardless of how much the borrower draws.

The advantage of buying a house with a HECM has not changed. It remains the case that the HECM does not impose a monthly payment burden on the borrower. The only disadvantage is that the reverse mortgage will cover only about 50-60 percent of the house price, depending on the borrower’s age, requiring the purchaser to find the remaining needed cash elsewhere. The most common source is asset liquidation.

Seniors who go this route have two decisions to make. First, they must decide whether they want an adjustable rate or a fixed-rate HECM. Second, they have to select the lender offering the best terms. I will illustrate these decisions with the case of Charles, who is 72 and wants to purchase a $400,000 house on December 18, 2017.

Fixed Rate or Adjustable Rate?

Most seniors will select the option that provides the larger cash draw. Among five lenders quoting a price to Charles on my website, the largest cash draw on an adjustable rate was $201,800 whereas the largest draw on a fixed-rate was $194,600. The adjustable provided $7,200 more, which could settle the matter.

Or perhaps not. If Charles is concerned with the size of his estate, he will also look at how large his future loan balance would be. Looking ahead 10 years, for example, the balance of the adjustable will be $389,356 compared to a balance on the fixed of $406,386. He will owe $17,030 less on the adjustable.

This is not quite the slam-dunk it may appear, however. The future loan balances are calculated at the interest rates on December 18, which were 3.21 percent on the adjustable and 3.99 percent on the fixed. While the rate on the fixed will remain at 3.99 percent over its life, the rate on the adjustable could rise as high as 8.21 percent if market rates increase. Were that to happen in the near future, the balance on the adjustable would quickly come to exceed the balance on the fixed. It is unlikely that the risk of future rate increases will dissuade Charles from selecting the adjustable, but it could.

Selecting the Lender

The reverse mortgage market is extremely inefficient. Except for those seniors who make their way to my website, few try to shop. As a result, the prices of identical transactions can differ materially from one lender to another.

Even on my website, where participating lenders know that their price quotes will be compared to others, price differences are large. For example, on the day my hypothetical house purchaser was quoted an adjustable rate of 3.21 percent with a cash draw of $201,800, another lender on my site quoted a rate of 4.76 percent and a cash draw of $172,005, or $29,795 less. That was the worst quote among five lenders who lend in California. The quotes of the other three lenders were in-between the best and the worst.

Bottom Line

Seniors who want to purchase a house with a HECM and who have no concern regarding the amount of home equity they leave to their heirs can easily shop lenders for the largest cash draw. They can shop multiple lenders with one visit to my site, or by contacting individual lenders one lender at a time. If they shop by contacting individual lenders, the process should be completed within a week ending on a Monday because HECM lenders reset their prices on Tuesday.

Purchasers who do have a concern for what their heirs will inherit will want to see not only cash draws but also projections of future loan balances that are consistent from one lender to another. My site is the only place they will find that.

Those who choose this mortgage loan officer will have the opportunity to make the choices in much the same way as the Mortgage Professor. Access contacts at the “information” tab on the home page. Thanks for asking for Warren Strycker, who manages this information webpage and is a fully licensed veteran (12 years) Arizona loan officer.



HECM from HELL — one that got away.

This is the story of a HECM loan gone bad — to be more accurate, it was the HECM that got away after every thing imaginable was tried to keep it in.

It was a simple solution, I thought, or was it???

Gentleman called to ask me to come talk about Reverse Mortgage with he and his wife. They were both in their early 90’s (can it be that “early” can ever refer to the 90’s?? Probably not).

Anyway, I went and did my best presentation and they decided to get the required counseling, and so they did.

The home was a modest 3 bedroom, appraised well above a hundred thousand. The “fix” was in, more than $70,000 in cash would be placed in their accounts, well, until the discussion centered on which of the two would get the money in their account.

Life was about to be better for them (or so we thought).

The couple had a trust, only she wasn’t in it. It’s OK, she said, she just needed a place to live and they needed to pay  some bills. Lender wouldn’t stand for an unborrowering spouse living in the house without a trust adjustment which would say she had rights to live in the house after he passed, and in the process of writing the paragraph that gave her the rights, his family (and him) halted all discussion as he headed to the hospital for open heart surgery.

That’s when his family entered in. Hmmmm. All negotiations came to a halt while he had bypasses installed (at 92 years of age).

Mrs Stars waited in his hospital room for days on end to see him through the surgery and then she was invited to stay home because… well mostly it was about making sure she didn’t get any rights to the house. One story counted the time she had with him alone in the hospital to talk about all this. It wasn’t about the reverse mortgage that caused the ruckus. It was because she was left out of the proceedings altogether and I was invited to “cease and desist” by the lawyers now filing for divorce. Coming out of the hospital, he moved into the home of his son and daughter in law and she lived in the “big house”.

Oh yes, then she was served with divorce papers for “irreconcilable differences” and partially because she threw a pitcher full of water on the son in law who was staying in their house to protect his dad from his step mother who was still trying to work out an agreement with her husband to stay in the house which now had all locks changed to prevent unagreed entry.

The divorce is set for two days after Christmas.

I’m pretty sure this is a HECM that wasn’t supposed to close. The positive message here is that this not-always-nice lady is now threatened with divorce two days after Christmas when she will be legally invited to leave her home soon after the holidays is now inviting us to eat her chicken soup, and it’s good.

It’s the HECM from HELL that didn’t happen. I am thankful for bunches of others that did. Don’t let this happen to you.


If you live in Arizona and wish to consider a HECM to shore up your finances and take some pressure off, it will be OK to call me for help. See “Information tab” on the home page for particulars.


Steps for Getting your Affairs in Order


Steps for Getting Your Affairs in Order

  • Put your important papers and copies of legal documents in one place.You can set up a file, put everything in a desk or dresser drawer, or list the information and location of papers in a notebook. If your papers are in a bank safe deposit box, keep copies in a file at home. Check each year to see if there’s anything new to add.
  • Tell a trusted family member or friend where you put all your important papers. You don’t need to tell this friend or family member about your personal affairs, but someone should know where you keep your papers in case of an emergency. If you don’t have a relative or friend you trust, ask a lawyer to help.
  • Give permission in advance for your doctor or lawyer to talk with your caregiver as needed. There may be questions about your care, a bill, or a health insurance claim. Without your consent, your caregiver may not be able to get needed information. You can give your okay in advance to Medicare, a credit card company, your bank, or your doctor. You may need to sign and return a form.

Consider HECM Reverse Mortgage to use some of your home equity to shore up finances for this “leg” of your finances. Call HECM veteran Warren Strycker, 928 345-1200 or email/write for professional friendship through the process.

Restart your conversation in 2018. Frequently Asked Questions about HUD’s #HECM62 Mortgages

Patriot Lending — unparalleled service.


To make retirement free of financial woes. Our dedicated, diverse, and determined staff are available to you 24/7 to hone in on the financial product that most fits your needs. The managerial staff at Patriot Lending has been able to compile a team of qualified professionals to assist you in any way possible.

The financial tools we offer are available at many other financial institutions but, we believe that the service we offer here at Patriot Lending is unparalleled.

Are you ready to embrace the flexible, affordable, hassle-free benefits of a reverse mortgage? Call us today to begin the journey towards the home of your dreams!

Consider talking to a reverse mortgage specialist here in Arizona 928 345-1200 or email, or access more HECM reverse mortgage information to get started — click here:

6 questions — Take time to get affairs in order — 928 345-1200

Let’s have a conversation today. If you are looking for some answers to the HECM puzzle… answer some of ours — call me (Warren Strycker) 928 928-1200 to start this conversation — let’s talk about HECM. (Strycker is a veteran fully licensed HECM advisor — you’ll get some valuable insights from him).

  1. What year were you born?
  2. Which income streams (will) fund your retirement? a. Pension income; b. 401k distributions; c. Selling home to access equity;  d. An annuity or another income vehicle. Will any of these income streams provide a credit line that grows and doesn’t have cost?
  3. Are you or your spouse currently receiving Social Security? yes or no
  4. Are you still working? Are you retired from working?
  5. How secure do you feel in your current retirement portfolio to provide monthly income you need to support ideal lifestyle? 1 through 5.
  6. Do you currently own your home? Are you making mortgage payments now?


Yes, I have one of these on my own home (and it’s OK to talk to me about it).


Seniors spend less and less as they age. True or False?

by Wade Pfau, Ph.D., CFA

August 3, 2011

Today’s classic withdrawal rate study is Ty Bernicke’s “Reality Retirement Planning: A New Paradigm for an Old Science,” from the June 2005 Journal of Financial Planning.

A common assumption for retirement withdrawal rate studies, which I’ve used in all of my own research, is that retirees will adjust their withdrawal amounts for inflation in each year of retirement.  The assumption is that retirees will want to spend the same amount in real, inflation-adjusted terms for as long as they live.

Ty Bernicke challenges this assumption in a rather significant way.  If he is right, then we are playing a whole different ballgame and the 4% rule falls by the wayside. His argument is that as retirees get older and older, they voluntarily reduce their spending. They are just not as interested or able to travel as much, go to so many restaurants, and so on.

I’m not sure if he is right or not, but this is a matter I would like to explore some more, as it is quite important. What percent of the population maintains constant spending?  What percent do voluntarily reduce their spending? What percent are forced to increase spending due to entering a nursing home or experience large medical bills?  What is the appropriate default assumption? Mr. Bernicke says that reduced spending is true for his clients, which I can fully believe.  People who use financial planners are probably more on top of their finances and may find that they can voluntarily reduce spending.  But I’m not necessarily convinced that this will be true for everyone or that do-it-yourselfers should rely on the notion that they will not need to spend as much as they get older and older.

Mr. Bernicke uses evidence from the Consumer Expenditure Survey (CES) to show that those aged 75+ spend less than those aged 70-74, who spend less than those aged 65-69, who spend less than those aged 60-64, who spend less than those aged 55-59.  This particular results seems hard to dispute, though like all of his results, it is based on aggregate numbers.  These are just the averages by age group, but how much variation is there within each age group?

One possible explanation for this reduced spending is the cohort effect: different age groups just happen to spend differently for reasons unrelated to age.  He checks this as well by comparing the 1984 and 2004 CES surveys and finds further evidence for the reduced spending.

In order to argue that these reductions are voluntary, he refers to data on median net worth by age and household income quintile to show that older people have more wealth than younger people within each income quintile. If older people are wealthier but are spending less, he concludes that the spending reductions must be voluntary. Again, these are all still just averages. Jonathan Clements brings up a valid criticism of this, though, in a 2006 Wall Street Journal article. These income quintiles are defined for the whole population, and a much higher percentage (43%) of the 75+ individuals are in the bottom income quintile.  This makes the comparisons somewhat meaningless. As well, Mr. Clements notes that the median net worth of those aged 75+ is $100,100.  But after removing home equity, the median net worth is only $19,205.  This would explain lower spending levels very well.

Beyond this as well, since Social Security is adjusted for wage growth prior to retirement but inflation after retirement, older retirees will naturally have lower benefits than younger retirees, another reason for less spending. I haven’t used household data very much in recent years, but a paper that I wrote as part of my dissertation does also show that poverty rates are higher for the older retiree age groups than the younger retiree age groups.

Getting back to the results of Mr. Bernicke’s paper, he then explores the implications of lower spending with a Monte Carlo simulation example.  Assuming 3% inflation, he assumes that retirees increase their spending by inflation, but at the same time tend to reduce their overall spending as well.  Spending fluctuates, but these two effects mostly cancel out so that nominal spending stays close to its initial value. This allows the failure rate in this “reality case” example to be 0% compared to 87% for the traditional case of constant inflation-adjusted spending.

If we can assume that a retiree’s spending stays the same in nominal terms, the initial withdrawal rate can be higher.  Here is a figure I made before with Trinity Study data comparing the inflation-adjusted case with the no inflation-adjustments case.

With no inflation-adjustments, the SAFEMAX (lowest sustainable withdrawal rate in history) was a little above 5.5%, as experienced by the 1929 retiree.  However, this is a bit misleading, because the Great Depression was also a time of sustained deflation, with prices falling 24 percent between the start of 1929 and the start of 1933. The January 1929 price level was not seen again until 1943. Thus, even though nominal spending stayed the same, the spending in real terms would have grown.  Aside from the deflation-case of the Great Depression, we are looking at a SAFEMAX of more like 6.5 percent.  Retirees who plan to reduce their spending as they get older and older can withdraw more at the beginning.

But what is the best assumption to use: constant inflation-adjusted spending, or decreased spending as one ages more?  This is a big question that I think is still not fully resolved.  I’d like to find a Ph.D. student willing to dig more into the household survey data and to classify different retirees by their spending patterns over time using surveys that do indeed track the same households over long periods.

Retirement Researcher is owned by McLean Asset Management Corporation (MAMC), which is a SEC registered investment adviser. The content of this publication reflects the views of McLean Asset Management Corporation (MAMC) and sources deemed by MAMC to be reliable. There are many different interpretations of investment statistics and many different ideas about how to best use them. Past performance is not indicative of future performance. The information provided is for educational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy or sell securities. There are no warranties, expressed or implied, as to accuracy, completeness, or results obtained from any information on this presentation. Indexes are not available for direct investment. All investments involve risk.

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Editor’s Note: So, our question is this: If seniors had more income available, would they spend more or less? And, another question: Do seniors stick by their “guns” on the opportunity that reverse mortgages offer, because they are proud of their decision to spend less and not more when they could? And another question comes to mind: Are seniors being honest when they quickly respond with a “we’re fine” response when they are truly “not fine at all”, going through much of their retirement cycle, “payday to payday” hoping to escape the pressures that such a lifestyle offers, without responding stubbornly to any kind of fix at all — even when it’s offered as a transition to a much more peaceful replacement such as using a HECM reverse mortgage to smooth out the spikes in income from home equity?

My aged father once set me straight on this. He remembered 1929 when there wasn’t any money so he refused to spend what he had for fear he would run out. As it worked out, I spent his money on his heirs as distributor of his estate, taking my share of it in stride because he wouldn’t budget when he could have.

Those who consider a HECM reverse mortgage will have more to spend. That’s the point of this. See contact information on the tool bar “Information” on home page to further this discussion.


CUT through Gov’t CRAPOLA on HECM Reverse Mortgages.

What the 2016 Survey of Consumer Finances tells us about senior homeowners — take a look for yourself…

‘Impediments to extracting home equity (HECM Reverse Mortgage) can be attributed to factors that include an aversion to debt and a general desire to stay financially conservative (Kaul and Goodman 2017), a desire to leave a bequest or save for emergencies, fear of losing the home, product complexity, high costs, and fear of misinformation and fraud directed at the elderly.’ (Editor’s note: these same people can have what they want with a HECM Reverse Mortgage —



Click on this link to gather up this story online. what-the-2016-survey-of-consumer-finances-tells-us-about-senior-homeowners

HECM Reverse Mortgage accesses equity safely.

In this age of FAKE NEWS, you might be listening to the jaded misinformation of the forward mortgage industry who may well have told you how they can get you into another mortgage with payments and leave you with a little cash for your trouble. Don’t do it until you hear one of us HECM guys explain what can happen to you. First of all, you may not be eligible for a HECM for another year after you do that.

Those who prevail will find truth and WIN HECM BENEFITS. Consider from what source you heard about HECMs and then hear the oft played tune of the competition: “Oh, you DON’T WANT TO GET A REVERSE MORTGAGE” as if they cared what you want if you aren’t buying in to what “they” want. (Be careful — it’s a slippery slope).

And, for proof, these five myths are played for you, hoping you will refinance with them instead of the HECM originator who promises a much better scenario. MAKE NO MISTAKE — If you hook up with another cycle of  mortgage payments, you will often disqualify yourself of obtaining the HECM benefits.  Read on, and call with your questions, Warren Strycker. See “Information” tab on the home page for credentials and contact information. “I’ve been around the block now with HECM so you’ll soon see the differences.”

Here are some of the most common misconceptions about Home Equity Conversion Mortgages (HECMs)— also known as reverse mortgages — and the truth behind these myths.


“A HECM mortgage requires giving up ownership of your home.”


As the borrower, your name remains on the title and the home is still yours—just as it would be with any mortgage. You’re required to continue paying real estate taxes, homeowner’s insurance, and providing basic maintenance to your home. Once you no longer live in the home as your primary residence, the loan balance, including interest and fees, must be repaid.* This is usually done by the homeowner or their estate selling the house.


“A HECM mortgage should only be used as a last resort.”   *If the borrower does not meet loan obligations such as taxes and insurance, then the loan will need to be repaid.


How you use your HECM mortgage proceeds is up to you. Among the most common uses are paying off an existing mortgage or other debt in order to eliminate monthly debt payments; creating a cash reserve; supplementing monthly income; paying for home improvements; or covering medical bills or long-term care expenses.


“I could wind up owing more than my house is worth with a HECM, and leave my heirs with debt.”


A HECM (Home Equity Conversion Mortgage is insured by the Federal Housing Administration. This insurance feature guarantees that you will never owe more than the value of your home when the loan becomes due. No debt will be left to your heirs. And if the loan balance is less than the market value of the home, the additional equity is retained by the homeowner/heirs (if the home is sold).


“There are restrictions on how I can use the money from a HECM mortgage.”


How you use your HECM mortgage proceeds is up to you.

Among the most common uses are paying off an existing mortgage or other debt in order to eliminate monthly debt payments; creating a cash reserve; supplementing monthly income; paying for home improvements; or covering medical bills or long-term care expenses.


“I could wind up owing more than my house is worth with a HECM mortgage, and leave my heirs with debt.”


If you understand how a mortgage works, you’ll quickly understand the HECM — except there are no monthly payments — that’s the major difference. A HECM (Home Equity Conversion Mortgage) reverse mortgage is insured by the Federal Housing Administration. This insurance feature guarantees that you will never owe more than the value of your home when the loan becomes due. No debt will be left to your heirs. And if the loan balance is less than the market value of the home, the additional equity is retained by the homeowner/heirs (if the home is sold).


“Reverse mortgages are too complicated.”


With most financial products, there are a number of factors to consider before you can choose what’s best for you. You can rely on your Senior Loan Officer to be a trusted resource for clear information and responsible guidance. In addition, before you apply for a government-insured Home Equity Conversion Mortgage, you are required to receive HECM mortgage counseling from a third-party counselor who’s approved by the U.S. Department of Housing and Urban Development (HUD). These independent counselors are not affiliated with any mortgage company and their only job is to ensure you fully understand every aspect of your HECM mortgage.

Consider the information on this webpage before you make any decisions, and then see contact information in home page “information” tab and ask for the HECM facts. We’ll not mislead you — that is the truth.

‘New Rules Change Math On Reverse Mortgages.’

HUD shores up fund to stop “bleeding”, supports HECM financial strength

New federal rules that took effect Oct. 2 will raise upfront costs for some homeowners seeking a reverse mortgage, and reduce maximum loan amounts for most, raising the question: Is a reverse mortgage still worth considering?

Most experts say yes, although the increasingly popular strategy of taking a reverse mortgage line of credit—known as a standby reverse mortgage—may become less useful because credit lines will now grow more slowly.

That type of reverse mortgage “is a much less appealing option moving forward,” says Jamie Hopkins, associate professor at the American College of Financial Services in Bryn Mawr, Pa.

A reverse mortgage is a federally backed loan against a home’s equity that requires no monthly payments and is available to homeowners 62 and older. Proceeds can be taken as a lump sum, monthly income for life or line of credit. Interest charges are added to the debt, which doesn’t have to be paid off until the borrower dies or no longer uses the property as a primary residence. As long as the borrower keeps up with taxes, insurance and maintenance, the lender cannot call the loan, and the lender can never recover more than the home fetches in a sale, even if the debt is larger, protecting the borrower’s other assets.

To protect lenders against loss, the federal government limits the initial loan amount and maintains an insurance fund with premiums paid by borrowers. The Department of Housing and Urban Development, which oversees the dominant reverse-mortgage program, has moved to shore up that fund.

The input to this news is that different borrowers will have different results, so wait until you get a HECM analysis to weigh in on HECM.

Access a qualified loan officer to furnish this analysis. See contact information under “Information” on the navigation bar.








Using reverse mortgage credit lines to support income reliability — Financial Planners Do Diligence

Integrating Home Equity and Retirement Savings through the “Rule of 30”

To access charts presented as part of this paper, please access them online at: Peter Neuwirth, FSA, FCA; Barry H. Sacks, J.D., Ph.D.; and Stephen R. Sacks, Ph.D.

Note: *No payments as long as taxes and homeowners insurance is paid promptly.

Executive Summary

This paper examines the effect of using reverse mortgage credit lines to supplement retirement income by two types of retirees that have not been addressed in the previous literature: (1) those whose retirement savings are significantly below those of the mass affluent; and (2) those who are “house rich/cash poor.”

Results of this analysis demonstrate an important contrast with the results of the earlier literature; specifically, the greater percentages of home value, when coordinated with the retirement savings portfolio, resulted in substantially greater percentages of the portfolio that can be drawn.

This paper suggests a new alternative to the 4 percent rule that can guide planners and retirees toward an optimal cash withdrawal strategy. This new rule takes into account the total of the retiree’s retirement savings plus his or her home value.

The quantitative analysis in this paper uses the same spreadsheet models and strategies first presented in the Journal by Sacks and Sacks (2012). This paper builds on that work by extending the analysis to a broader range of retirees.

Peter Neuwirth, FSA, FCA, is an actuary with 38 years of experience in retirement and deferred compensation plans. Recently retired from Willis Towers Watson in San Francisco, he now maintains an independent actuarial consulting practice. He has published numerous articles on deferred compensation and a book on balancing time, risk, and money.

Barry H. Sacks, J.D., Ph.D., is a practicing tax attorney in San Francisco. He has specialized in pension-related legal matters since 1973 and has published numerous articles on retirement income planning and on tax-related topics.

Stephen R. Sacks, Ph.D., is professor emeritus of economics at the University of Connecticut. He maintains an economics consulting practice in New York and has published several articles on operations research and on retirement income planning.

Using home equity to enhance retirement income is an emerging topic in the financial planning profession. Research on strategies for tapping home equity to boost the sustainability of retirement income drawn from securities portfolios, such as 401(k) accounts or rollover IRAs, is quite recent. The concept was first introduced in the Journal of Financial Planning by Sacks and Sacks (2012) and Salter, Pfeiffer, and Evensky (2012), both of which focused on home equity accessed by reverse mortgage credit lines.

Research continued in 2013. Pfeiffer, Salter and Evensky (2013) focused their analysis primarily on cash flow sustainability rather than on portfolio survival, which was the focus of their 2012 work. And Wagner (2013) based his analysis of cash flow sustainability on a strategy that used the reverse mortgage annuity.

Pfeiffer, Schaal, and Salter (2014) presented results based on a strategy that used the reverse mortgage credit line as the last resort. And Pfau (2016a) presented a comparison of the strategies from the previous literature, including six strategies using the reverse mortgage credit line and one strategy using the reverse mortgage annuity.

Although the previous literature examined model retirees whose ratio of home value to the value of their retirement savings portfolio was 1:2, Sacks and Sacks (2012) and Pfau (2016a) suggested expanding the research to retirees with different ratios. This paper followed that suggestion, broadening the range of retirees examined using two strategies. Future research might examine how other strategies would apply to the broader range of retirees examined here.

Like much of the existing literature on reverse mortgages, this paper uses the term “reverse mortgage” to mean the Home Equity Conversion Mortgage, or HECM, established and regulated by the federal government.

Home Equity and Retirement Savings

Although data on retirement savings and home equity have been amassed from a number of surveys, there is not much coherence among, nor coherence between, the datasets. Some datasets consolidate data from ages 55 to 64 and 65 to 74 while others focus on the age group 63 to 65. And data on retirement savings is often tracked separately from data on home equity, making it difficult to draw conclusions about the distributions of the combination of home equity and savings.1

Some attempts have been made to correlate and combine home equity and retirement savings data. For example, Tomlinson, Pfeiffer, and Salter (2016) showed retirement savings, home equity, and home values for married retirees ages 63 to 65 who had non-zero retirement savings (see Table 1).

If, as some economists project, the use of home equity for generating retirement income grows in prevalence in the coming years (e.g., Merton 2015; Guttentag 2017), this conjoint analysis of the total resources available to retirees will improve financial planners’ understanding of the true state of retirement readiness of the population who will be retiring in the next five to 10 years.

This paper introduces a new rule, called the “rule of 30.” As the rule gains acceptance—and as the limits of its applicability are determined—this analysis based on retirement savings plus home value becomes that much more important. Retirement savings are assumed to be held in a diversified portfolio of securities—typically, but not necessarily, in a 401(k) account or a rollover IRA.

Types of Retirees Considered

As previously noted, it can be difficult to draw conclusions about the distributions of the combination of home equity and retirement savings from the existing data. Nonetheless, for most segments of the population, from the “mass affluent” (who fit within the top quartile of Table 1) to the “almost affluent” (defined here as Table 1’s second quartile), home equity represents a significant component of total assets available in retirement.

Rather than extend the analysis of Tomlinson, Pfeiffer, and Salter (2016), this paper focused on four representative retirees drawn from Table 1 and explored more deeply the reverse mortgage strategies that each type of retiree might use to meet their retirement income objectives. As a part of that analysis, the following question was explored: is there an optimal percentage of total retirement income resources that a broad range of retirees could withdraw (from one or both sources) each year that would maximize retirement income while minimizing the probability of exhausting all assets before the end of retirement?

In addition to the combination issue noted earlier, another complicating factor in the data is that about 20 percent to 30 percent of retirees have mortgages still outstanding on their homes when they retire.2 Because of the reduced (or zero) HECM credit line available when a conventional mortgage is yet to be paid off, the analysis presented here considered only those retirees who own their homes free and clear, and whose value is consistent with the home equity values shown in Table 1. However, the majority of retirees own their homes free and clear.3 Therefore, the terms “home value” and “home equity” are synonymous in this paper.

As noted, Table 1 shows median values of both retirement savings and home equity. In order to better capture the range of financial situations among the population of retirees as well as the acute retirement income generation problems facing the retiree with significant home value but limited retirement savings, this study considered not only “typical” retirees but also “house rich/cash poor” retirees.

Table 2 describes the four representative retirees analyzed in this study.

Retiree No. 1: The mass-affluent retiree. Retiree No. 1, the typical mass-affluent retiree, has been defined and discussed in the existing literature. Sacks and Sacks (2012) considered a mass-affluent retiree with a home of value $417,000 at the outset of retirement and a portfolio of retirement savings of $800,000. Similarly, Salter, Pfeiffer, and Evensky (2012) considered a retiree with a home of value

of $250,000 and a portfolio of retirement savings of $500,000. (Although these figures place the hypothetical retiree at the low end of the “mass affluent” range, the ratio of home value to retirement savings is the same, 1:2.) Pfau (2016a) reviewed a series of previous papers and their respective algorithms, considering a retiree with a home value of $500,000 and a $1 million retirement portfolio, again replicating the 1:2 ratio of home value to retirement savings. With the possible exception of certain areas on the West Coast and in the Northeast where home values have climbed to extraordinary heights, these values would likely be typical of “mass-affluent” retirees.

The results of this study indicate that, in the case of the typical mass-affluent retiree considered, the probability of cash flow survival over a 30-year retirement would be at least 90 percent with an initial withdrawal rate of approximately 5 percent of the portfolio’s initial value. Thus, using the reverse mortgage credit line, in either the simple algorithm (referred to as the “coordinated strategy”) suggested by Sacks and Sacks (2012), or the more complex algorithm (referred to as a “standby line of credit”) suggested by Pfeiffer, Salter, and Evensky (2013), increased the initial withdrawal rate that had approximately a 90 percent probability of 30-year cash flow survival from Bengen’s (1994) 4 percent (with no use of home equity) up to 5 percent.

By contrast, if the reverse mortgage credit line was used only as a last resort, and not in either of these algorithms, the increase in effective safe withdrawal rate was negligible. Therefore, for this typical mass-affluent retiree, the reverse mortgage credit line used in either algorithm resulted in a roughly 25 percent increase in the retiree’s inflation-adjusted retirement income throughout his or her 30-year retirement.4

A question that arises, and one that is explored in the remainder of this paper, is: how, and to what extent, is the retirement income of the other three representative retirees affected by the use of one of those strategies, specifically the coordinated strategy of the Sacks and Sacks (2012) algorithm?

Retiree No. 2: The house-rich mass-affluent retiree. Retiree No. 2, the “house-rich” mass-affluent retiree, is defined here as one who has a home value of $800,000 at the outset of retirement and a retirement portfolio value of $400,000 at the same time. This representative retire has the same total retirement income resources as Retiree No. 1, but the opposite ratio of asset values (2:1).

For this retiree, his or her home value is substantially greater than the value of his or her retirement savings. Such a situation may have arisen because the retiree lives in a part of the country where exceptional increases in home value have occurred, or perhaps because of lifestyle choices resulting in buying a larger home at the expense of reduced retirement savings. This representative retiree does not appear to have been considered in any detail in the financial planning literature. Therefore, the situation of this type of retiree is examined in quantitative detail in later sections of this paper.

Retiree No. 3: The almost-affluent retiree. Retiree No. 3, the almost-affluent retiree, is one who has a home of value $150,000 at the outset of retirement and a retirement portfolio of $300,000 at the same time. This representative retiree is not quite affluent, having total retirement income resources of $450,000 at the outset of retirement.

Moreover, it follows from Table 1 that this retiree is not quite typical, because he or she has retirement savings greater than his or her home value, whereas the table (and other data) indicate that most retirees—especially those with total retirement income resources in the middle of the economic spectrum—have retirement savings that are less than their home values. It is worth noting, and relevant to the calculations set out in the later portion of this paper, that the ratio of home value to retirement savings (1:2) is the same for this retiree as for Retiree No. 1, the typical mass-affluent retiree.

Retiree No. 4: The house-rich almost-affluent retiree. Retiree No. 4, the “house-rich” almost-affluent retiree, is one who has a home value of $300,000 at the outset of retirement and a retirement portfolio of $150,000. This retiree has the same total retirement income resources as Retiree No. 3, but the ratio of home value to retirement savings (2:1) is the same as for Retiree No. 2. The amount of total asset value, plus the fact that home value is greater than retirement savings, makes this retiree more broadly representative than the others.

Assumptions and Background for the Analysis

Economic concerns of retirees. Retirees have several major economic concerns, most notably: (1) inflation-adjusted cash flow survival throughout retirement; (2) additional cash availability in the event of emergency or other unanticipated need; and (3) legacy.

It was assumed in this analysis that the overriding economic concern for many retirees is to maintain cash flow throughout retirement. Accordingly, the quantitative analysis presented in this paper addressed that concern.

Cash flow. Cash flow survival is defined here as a 90 percent or greater probability that cash flow to the retiree, based on the initial withdrawal and continuing at constant purchasing power each year thereafter, will continue for at least 30 years following the outset of retirement.

The measure of cash flow itself is expressed in terms of an “initial withdrawal rate.” Typically, this rate has been defined as a percentage of the value of the retirement savings portfolio at the outset of retirement. Many financial planners use this measure and some recommend that retirees adhere to a “4 percent rule” (Bengen 1994). Pfau (2014) examined several more nuanced approaches to withdrawal rates, exploring situations in which the 4 percent rule may be too low or too high.

The results presented here express the initial distribution rate in the traditional way so that comparisons can be made to the 4 percent rule, but these results also indicate that expressing the initial withdrawal rate as a fraction of total retirement income resources may be more useful and more broadly applicable. As shown below, in the context of investment returns consistent with historical averages, a “rule of 30” where the initial distribution rate is 1/30 of the total retirement income resources (including home value), provides a more stable and consistent retirement income strategy across various classes of retirees.5

The HECM’s growing line of credit. Also important to the analysis is the growing line of credit. A majority of the roughly one million reverse mortgage loans currently outstanding are HECMs.6 A unique feature of HECMs is that when some or all of the loan proceeds are taken in the form of a line of credit, the amount available to be taken grows over time. After the credit line is established, the amount available to be taken grows at the same rate as the interest applicable to the amount that actually is taken. (See the appendix for details on the assumptions related to the interest rate on the line of credit.)

The amount available when a reverse mortgage is established depends upon the age of the borrower at that time and is greater for an older borrower than for a younger borrower. However, the increment as a function of age is substantially smaller than the increment that results from an early establishment followed by the increase resulting from the application of the interest rate.

The effect of the HECM’s interest-based increase in the amount available is important in enabling a retiree to have cash available throughout a 30-year retirement. Moreover, at this time, reverse mortgages other than HECMs are not available as credit lines. Therefore, the reverse mortgage credit line considered in this paper was the HECM credit line.

Another important aspect of the HECM is the non-recourse feature. Regardless of the duration through which the HECM credit line is in place (and growing), the Federal Housing Administration guarantees that the retiree (or his or her heirs) will never have to pay back more than the value of the home. For many retirees, this guarantee, when combined with the growing line of credit feature, may be significant.

Reverse mortgage specifications. Two specific aspects of reverse mortgage credit lines affect the quantitative analysis (for general information about reverse mortgages, see Giordano (2015) and Pfau (2016b)). They are: (1) the amount available at the establishment of the reverse mortgage line of credit; and (2) the cost of the reverse mortgage credit line.

The amount of credit line initially available is a function of the age of the borrower at the establishment of the credit line and the prevailing expected rate. In this analysis, the borrower was assumed to be 65 years old. The prevailing expected rate at the time of this writing (May 2017) meant that the amount initially available was approximately 54 percent of the home value (the Monte Carlo simulation program determined the amount available at later ages for the spreadsheets using Strategy No. 2).

Other than approximately $125 for a mandatory counseling session, there are no out-of-pocket costs for establishing or maintaining a reverse mortgage line of credit. The costs for establishing the reverse mortgage itself include three parts (described in detail in Giordano (2015) and Pfau (2016b)), all of which become part of the debt. These amounts can be negotiated with the lender to be brought down from a high of approximately $12,000 to near zero, in exchange for higher ongoing interest rates.

The calculations in this analysis used fees of $7,500, comprised of $3,000 for the mortgage insurance premium (as prescribed by HUD), plus $3,000 origination fee (calculated as the average of the figures shown on the Mortgage Professor website,, plus $1,500 closing costs.

The Analysis

The analytic technique used here was similar to that used by Sacks and Sacks (2012), although this paper used a similar spreadsheet model for each of the four representative retirees. The spreadsheet model used the following input parameters: (1) initial value of the retirement savings portfolio; (2) initial value of the retiree’s home; and (3) initial withdrawal rate.

The model used two worksheets run simultaneously.7 The two worksheets were identical in all respects (including the investment performance of the portfolio, the rate of inflation, and the amount drawn by the retiree) except for the strategy used to determine whether the retirement income was withdrawn from the portfolio, and/or the reverse mortgage line of credit was used (in other words, whether Strategy No. 1 or Strategy No. 2 was used).

On each worksheet, the calculations of investment gain or loss and of retirement income withdrawal were performed for each year in a 30-year period. The investment gain or loss was determined stochastically, as was the inflation adjustment to the withdrawal amount.

The 30-year calculation was repeated 10,000 times. In a certain number of those repetitions, the cash flow survived for 30 years, and in the other repetitions it did not. (The three most significant determinants of cash flow survival are the initial withdrawal rate, the sequence of investment returns, and the strategy for dealing with negative returns.) In each of the 10,000 repetitions, the initial withdrawal rate was the same, and the average investment return was the same, but the sequence of investment returns, being randomly selected, was not the same in each. A simple count was made of cash flow survival over the 10,000 trials (with the two worksheets run simultaneously in each trial and the results of the 10,000 trials shown on a histogram for each worksheet). The percentage of the repetitions in which the cash flow survived was termed the “cash flow survival probability.”

The primary focus was on the comparison of the cash flow survival probabilities of the two strategies for each of the four representative retirees.

The quantitative analysis was based on the premise that the retiree sought to draw on his or her total retirement income resources at a rate that yielded the maximum amount of constant purchasing power throughout a 30-year retirement. Therefore, in each part of the analysis, the initial withdrawal rate that resulted in a 90 percent cash flow survival probability was used.

The assumed portfolio. The securities portfolio held by the representative retirees in all of the analyses and results shown was assumed to be a 60/40 portfolio comprised of the following indices, in the following proportions:

60 percent equities: S&P 500 (40 percent); U.S. small stock (10 percent); and MSCI EAFE (10 percent).

40 percent fixed income: Lehman Brothers long-term government/credit bond index (10 percent); Lehman Brothers intermediate-term government/credit bond index (15 percent); and U.S. one-year Treasury constant maturity (15 percent).

A normal distribution of the investment returns was assumed from each asset class. The geometric mean and standard deviation projected for the investment return of each asset class, consistent with historical averages, are set out in Appendix A. More recent (more conservative) figures for the same asset classes are set out in Appendix B. Correlation matrices were also constructed and incorporated into the simulation program.

Because the portfolio composition was the same in each of the 30 years of each trial, the portfolio was, in effect, rebalanced each year.

Establishing the HECM line of credit. As indicated previously, the primary financial objective of many retirees, especially those in the house-rich categories, was assumed for this analysis to be inflation-adjusted cash flow survival throughout retirement. And for analytic purposes, the duration of retirement was assumed to be 30 years.

The model for the analysis was that in the first year of retirement, a certain amount was withdrawn from the portfolio, and each subsequent year’s withdrawal was equal to the previous year’s withdrawal, adjusted only for inflation. Thus, the annual withdrawals provided constant purchasing power throughout retirement. Following the well-established convention, the initial withdrawal was expressed as a percentage of the initial portfolio value.

This analysis also used two alternative strategies for establishing and drawing on a HECM line of credit to enhance the 30-year survival of cash flow.

Strategy No. 1. Establish a reverse mortgage credit line at the outset of retirement. At the beginning of the first year of retirement, the first year’s draw is taken from the portfolio. The amount of the draw is equal to 1/30 of the total retirement income resources (or 1/34, if conservative projections of investment returns are used). At the end of each year, the investment performance of the portfolio during that year is determined. If the performance was positive, the ensuing year’s income is withdrawn from the portfolio. If the performance was negative, the ensuing year’s income is withdrawn from the reverse mortgage credit line.8 This is the “coordinated strategy” described by Sacks and Sacks (2012).

Strategy No. 2: From the outset of retirement, withdraw retirement income only from the portfolio. Do not establish a reverse mortgage credit line unless and until the portfolio is exhausted. From and after that point, as the only source of retirement income, the credit line is drawn upon continuously unless and until it is exhausted. This is the “last resort strategy” described by Sacks and Sacks (2012).9

Figure 1 and Figure 2 demonstrate the dramatic increase of cash flow survival probability of Strategy No. 1 over Strategy No. 2, which is the strategy often recommended by many financial planners.10

Key Findings

The key findings reported in this paper are the following:11

  1. Broad range of retirees. An effective coordinated approach to drawing upon total retirement income resources (defined here as the total of retirement savings plus home value) can be used across a broad range of retirees both in terms of their total retirement income resources and in terms of the ratio of their home value to the initial value of their retirement savings. These findings are explained in greater detail in the following paragraphs and are illustrated in Table 3.
  2. For any given amount of total retirement income resources, the dollar amount of initial withdrawal was constant regardless of the ratio of home value to retirement savings. The dollar amount of the initial withdrawal that resulted in an approximately 90 percent probability of cash flow survival was the same across a broad range of ratios of home value to initial value of retirement savings portfolio. That dollar amount was determined as a fraction of the retirees’ total retirement income resources. This finding resulted when the coordinated strategy was used for the withdrawals, but not when the last-resort strategy was used.
  3. Across a broad range of amounts of total retirement income resources, the applicable fraction was constant. In addition to the range of ratios described above, the fraction described above applies to a broad range of amounts of total retirement income resources. That is, once the fraction was determined for one value of total retirement income resources, the same fraction, applied to any other value of total retirement income resources, yielded, for that value, the applicable dollar amount of initial withdrawal that resulted in cash flow survival. This observation reflects that the computations scale up to greater amounts of total retirement income resources and scale down to lower amounts (see Table 3 and Table 4).
  4. The relevant fraction is a function of the investment returns. If the investment return figures used are consistent with historical averages, the dollar amount of the initial withdrawal for any given total of retirement savings plus home value (at the outset of retirement) turned out to be 1/30 of that total. Accordingly, the finding is termed the “rule of 30.” If more recent (and more conservative) projections of investment returns were used, the dollar amount reflected in the result described above turned out to be 1/34 of the total of retirement savings plus home value. However, it is important to note that, with these more conservative projections, the 4 percent rule became a 3.2 percent rule. This result is analogous to the results found by Finke, Pfau and Blanchett (2013) and by Pfau (2014).

The findings using the “rule of 30” are shown for the four representative retirees in Panel A of Table 3. Panel B of Table 3 uses the “rule of 34.” These results are also shown in a more granular fashion for a larger number of retirees in Table 4 and in Figures 3 and 4.

Observations Regarding Cash Flow

Computations using the “rule of 30” and those using the “rule of 34” both resulted in dollar amounts for retirees No. 2 and No. 4 that were more than twice the amounts resulting from the safe withdrawal rate applicable when only the securities portfolio was drawn upon. Even for retirees No. 1 and No. 3, the “rule of 30” and the “rule of 34” both resulted in dollar amounts of cash withdrawal that were more than 25 percent higher than the amounts that could be safely withdrawn from the portfolio only.

In dollar terms, and in percentage of income terms, these results are significant. For example, retiree No. 4 who retires with a 401(k) account or rollover IRA valued in the vicinity of $150,000 is likely to have Social Security as his or her primary source of retirement income. Assume that his or her annual Social Security income is about $25,000 (adjusted for inflation). Using Strategy No. 1, an initial withdrawal rate of 10 percent of the retirement account ($15,000) annually adjusted for inflation provided a 29 percent greater total cash flow throughout a 30-year retirement than drawing according to the 4 percent rule (equal to $6,000 per year).

Detailed Results

Cash flow survival probability. Figure 1 and Figure 2 set out the probabilities of cash flow survival for each of the four representative retirees. In each case, the initial withdrawal rate was selected to yield a 90 percent probability of 30-year (inflation-adjusted) cash flow survival when Strategy No. 1 was used. It turns out that, in every such case, the dollar amount of the distribution was equal to 1/30 of the total retirement income resources.

It is also noteworthy that when Strategy No. 2 was used, the cash flow survival probability was lower when the initial portfolio value was low compared with the home value, than when the initial portfolio value was high compared with the home value. That is because, with low initial portfolio values, under Strategy No. 2 the portfolio was exhausted sooner than with higher initial portfolio values. When then portfolio was exhausted sooner, the reverse mortgage credit line was drawn upon sooner, and it therefore must provide more years of withdrawals. Moreover, early withdrawals from the credit line (once it was established), coupled with relatively late establishment of the credit line, prevented the credit line from growing to a level from which it could sustain the retirement income withdrawals throughout the remainder of the retirement period.

Similar tests were performed with other combinations of portfolio values and home values, all with the same “total retirement income resources.” The rule of 30 was shown to apply in those cases as well, as set out in Table 3.

Other combinations of portfolio value and home value. In each case of analyzing other combinations of portfolio and home values, using Strategy No. 1 yielded a 90 percent probability of inflation-adjusted cash flow throughout a 30-year retirement, and in each case the dollar amount of the initial distribution was equal to 1/30 x total retirement income resources (see Table 4). These results are shown in graphic form in Figure 3.

When considering the results shown in Figure 3, keep in mind that both strategies accessed the home equity. The big difference was in the order in which the access occurred. Under Strategy No. 1, the home equity was accessed in each year following a year in which the volatility of the securities portfolio incurred an adverse investment return. Under Strategy No. 2, the home equity was only accessed if and when the securities portfolio had been exhausted.

Figure 3 shows that when Strategy No. 1 was used, a 90 percent probability of 30-year cash flow survival was independent of the ratio of initial home value to initial portfolio value over a wide range of such ratios.

Similar results to those shown in Figure 3 were obtained with values of total retirement income resources equal to $600,000, $750,000, $900,000 and $1.2 million. And although the results shown were obtained using the “rule of 30” with the investment return figures set out in Appendix A, essentially the same independence of ratio was shown with the investment return figures set out in Appendix B.

An obvious corollary of the constant dollar result is that the initial withdrawal that resulted in a 90 percent probability of cash flow survival, as a percentage of the initial portfolio value, varied widely across the range of ratios. This variation is illustrated in Figure 4. Thus, with the ratios of home value to portfolio value (at the outset of retirement) in the range from 0.5 to 2.0, that percentage ranged from about 5 percent to 10 percent when investment returns were consistent with historical averages, and from about 4 percent to 9 percent when investment returns were more conservative.

Limitations and Caveats

The analysis presented has the following limitations and caveats:

As noted earlier, the existing data on the distribution of the combination of retirement savings and home value is very sparse. In the aggregate, Americans have more home value than retirement savings; therefore, there is increasing focus on the use of home equity as a component of retirement income. As a result, there should be an increase in the amount and detail of such combination data. When such data becomes available, analysis similar to that presented here should be performed in order to refine the applicability of this research.

The top two key findings presented in this paper are: (1) when the “coordinated strategy” was used, a constant dollar amount yielded an approximately 90 percent probability of a 30-year inflation-adjusted cash flow survival across a wide range of ratios of home value to initial portfolio value; and (2) the same approach applied across a wide range of total retirement income resources. These findings are empirical observations; they are not mathematically determinable in closed form. Although these findings have been tested and validated for ratios of home value to initial portfolio value ranging from 0.5 to 2.0, it is not clear what the results would be for lower or higher ratios; that is, where there was little or no retirement savings portfolio or accumulated home equity. The findings presented in this paper are unlikely to have any application to a retiree whose total retirement income resources substantially exceeds the HECM limit of $636,150 by an order of magnitude or more.

The Monte Carlo simulations employed in the analyses presented in this paper are purely stochastic. That is, each year’s investment performance and inflation amount is treated as entirely independent of those parameters of the previous year. Other approaches exist that reflect the fact that actual financial processes are often subject to a kind of “homeostasis,” a reversion to the mean, often resulting from government intervention (such as the Fed changing interest rates to bring down inflation). Strategies No. 1 and No. 2 have not been tested under such approaches to determine whether the resulting cash flow sustainability results would be significantly different from the results obtained with the purely stochastic method employed here.

The analyses reported in this paper assumed that the “expected” interest rates, and therefore the principal limit factors (plfs), would remain constant. The expected rates are currently near the low ends of their ranges, so the plfs, and therefore the amounts available under reverse mortgage lines of credit, are near the high ends of their ranges. If the expected rates increase, the amounts available will decrease, and the effectiveness of the strategies considered would also decrease.

Finally, there has been no consideration of possible changes in the law or regulations governing reverse mortgages in this paper.

Implications for Planners

The foregoing results have great significance for baby boomer retirees who have limited total resources and/or have a disproportionate amount of their wealth in the value of their home.

A simple rule of 30 can be used by a broad range of retirees to help determine how much retirement income their total retirement resources can provide, with a small probability of outliving those resources. The availability of this rule can potentially make retirement income planning more straightforward for a large number of individuals currently considering their future retirement income needs.

In addition, the non-recourse feature of the HECM is significant over the long term (20-plus years into retirement). As a result, establishing a HECM line of credit as early as possible can provide the almost-affluent retiree—particularly if he or she is house rich and cash poor—with a significantly higher retirement income than a later establishment of the credit line, while reducing the probability of exhausting his or her assets.


See the May 2015 GAO report, “Retirement Security: Most Households Approaching Retirement Have Low Savings” and the 2016 Vanguard report, “How America Saves 2016.”

See “Home in Retirement: More Freedom, New Choices,” a 2014 Merrill Lynch retirement study conducted with Age Wave., specifically figure 7 citing 2013 Bureau of Labor Statistics data. The study is available at

As a practical matter, for the minority—those who retire with a mortgage debt against their home—a mortgage-free situation could arise through “downsizing” at retirement. The extension of this analysis to situations where a mortgage exists is quite feasible, however, the fundamental results of such an analysis would not differ materially from those shown here.

In addition, as noted by Sacks and Sacks (2012) and Salter, Pfeiffer, and Evenksy (2012), the residual net worth of the retiree at the end of his or her 30-year retirement had a 67 percent to 75 percent likelihood of being greater if the coordinated strategy or the Salter, Pfeiffer, and Evensky algorithm was used, than if the last resort strategy was used. This greater residual net worth results in a greater legacy prospect.

Over the course of a lengthy retirement, aspects of any retiree’s financial situation and the financial environment can, and do, evolve. Accordingly, the “rule of 30,” just like the 4 percent rule, will be subject to mid-course corrections.

See “HECM or Jumbo Reverse Mortgage: Which Is Better” at

In addition, two other worksheets were run, using the hybrid strategies mentioned in endnote 9, simply to ascertain the results reported in endnote 10.

In cases where the investment performance was positive but less than the withdrawal amount scheduled for the ensuing year, only the amount of the positive performance is withdrawn from the portfolio, and the remaining portion of the scheduled withdrawal amount is taken from the reverse mortgage credit line. Also, if the investment performance was negative but the credit line has already been exhausted, the entire withdrawal will come from the portfolio.

Two “hybrid” strategies were also considered. In one, the HECM credit line is established at the outset of retirement but only used as a last resort. The other hybrid strategy is essentially the same as Strategy No. 1 except that the HECM credit line is not established until it is first needed to be drawn upon. These strategies are not analyzed in detail here because of space constraints and the fact that, in practice, neither is likely to be implemented.

The first hybrid strategy yielded a slightly greater cash flow survival probability than Strategy No. 1, but a substantially smaller legacy potential. The second hybrid strategy yielded results very similar to those of Strategy No. 1.

Editor’s note: While this paper was in final editing, HUD issued Mortgagee Letter 2017-12 (, which revised initial and annual mortgage insurance premium rates and principal limit factors for all HECMs with FHA case numbers assigned on or after October 2, 2017. The authors note that none of the HUD changes would have a material impact on the key findings presented here, however some numerical results would change slightly.


Bengen, William P. 1994. “Determining Withdrawal Rates Using Historical Data.” Journal of Financial Planning 7 (4): 171–180.

Finke, Michael, Wade D. Pfau, and David M. Blanchett. 2013. “The 4 Percent Rule Is Not Safe in a Low-Yield World.” Journal of Financial Planning 26 (6): 46–55.

Giordano, Shelley. 2015. What’s the Deal with Reverse Mortgages? Pennington, N.J.: People Tested Media.

Guttentag, Jack M. 2017. “Income Replenishment with a Reverse Mortgage,” posted June 2, 2017 at

Huebler, Robert. 2015. “Robert Merton and the Promise of Reverse Mortgages and the Peril of Target Date Funds.” Posted Nov. 2, 2015 at

Pfau, Wade D. 2014. “Is the 4 Percent Rule Too Low or Too High?” Journal of Financial Planning 27 (8): 28–29.

Pfau, Wade D. 2016a. “Incorporating Home Equity into a Retirement Income Strategy.” Journal of Financial Planning 29 (4): 41–49.

Pfau, Wade D. 2016b. Reverse Mortgages: How to Use Reverse Mortgages to Secure Your Retirement. McLean, VA: Retirement Research Media.

Pfeiffer, Shaun, John R. Salter, and Harold Evensky. 2013. “Increasing the Sustainable Withdrawal Rate Using the Standby Reverse Mortgage.” Journal of Financial Planning 26 (12): 55–62.

Pfeiffer, Shaun, C. Angus Schaal, and John Salter. 2014. “HECM Reverse Mortgages: Now or Last Resort?” Journal of Financial Planning 27 (5):44–51.

Sacks, Barry H., and Stephen R. Sacks. 2012. “Reversing the Conventional Wisdom: Using Home Equity to Supplement Retirement Income.” Journal of Financial Planning 25 (2): 43–52.

Salter, John R., Shaun A. Pfeiffer, and Harold R. Evensky. 2012. “Standby Reverse Mortgages: A Risk Management Tool for Retirement Distributions.” Journal of Financial Planning 25 (8): 40–48.

Tomlinson, Joseph, Shaun Pfeiffer, and John Salter. 2016. “Reverse Mortgages, Annuities, and Investments: Sorting Out the Options to Generate Sustainable Retirement Income.” Journal of Personal Finance 15 (1): 27–36.

Wagner, Gerald C. 2013. “The 6.0 Percent Rule.” Journal of Financial Planning 26 (12): 46–59


Neuwirth, Peter, Barry H. Sacks, and Stephen R. Sacks. 2017. “Integrating Home Equity and Retirement Savings through the Rule of 30.” Journal of Financial Planning 30 (10): 52–62.

See “Information” tab on home page to find contact information on this website. Thank you. Warren Strycker.


Strategic Uses of Reverse Mortgages for Affluent

While the refrain that reverse mortgages aren’t just last resorts for cash-strapped older homeowners may be canonical within the industry, many higher-income retirees may not be familiar with the Home Equity Conversion Mortgage and its potential uses.

Writing on his retirement-planning blog, financial planner and HECM advocate Tom Davison provides an all-in-one resource for explaining the product to more affluent potential borrowers.

“Reverse mortgages have evolved over the years, including significant improvements after 2008’s housing crisis, resulting in enhanced consumer protections, refined federal oversight, reduced costs, and better balance amount the interests of clients, lenders, and the Federal Housing Administration’s insurance backing,” Davison writes by way of introduction.

Davison’s post features a handy table that shows the “highest and best use” of the product for a variety of potential scenarios. For instance, a homeowner looking to buy a vacation home would be best off with a lump sum HECM, Davison writes, while those seeking a safety net for health care emergencies or down markets would be best off with a HECM line of credit. But for higher-income individuals, Davison — based on his experience managing investment portfolios between about $500,000 to $4 million — lays out two “most common” uses of a HECM: improving an existing retirement plan to facilitate increased spending, or adding a rainy-day safety net to an already robust portfolio.

Perhaps the most valuable passage in Davison’s extensive post concerns the HECM line of credit option and its growth over time.

“A line of credit is the most flexible way to access cash and takes advantage of a unique and powerful feature: the borrowing limit grows every month,” Davison writes, adding that the fact the limit can’t be reduced or cancelled — as long as the borrower maintains his or her tax and insurance obligations — represents a major benefit over a traditional home equity line of credit.

Using a graph to illustrate his point, Davison gives the example of a hypothetical $300,000 home, plotting the home-value appreciation against the compounding growth in the line of credit.

“The obvious result is more cash is available later — and in an amount that’s likely to grow substantially more than inflation,” Davison writes. “It may grow faster than most fixed income investments, especially those with guarantees like the FHA backing.”

Davison also points out research showing that using the reverse mortgage line of credit can increase a borrower’s entire estate size, calculated as the investment portfolio plus “housing wealth” minus the loan balance.

“Perhaps the rule of thumb is: when spending is pushed to the max, estate sizes suffer, but when housing wealth is used judiciously, both sustainable spending and estate size can improve,” Davison writes.

Read Davison’s full piece at his blog,

How large is your mortgage “bite” in the household “apple”

As the years go on, more seniors are entering retirement with home mortgage payments.

Soon, if not eventually, they become a burden.

How large is your mortgage “bite” in the household “apple”?

New research now points to an increase of baby boomers entering retirement with house payments. Consider what a HECM mortgage can do to free up household budget by eliminating the mortgage payments you have. Ask for a free look at the mortgage “pie” by requesting a HECM ANALYSIS here. See navigation bar tab “information” for contact details.


Paying off the mortgage, once a widespread rite of passage for homeowners approaching retirement, has become less common in recent years. Concerns are mounting that the increased prevalence of housing debt among older homeowners could compromise financial security in retirement by expanding housing affordability problems, crimping essential non-housing spending, increasing vulnerability to home loss through foreclosure, or limiting the accumulation of housing wealth.

These concerns are amplified by the fact that the large Baby Boomer generation, which includes about 33 million owner occupants, has begun to reach retirement age. Although multiple studies have documented the rise of housing debt among older homeowners, prior research has not focused on how Boomers’ mortgage status has changed as they’ve approached retirement age. Importantly, previous research has not investigated whether Boomer homeowners have begun to extinguish their housing debts more rapidly as the economy and housing market have emerged from recession.

The leading edge of the large Baby Boom generation has reached retirement age with a greater likelihood of carrying housing debt, raising concerns about the retirement financial security. The oldest Boomers, who were aged 65-69 in2015, were 10 percentage points less likely to own their homes outright than were pre-Boomer homeowners of the same age in 2000.

Enter the innovative Home Equity Conversion Mortgage (or HECM), a mechanism for eliminating the payments without payments, utilizing home equity to fill the income gap.

We can make this happen for you if you are 62 or more, have 50% (or more) home equity and the desire to free yourself from these menacing payments.

See contact information in navigation bar for details.


The POWER of HECM62; 10 steps on how it works; This is the winner’s circle

The power of 62 is an age, like 21, or 65; For the HECM, it means you are “of age” — eligible.

Mark it on the calendar. Make a star for 60, because that means you are only 2 years away from launching a HECM use of home equity to survive retirement in one piece. It means you might qualify for a big bonus. You can get a HECM, and there are bunches of benefits on this webpage about HECMs. Walk through these expected steps to be familiar.

If you are already 62, have at least 50% home equity, it’s time to get a move on. You have the makin’s of a winner. Use what you have to move up now. Loser’s quit. They get discouraged. They don’t think positive anymore. But that role doesn’t fit you, does it?

Think how much more money you’ll have if you don’t pay all that interest on your mortgage — get rid of the mortgage. Take that money you saved and do something you’ve been wanting to do for a long time. That’s what winners do, they plot with their opportunities and win because there’s still room in the winner’s circle. Now, they are thinking ahead — and they are alive with new ideas — and they won’t be planning to live in the rest home. They’ll still be looking ahead. That’s what life is, but unfortunately, a lot of us are lazy and depressed without much hope for the future. We say “no” because we don’t have courage to say “yes” when we want to or have the power to believe in our dreams.

  1. Buy a house, make payments, watch equity grow.
  2. Plan retirement utilizing (about 50%-100%) home equity and other sources you have created.
  3. When you are 62, pay off your forward mortgage with a HECM, establish your HECM line of credit (You won’t need a HELOC which requires payments).
  4. Determine how much of your HECM will come as a lump sum. Use the lump sum to pay off as many bills as you can to eliminate debt and increase cashflow.
  5. Cashflow increases as payments are phased out.
  6. Use your line of credit to cover emergencies, long term care, watch it grow without payments.
  7. Thru appreciation, your home value will continue to grow over time.
  8. Line of credit will grow — like the real growth savings account you never had and without payments so long as taxes and homeowner’s are paid current.
  9. Laugh your way to the bank, pass “go” and collect combined wealth.
  10. Plan your legacy with an inheritance for your family. It could exceed all your imagination.

Talk to your loan officer about the POWER of HECM — see “information” ( in navigation bar, ask questions, get government mandated counseling, get the wheels turning.

Think win win.

HECM Reverse Mortgages: Now or Last Resort?

Pfeiffer, Schaal & Salter

By Tom Davison on November 15, 2015

(This is an unchanged repost of an earlier contribution)

Does it pay to get a reverse mortgage early in retirement, or is it better to wait until it’s absolutely required – a “last resort”? New research shows early is better. In the most challenging case nearly twice as many homeowners who got a reverse mortgage early still had money at age 92  than those who waited until their investments were gone to use their home equity.

The authors said: “Early establishment of the HECM line of credit in the current low interest rate environment is shown to consistently provide higher 30-year survival rates than those shown for the last resort strategies.”  The May 2014 study by Pfeiffer, Schaal and Salter was published in the Journal of Financial Planning. It is another article from the team (Salter, Pfeiffer and Evensky) who investigated the “Standby Reverse Mortgage”.  Monte Carlo simulations of many lifetimes analyzed investment portfolio withdrawal rates of 4%, 5% or 6% starting at age 62 and running for 30 years. To help improve retirement success a Home Equity Conversion Mortgage (HECM) reverse mortgage line of credit (LOC) was obtained one of two times: either at age 62 or later when the portfolio was completely spent. In either case the LOC was tapped only after exhausting the investment portfolio.

The authors designed the study thoughtfully and describe various conditions affecting LOC. The results are measured by the client’s sustainable withdrawal rates and net worth after 10, 20, and 30 years. To develop an intuitive feel for the results the graphs below show the study’s LOCs. The long brown line show the LOC starting at age 62 and three conditions when established late (short green lines). In the study the “late” LOC is  in each simulated lifetime is set up at the age when the portfolio runs out – the graphs show age 82 as only one example. The study looks at low, medium and high interest rates in effect when the late LOC is set up. Interest rates and LOC sizes are inversely related: when interest rates are high the homeowner gets a smaller LOC, and conversely a larger LOC when interest rates are low. HECM regulations are designed to balance risks and benefits among borrowers, lenders and the FHA insurance program by adjusting the actuarial chances that the HECM loan value will end up exceeding the value of the home. Once a line of credit is in place, higher interest rates lead to higher loan balances, so those starting balances are reduced. Among the three green “late” lines, the bottom dark green line is for the highest interest rate, so it has the lowest starting point and fastest growth. The tradeoff between starting loan size and the loan’s growth rate leads to the late LOC lines converging after about 10 years. (Note: this discussion blurs the distinction between the two different interest rates used to determine initial loan size and to determine the LOC growth once it is set up).

The tan columns show the house appreciating at 3% or 5% a year. The early (brown) line of credit is naturally the same in the two graphs as the home value at the start and grwoth is the same regardless of future home appreciation. The second graph shows the house appreciating faster so the “late” green lines of credit start at higher values, so are closer in value to the early LOC. The top graph’s “later” credit lines start around $200,000 while the bottom graph’s start around $300,000 due to the higher home value at age 82. You can see the advantage of getting the LOC early is smaller when the house appreciates faster.

What does “later” mean? “Later” means what it does to you. It’s your retirement and you can adjust quickly or put it off. In the end, you will prosper with a HECM if it is still available at whatever level it is when you “later” it.

See “Information” on home page for contact information.

The graphs show the people with the early LOC (the long brown line) had the most reverse mortgage resources later in life to fund spending, and the simulation results confirm that. For example, the “early” people who exhausted their portfolio at age 82 had close to $600,000  in their LOC.

Six groups got their LOCs late. Out of those, the highest green line starting at age 82, and therefore closest to the “early” brown line, were those in the bottom graph where the house appreciated the most, and in the low interest rate environment – the highest start of the three green lines. They got close to $400,000 to help their spending. The worst group to have been in were the people in the top graph where the house appreciated the least, got the LOC late, and found themselves in a high interest rate environment – the bottom darker green line. They got under $200,000 to help their spending.

In their conclusions the authors suggest considering postponing setting up the HECM line of credit when there is good reason to believe that home occupancy after loan origination is likely to be less than 15 years. This recommendation is well founded, but should be understood to be based only on this paper’s specific use of the LOC. A variety of other uses of the LOC would have shorter minimum expected stays. (And of course many applications have immediate use of HECM funds!)

The study did not evaluate other homeowner uses of the LOC, such as unplanned health care expenditures. At the lower 4% and 5% withdrawal rates the early LOC would often have untapped capacity, and would have been completely untouched in a number of lifetimes. A similar observation was median wealth at age 92 did not reflect any untapped line of credit above the home’s value. The authors are to be commended for judiciously conservative assumptions and circumspection in their recommendations. Examples of conservative assumptions were the LOC”s cost included a $35 monthly fee which many lenders don’t charge, using the maximum allowable loan origination fee, and setting closing costs near the top of the expected range.

Returning to the author’s focus on using the LOC once the portfolio has been exhausted, the early line of credit’s advantages are highest with:

longer stays in the house, thus more time for the LOC to grow

higher short-term interest rates after the early line is set up, creating faster growth of the line of credit’s borrowing limit

higher long-term interest rates later in life, resulting in lines of credit set up later being smaller (dark green lines in the graph)

slower home appreciation

Other reasons an early line of credit may be advantageous in aiding spending from investment portfolios include:

ability to draw from the line of credit rather than the portfolio in times of significant market downturns

if long-term investment returns are lower, due either to the client’s very conservative asset allocation or lower market returns

when the client has higher tax rates, as the line of credit draws are tax-free, while investment portfolio withdrawals are generally tax-burdened

locking in the current HECM program rules, as there has been a trend to increasing restrictions

creating a larger contingency fund, potentially exceeding the future value of the house

For a much more complete discussion of the study with thoughtful insights please see the original paper!


Pfeiffer, Shaun, C. Angus Schaal, and John Salter. 2014. “HECM Reverse Mortgages: Now or Last Resort?” Journal of Financial Planning 27 (5) 44–51.


“This is going to become one of the key means of funding retirement in the future.”, says Merton

Robert C. Merton has been called a groundbreaking economist, an options guru and one of the finest minds in finance. For those in tune to the finance world, Merton is as high-profile as it gets.

A sought-after speaker on the investor circuit, Merton caught the attention of the crowd at an asset management conference in St. Louis last fall when he commented on the value of reverse mortgages. “Americans have wrongly steered clear of reverse mortgages,” he said. “This is going to become one of the key means of funding retirement in the future.”

Merton’s advocacy of reverse mortgages coincides with support from other leading academics and financial experts. It just might signal the beginnings of a shift in public opinion. Certainly, support from someone as influential as Robert Merton is a tremendous boost for reverse mortgages, one that might help elevate the product in the financial community, in the press and in the public eye.

Who is Robert Merton?

Robert Cox Merton is a longtime student of economics. He holds a B.S. in engineering mathematics from Columbia University, an M.S. in applied mathematics from the California Institute of Technology and a Ph.D. in economics from MIT, in addition to honorary degrees from 13 universities. (Merton’s father, a prominent sociologist, was also a noted academic, known for pioneering the focus group and coining the terms “role model” and “self-fulfilling prophecy.”)

In 1997, Merton was awarded the Nobel Prize in Economics for his work in developing a new method to determine the value of derivatives. His options-pricing method, the Black-Scholes model, has been labeled one of the most revolutionary concepts in modern finance.

Nowadays, Merton sits on the faculty at MIT’s Sloan School of Management, serves as a professor emeritus at Harvard University, and is a resident scientist at global asset management firm Dimensional Fund Advisors. His current research includes a focus on lifecycle investing and retirement funding solutions, a topic that has led him to assess the benefits of home equity conversion. His work takes him around the world, where he speaks before groups of riveted followers and sometimes extols the reasons why reverse mortgages have such value.

The Global Retirement Crisis

According to Merton, home equity conversion stands to play a key role in solving the retirement crisis—a problem that plagues countries around the world, not just the U.S.

The global financial crisis that exploded in 2007/2008 depleted savings for many and volatile markets prevented a significant rebound. Add to this a dramatic increase in the 65-plus population and increasing life expectancies around the world, and it’s clear that the world economy is experiencing pressure like never before. Faced with an aging population, government benefits and pension plans in many countries are stifled as resources once earmarked for retirement funds are being funneled toward health care and other services to accommodate aging.

“The world is getting older,” Merton says. “With our baby boomers in the U.S., we are an older society. China is aging even faster than the U.S., and Korea faster than China. Increasing demographics is putting pressure on funding.”

This means that the traditional three-legged stool of retirement funding—government benefits, employer pensions and personal savings—is getting awfully wobbly. It appears that now, the responsibility to fund retirement has mostly shifted to the individual.

Rethinking Retirement

But the picture is not entirely bleak, as Merton points out. “There is good news, and I underscore, it is very good news: Future generations are going to live longer. This is great. But, as with many good things, there comes another challenge, which is simply how to fund those extra years.”

If you live 10 years longer than your parents, but still want to retire around 65 as they did, you now have to save enough to support 20 years of retirement, Merton points out. “The only way you can do that is to save 33 percent of your income.”

If saving more during your working years proves impossible, the alternative is to alter your lifestyle in retirement. 8 “If you want to work the same number of years your parents did, fine, but you’ll have to accept a lower standard of living,” he says. “If you want to have the same standard of living as your parents, you can have 12 years of retirement—they only had 10—but you have to work 48 years, not 40.”

Basically, Merton says it boils down to this: “You either have to work longer or accept a lower standard of living. What you can’t do is work the same number of years as your parents, live longer and enjoy the same standard of living. That’s not feasible.”

Finding a Solution

For those who can’t work longer or save more, Merton draws attention to another solution.

“There is one more thing we can do to try to address the challenge, and that is to take the assets people have and get more benefits from those assets. Now, I don’t mean get higher returns; we’re already trying to get the highest returns on our investments that we can for the level of risk, we can’t just dial up the return… So how do we get more from the assets? Well, we use them differently and we develop tools that are efficient for doing that.”

One specific asset that needs to be tapped, says Merton, is the house.

“There’s no magic potion here. For working middle-class people, the biggest asset they have is not their retirement pension, it’s their house. And it’s typically the only major asset they have, but it is big. I’m talking about the house they want to live in in retirement.”

Merton says we need to start thinking about the house differently, viewing it as an asset rather than treating it as part of our legacy.

“The house is like an annuity: It provides the housing you need for as many years as you need it,” he says, adding that the idea of leaving the house as a bequest is flawed. “In our society, and even in Asian societies that are transforming from agrarian to industrial, the children don’t move into the house. No matter how precious the house is, how sacred, in any culture, in the end when you don’t need it anymore, it’s going to get sold, and that makes it a financial asset. So it’s an annuity while the retiree needs it, and then it becomes just a financial asset.”

Overcoming Obstacles

While Merton praises the concept of a reverse mortgage, he takes issue with the name itself, which he says has hindered the product’s acceptance.

“I hate the name. First of all, it’s misleading because saying it’s a mortgage makes it sound like it’s a loan. But with reverse mortgages, you don’t pay anything as long as you stay in the house. So it’s a very different animal. It also sounds like you’re leveraging your house.”

Merton points out that other countries with similar equity conversion programs have much better names. “In England they call it equity release, that’s a little more neutral. I like the Korean name; they call it a home pension. It’s more descriptive. The house itself provides you a pension, and the home pension allows you to take some of the value from the house to provide you additional pension. It doesn’t say anything about a mortgage or imply that you may owe money.”

Merton admits that confusion about the product is problematic, and says the HECM program as it currently stands may need some tweaking to help the product reach its full potential.

“We also have to educate people as to the proper use of them and in general make them much more efficient,” he says.

“You hear some people say reverse mortgages are bad, but I think what they may mean is the way that they are currently being produced and sold, and the cost associated with them, is not a good example of the product,” he says. “I think that’s what they mean, but people hear it as, ‘Reverse mortgages are not a good idea and we should ban them.’ I say that a reverse mortgage is a good idea, but maybe we need to fix the design a bit. Let’s fix it if we need to, but don’t get rid of it.”

Merton says making product improvements, which have already taken place with recent changes from HUD, is a large but feasible undertaking.

“It’s going to require a lot of hard work and innovation, which we know how to do. It’s a simple engineering problem,” he says, adding that he doesn’t believe a government-sponsored program is the right way to go.

“There’s going to be a need to find wide-based funding sources, and I don’t believe government is the answer. HECMs are about the only reverse mortgages out there, and it’s a government plan, but government balance sheets just aren’t big enough,” he says. “We have to find very efficient ways to provide the funds for the reverse mortgages, but we can do it.”

Global Acceptance

Merton predicts that home equity conversion—whether it’s called a home pension, an equity release or a reverse mortgage—is going to be a crucial part of solving the retirement income problem.

“I believe it is going to be essential for a good retirement around the world. In Asia, they are paying a lot of attention to it, they are working on it. There is a lot of interest in developing it in many countries. Even in Colombia and Latin America, where they don’t have a reverse mortgage, they are very interested in finding out about it.”

“Sooner or later, to have a decent retirement, a number of people are going to have to tap into this. It’s not a matter of choice. This is going to be an essential part of the foundation for funding retirement around the world.”

*For those freaked out over my use of the word “confiscation” in the headline, consider that there are already government studies on the trillions of dollars tied up in senior home equity and how it may be used for retirement in lieu of reduced social security benefits the government may plan to run out of. The rest is for your imagination if you are concerned about what the government will do with increasing debt and reduced social security funds in the years ahead.

Also, consider how the retirement industry is counting on your equity to cover the “gap” they perceive between retirement costs and resources: “There is a really, really large gap between retirement assets and retirement liabilities,” says Chris Meyers, a professor at Columbia Business School and the CEO Longbridge Financial. pointing to data that suggests an $11 trillion gap between the available assets and overall needs. Down the road, he says, home equity might be able to offer as much as $6 trillion to fill the gap.

It is not a big reach, given the government’s little by little dissipation of your social security benefits for them to confiscate your home equity in lieu of paying you the social security you counted on and believe is  yours. There is already evidence that governments around the world are contemplating what happens when they run out of money. There is reason to believe they have a focus on your home equity to get them past the devastation of your social security benefits. Is it already happening? CONSIDERING A HECM NOW is  wise move. Call me with your questions: Warren Strycker 928-345-1200.

CONSIDER other information about HECM on these pages:

HECM spectrum 150w, 300w, 768w" sizes="(max-width: 604px) 100vw, 604px" />“We endorse HECM, the reverse mortgage, for senior age future”, said Warren Strycker this week as it takes the stage in financing retirement. Other efforts to dominate retirement trust have failed to do that, leaving seniors short of cash in their closing chapters forced to resorting to another forward mortgage with payments they can’t afford”, he added. We believe the HECM is a trusted tool as seniors are rewarded for their focus on home equity. This tool will revolutionize the mortgage industry as the reward for good mortgage planning.”

For more information about this website, call 928 345-1200 and ask for Warren Strycker. Email:, This is a HECM informational website and does not solicit or intend to represent any lender or loan officer in providing solutions for retirement products or services. 928 345-1200.

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With Similar Retirement Stresses, U.K. Poised for Reverse Mortgage ‘Boom’

July 25th, 2017

Retirement-planning shortfalls, trillions in built-up home equity, and fears over rising long-term health costs are stoking rumors of a reverse mortgage renaissance — only this time, it’s happening across the pond. Circumstances are conspiring to make “equity release mortgages” increasingly attractive to borrowers in the United Kingdom, according to a recent story from the Financial Times.

Though the Home Equity Conversion Mortgage market in the United States remains a small part of the overall domestic lending landscape, it still dwarfs its British counterpart, which the Financial Times pegs at five times smaller than the American marketplace. Still, major players such as Santander have made moves to enter the market, the publication notes, and they could soon expand the overall equity release picture.

Equity boom, pension bust

Writer Patrick Jenkins lays out an eerily familiar scene, noting that U.K. homeowners aged 65 and older control £1.7 trillion in home equity, or about £340,000 per homeowner; for reference, based on Tuesday’s exchange rate, that’s about $2.2 trillion, or $443,000 per house. American homeowners aged 62 or older, meanwhile, have anywhere from $3.6 trillion to $6.3 trillion in available home equity, depending on who you ask.

And though the pension system is notably different in the U.K., British seniors face a similar dilemma as their American counterparts: The World Economic Forum declared Britain’s “pension gap,” or the gulf between what retirees actually have and what they need to maintain 70% of their pre-retirement income, to be one of the worst in the world, totaling £25 trillion, Jenkins writes.

“The government has duly responded. This month, it announced the retirement age would rise to 68 for anyone born after 1970,” Jenkins points out. “A large gap will remain, though — fertile ground for insurers to sell equity release mortgages.”

Jenkins also explains renewed concerns over health care costs for older Britons, another common worry for American seniors. The ruling Conservative Party, which suffered unexpected losses in the nation’s recent snap election, had campaigned on a policy that would require seniors to tap into their personal assets above  £100,000 to cover long-term health care expenses, a figure that would include the value of any owned property.

“Although the party rowed back on the no-cap idea, experts believe individuals will have to take more responsibility for funding their own old age care in the future,” Jenkins writes.

Key differences

Of course, the British products differ greatly from domestic Home Equity Conversion Mortgages. “Typical” equity release mortgages in the U.K. allow borrowers to tap into 25% of their home values, either upfront or in an “income drawdown format.”

Echoing similar problems with the U.S. program, Jenkins notes that the British equity release mortgage industry had grappled with issues in its early days, but has since improved.


See the full look into the U.K.’s equity release marketplace at the Financial Times.

See “Information” tab on the home page for access to origination consultant, Warren Strycker, who can explain the program in the United States.


Without Fixes, Social Security Benefits Would Drop to 1950s Lows

July 19th, 2017

It’s a refrain that Americans approaching their retirement years have heard for years now: Social Security is poised to run out of reserve cash in 2034, which could potentially trigger a sharp decline in benefits. But a recent research brief implies that a solution could be simpler than many in industry observers imagine — assuming Congress can somehow agree on a compromise.

Writing for the Center for Retirement Research at Boston College, director Alicia H. Munnell summarizes the most recent 2017 Trustees Report, which presents the state of the Old-Age, Survivors, and Disability Insurance (OASDI) trust fund.

“The bottom line remains the same,” Munnell writes, noting that the exhaustion year of 2034 has not changed for several years. “Social Security faces a manageable financing shortfall over the next 75 years, which should be addressed soon to share the burden more equitably across cohorts, restore confidence in the nation’s major retirement program, and give people time to adjust to needed changes.”

Munnell, a Boston College management professor who has advocated for the use of reverse mortgages as a part of some Americans’ overall retirement strategies, makes the somewhat surprising assertion that fixing the problem is easy — and that the “problem” itself wouldn’t be as devastating as it seems at face value.

“The exhaustion of the trust fund does not mean that Social Security is ‘bankrupt,’” Munnell writes. “Payroll tax revenues keep rolling in and can cover about 75 percent of currently legislated benefits over the remainder of the projection period,” which stretches all the way to 2091.

Still, that would mean that recipients’ Social Security income would decline to levels not seen since the Eisenhower administration: Instead of covering 36% of a 65-year-old worker’s pre-retirement earnings, Munnell writes, that number would drop to 27%, its lowest point since the 1950s.

For the tax wonks out there, Munnell then dives into detailed plans to fix the coming crisis, including a Republican-sponsored proposal to cut benefits, and a Democratic-led effort to raise payroll taxes. She concludes that they “bracket the range of options,” presenting two extremes with the answer likely falling somewhere in the middle.

“These are useful bookends, highlighting that policymakers need guidance about how Americans want the burden of fixing Social Security allocated between benefit cuts and tax increases,” Munnell writes. “Finding a mechanism to communicate those preferences to Congress is the big challenge.”

She ends on an optimistic — perhaps overly so, given the current political climate — note.

“Once the preferred allocation is determined, filing in the specifics is relatively easy,” Munnell writes.

Read her full brief here.

Editor’s note: Beware of this logic. Congress would have to agree on something, but it’s pretty clear they are pledged not to.




Obama’s Budget Plan: Not Looking Any Better for RetireesFebruary 26, 2012In “News”

Average Retirement Age Ticks Up, But Not MuchMarch 4, 2015In “News”

Senators Aiming to Solve Retirement Crisis Hear About Reverse MortgagesMarch 15, 2015In “News”


U.S. home prices were 6.6% higher in May 2017

July 5th, 2017

U.S. home prices were 6.6% higher in May 2017 than the same point in 2016, pulling home equity up along with it.

“For current homeowners, the strong run-up in prices has boosted home equity and, in some cases, spending,” said Frank Martell, the president and CEO of real-estate research firm CoreLogic, in its latest report on nationwide home price trends.

The list of states that saw the biggest gains in CoreLogic’s Home Price Index — a proprietary metric that takes into account various single-family home price factors — should be familiar to RMD readers who follow equity trends: Washington State home prices jumped 12.6% year-over-year, followed by Utah with 10.4% and Colorado at 9.7%.

Those states have frequently topped recent lists of states with the greatest home equity gains, and have also generated significant Home Equity Conversion Mortgage growth: As RMD reported yesterday, reverse mortgage endorsements in Colorado between January and April 2017 are running 69% higher than at the same point in 2016, while Washington and Oregon saw jumps of more than 30% each during that span.

Denver also claimed the top spot among metropolitan areas, with 9.2% year-over-year home price growth. Las Vegas, San Diego, Los Angeles, and Boston rounded out the top five.

“The market remained robust with home sales and prices continuing to increase steadily in May,” CoreLogic chief economist Frank Nothaft said in the report. “While the market is consistently generating home-price growth, sales activity is being hindered by a lack of inventory across many markets.”

Though these trends generally spell good news for homeowners and those potentially looking into tapping home equity in retirement, the same forces work against renters and first-time homebuyers, CoreLogic noted: Rents for affordable housing units are rising significantly faster than inflation, and new buyers are facing higher-than-expected sticker prices.

Read CoreLogic’s full report here.


25 plus ways to use a HECM; What would you do with all that money?

The New HECM Reverse Mortgage is a versatile retirement funding tool that can be utilized in many ways. Here are just some of them:

  1. Pay off your forward mortgage to reduce your monthly expenses.
  2. Re-model your home to accommodate aging limitations.
  3. Maintain a line of credit (that grows) for health emergencies and surprises.
  4. Cover monthly expenses and hold on to other assets while their value continues to grow.
  5. Cover monthly expenses and avoid selling assets at depressed values.
  6. Pay for health insurance during early retirement years until Medicare eligible at 65.
  7. Pay your Medicare Part B and Part D costs.
  8. Combine life tenure payments with Social Security and income generated by assets to replace your salary and maintain your monthly routine of paying bills from new income.
  9. Pay for your children’s or grandchildren’s college or professional education.
  10. Maintain a “standby” cash reserve to get you through the ups and downs of investment markets and give you more flexibility
  11. Combine proceeds with sale of one home to buy a new home without a forward mortgage and monthly mortgage payments.
  12. Pay for long-term care needs
  13. Fill the gap in a retirement plan caused by lower than expected returns on your assets.
  14. Pay for short term in-home care or physical therapy following an accident or medical episode.
  15. Pay for a retirement plan, estate plan or a will.
  16. Convert a room or basement to a living facility for an aging parent, relative or caregiver.
  17. Set up transportation arrangements for when you are no longer comfortable driving.
  18. Create a set aside to pay real estate taxes and property insurance.
  19. Delay collecting Social Security benefit until it maxes out at age 70.
  20. Eliminate credit card debt and avoid building new credit debt.
  21. Cover monthly expenses in between jobs or during career transition without utilizing other saved assets.
  22. Cover expenses and avoid capital gains tax consequences of selling off other assets.
  23. Purchase health-related technology that enables you to live in home alone.
  24. Pay for an Uber or Lyft account so you have mobility and access to appointments and social activities.
  25. Help your adult children through family emergencies.
  26. Use home equity to purchase solar panels to make electricity / no payments.

Reverse mortgages provide access to cash without monthly pmts.

Reverse Mortgages: Many Users, Many Uses


Reverse mortgages provide access to cash. Cash is the most flexible financial resource of all. In turn, access to cash makes a reverse mortgage a very flexible resource. Many homeowners could qualify for an FHA Home Equity Conversion Mortgage (HECM).

Reverse mortgages provide access to cash without monthly pmts.

Steven Sass, a research economist at the Center for Retirement Research at Boston College,  in his recent research brief “Is Home Equity an Underutilized Retirement Asset?” observed that while “retirement planning generally focuses on the use of financial assets,” he finds that “home equity is the largest store of savings for most households entering retirement.” And indeed, “for many households, particularly those with less wealth, home equity is larger than financial assets.” He analyzed home equity and financial wealth across households ages 65-69 for 2012 and expresses it in thousands of 2015 dollars.

For financial planning purposes, I overlay the concept of how adequately funded a homeowner is for retirement. “Fundedness” reflects how well a family’s financial resources match their retirement needs and desires. Many in the top wealth quintile would be Well Funded, as would part of the third and fourth wealth quintiles. Constrained and Underfunded describe a broader range of households.

While the distribution of wealth is not surprising, it provides context for appreciating the range of homeowner’s needs and how their home equity may contribute by using a reverse mortgage.

Reverse mortgages provide access to cash without monthly pmts.

The value reverse mortgages could bring to the aging US population starts with the breadth of users and uses. The value and breadth also challenge homeowners, financial professionals, and the reverse mortgage industry to find good matches between an individual homeowner’s situation and their highest and best use of a reverse mortgage.

What’s not to like? — HECM line of credit “may be a far better choice”

July 12th, 2017

Pitching the benefits of a reverse mortgage over a home equity line of credit has emerged as a major marketing strategy for Home Equity Conversion Mortgage professionals, and now a prominent retirement blogger has added his voice — and some helpful charts — to the mix.

On his Tools for Retirement Planning blog, Tom Davison explores why a HECM line of credit “may be a far better choice for many retirees” than the traditional “forward” line, starting with some familiar facts: the amount of cash available grows over time, regular payments aren’t required, and the lender can’t freeze or cancel the line unless the borrower fails to meet the basic obligations.

While Davison writes that he regularly discussed HELOCs with his clients during his time as a financial advisor — and even maintained one himself as a standby hedge against emergencies — he firmly comes down on the side of the so-called “ReLOC,” which in his telling can stand for either a “reverse” or “retirement” line of credit.

He uses the example of a 63-year-old homeowner who decides to tap into $200,000 of home equity on a $400,000 home. With a “forward” home equity loan, that $200,000 of availability remains steady for the life of the loan, which eventually comes due at the end of a 10-year draw period. Starting at age 73, Davison writes, the borrower must pay $1,212 per month, for a total of $14,544 per year, at an interest rate of 4%.

“With those payments, it would take until the homeowner is 93 years old to pay it off,” Davison notes. “The HELOC repayment works the same way as a traditional mortgage: no draws and can’t skip payments. The HELOC’s flexibility ends when the loan switches from the draw to the repayment period.”

Had the same homeowner selected a HECM line of credit instead, she’d be able to access up to $120,000 during the first year and then the remaining $80,000 starting in the second year of the loan period. But if the borrower does nothing, the major potential advantage begins to appear.

“By the time our homeowner turns 80, if they had not tapped their $200,000 ReLOC, they could withdraw $400,000,” Davison writes. “Or nearly $600,000 at age 90, and $800,000 at age 97.”

He goes on to point out that this growth could end up outpacing a retiree’s investment portfolio depending on the circumstances, and that unlike with a HELOC, repayment isn’t required unless the borrower leaves the house or passes away.

“The homeowner may find making payments very beneficial,” Davison writes, echoing a new “flexible payment” pitch adopted by some reverse mortgage professionals. “A payment both reduces the loan balance and increases the amount that grows and can be borrowed again. More flexibility stems from the fact that the maximum amount owed on the loan is limited to what the house is worth when the homeowners leave it.”

To read Davison’s full post, as well as to check out some visuals illustrating the differences between the two types of loan products, visit Tools for Retirement Planning.

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Researcher: No “Rational Reason” to Avoid HECM

As the American population ages, experts have increasingly pointed to home equity as a key source of retirement income — even as many older homeowners remain hesitant to tap into it for reasons that continue to confound both academics and players in the mortgage industry.

Steven Sass, a research economist at Boston College’s Center for Retirement Research, has studied the behavioral roadblocks to home equity extraction, and concluded in a recent Boston College brief that the main culprits are lack of understanding and fear, as RMD recently reported.

“There’s not really a rational reason to avoid a reverse mortgage,” Sass told RMD in a recent phone interview. “It might be a fairly sophisticated analysis, but it makes sense for a lot of people.”

Sass pointed a finger at some familiar targets, including the deep-seated aversion to going into further debt among older folks, as well as the sense of accomplishment and satisfaction that can come from owning a home free and clear. But he also mentioned distrust of financial institutions in general, as well as a general inability to imagine a need for future cash early in retirement — a key reason many retirees don’t think to open a reverse mortgage line of credit soon after turning 62.

“If you have a sufficient income to cover your expenses, is there any great need to go out and secure this line of credit or get the money?” Sass asked rhetorically. “So I think people might need some impetus to use a reverse mortgage.”

That impetus could be the only way to convince older homeowners that a Home Equity Conversion Mortgage is a good idea, and Sass said the breaking point might start coming earlier an earlier. Social Security benefits could retract in the future, he said, and more and more boomers are entering their retirement years without sufficient cash or investment savings.

“The elderly will be increasingly dependent on savings to support their standard of living, maintain their consumption needs,” Sass said, noting that many of them won’t have employer-paid pensions or extensive Social Security benefits. “As households increasingly need to use their financial assets, at that point, home equity might be viewed as another store of savings and more households will consider using home equity in lieu of, or in combination with, financial outlets.”

While many seniors typically consider traditional “forward” home equity lines of credit as well as reverse mortgages, Sass said they shouldn’t necessarily be used to tap into home equity for retirement.

“A traditional HELOC is just a credit card, cash-flow kind of thing,” Sass said. “It’s not really good for eating your home equity.”

Sass said seniors could use HELOCs to cover specific smaller expenses that might come up during the retirement years — for instance, if a boiler breaks — but because they must be repaid within a set period of time, they’re a less attractive option for people who intend to stay in their homes for an extended period of time.

“It’s a different beast,” Sass said of the HELOC. “To really access your home equity, the two primary ways are to downsides or to take out a reverse mortgage.”


USA Today: Reverse Mortgages Could Hold Key to Secure Retirement

June 1st, 2017

Joining the chorus of popular media outlets that have covered home equity’s role in retirement, USA Today ran a lengthy piece this week about ways homeowners can tap into their wealth — including with a Home Equity Conversion Mortgage.

Quoting experts such as reverse mortgage researcher Wade Pfau and wealth advisor Randy Bruns, the national newspaper provided an uncritical forum for a high-level discussion of the HECM program and its potential benefits for seniors.

“Reverse mortgages have become a critical component of retirement planning,” Bruns told the paper. “A reverse mortgage line of credit can greatly reduce sequence of return risk by providing timely access to cash so you won’t have to sell investments until after markets have recovered,” he continued, explaining an increasingly popular pitch for the HECM: Use your home equity in down markets so you don’t have to deplete your nest egg just to cover basic living expenses.

“The hope is that a reverse mortgage line of credit can act as a standby source of liquidity in the kinds of instances that would otherwise lead to financial ruin for your portfolio,” Bruns told USA Today.

The paper built its story around a recent brief from the Employee Benefit Research Institute — which RMD covered last month — showing that the vast majority of the average American’s retirement war chest lies in home equity.

EBRI senior researcher Craig Copeland looked at households’ retirement investments relative to their overall wealth, including home equity, and determined that built-up home value accounted for pretty much all of what the average American will have to fund his or her retirement.

“Consequently, when measuring families’ financial asset holdings at retirement, it is overwhelmingly the case that just [retirement account] assets plus home equity represent almost all of what families have for retirement outside of Social Security and defined benefit pension plans,” Copeland wrote in his brief for EBRI.

In addition to reverse mortgages, USA Today’s piece suggests that  workers start funneling money into an employer-sponsored 401(k) or a private IRA as soon as possible, and also consider purchasing a home if possible — with the goal of paying down the mortgage quickly to build equity rapidly.

“It might seem obvious, even simplistic,” USA Today writer Robert Powell notes. “But having home equity and retirement accounts are key to most families’ financial assets and — by extension — retirement security.”

Read Powell’s full piece at USA Today.

Reward is to see “financial stress leave,” says HECM LO

April 30th, 2017

In recent years, the reverse mortgage program has undergone substantial policy changes as the product has been revamped and fine-tuned to better meet the needs of older Americans. Many of those who have made a living originating HECM loans have weathered the changes, but it hasn’t been without its challenges. For seasoned HECM loan officers, the work is not what it used to be.

“Tighter regulations have resulted in tougher underwriting standards that have made most HECM loans far less routine,” says Bill Smith of Reverse Mortgage West. “Complaints from my colleagues that ‘every loan is a problem loan’ are much too frequent and clearly not what used to be when I started.”

Smith, who has been originating HECMs for 15 years, says regulatory requirements have added considerable length to a loan’s turn time.

“The requirement that counseling precede the application has made the sales cycle far less efficient. Prior to the regulatory change, I was able to qualify most prospects over the telephone and arrive at the first appointment with an application ready to sign. Probably 90 percent of my loans were one-time visits to close. Now, two home visits are required, making the process less efficient,” he says. “This aggravates me because I do not see any clear advantage for the borrower.”

Less Originating, More Explaining

Beth Paterson of Reverse Mortgages SIDAC, a division of Greenleaf Financial, agrees. “A lot more work and a lot more time are involved in closing a loan,” says Paterson, who has been in the business for 18 years. “Now, with Financial Assessment, we spend a lot more time trying to get the documents needed. We need to explain what a LESA [Life Expectancy Set-Aside] is. There are a lot more conversations and much more legwork involved.”

Some LOs say explaining all the rules and regulations to a borrower can be a challenge.

“Putting FA into layman’s terms for my clients can be tough,” says Mark Draper, a 10-year HECM LO with Amity Mortgage. “They just want to know they are being treated fairly and it’s going to help them.”

Smith says reverse originators now need to do a lot of legwork to close just one loan, a fact others outside the profession may not recognize.

“People may think we are well paid for doing little,” he says. “In truth, they cannot know how many homeowners we must advise and counsel just to secure one loan that actually closes.”

Seeking New Audiences

Florian Steciuch, a HECM specialist with Retirement Funding Solutions who has been originating for seven years, says he has altered his approach in order to adapt.

“I’ve turned my focus to financial planners and estate planners, who are open to learning how a HECM can be used for retirement planning. Rather than marketing to the general consumer, I reach out to specific professionals,” Steciuch says. “Most advisors welcome the Financial Assessment and feel the HECM is a safer product with these changes. With a booming real estate market, serving Realtors and builders has become a larger part of my efforts.”

But getting through to these professionals can be difficult. “The greatest challenge is getting the commitment from financial planners other professionals, like Realtors and builders,” Steciuch says. “They still view the HECM as a last-resort option, even though that changed years ago.”

Outcomes Worth the Extra Work

While increased regulations may have complicated the loan process, HECM specialists are traditionally invested in helping their clients, and this aspect of the work has not changed.

“We are more than loan officers who calculate DTIs or chase conditions. We listen to the sometimes very urgent and sensitive needs of our older borrowers,” Steciuch says. “We understand retirement planning, cash flow, home safety. Of course, we never provide financial, legal or health care advice, but we do understand them. That makes us more than just an LO. We are professionals who can provide life-changing solutions.”

Though some may enumerate the challenges of the work in today’s post-FA world, they are just as quick to list the rewards of the job as well. For many reverse mortgage originators, helping clients solve their financial problems offers a reward great enough to outweigh the challenges faced along the way.

“The reward for me is and always will be that feeling of satisfaction when you’ve helped someone obtain a reverse mortgage and see the financial stress leave their body,” Draper says.

Steciuch says seeing his clients’ relief motivates him to keep at it. “At my last closing, the borrower clasped her hands over mine and said, with a tear in her eye, ‘Thank you. The pressure is lifted from us.’ All the no’s I face each week are worth that one yes.”

Paterson says helping seniors incites a passion that is her driving force. “As the saying goes, if you love your job, you never work a day in your life. That’s how I feel. It’s not work to me; I’m really passionate about it. To me, it’s a ministry.

“… and to me,” Warren Strycker



Finding a HECM Use for Every Income Bracket

June 19th, 2017

While reverse mortgages have long been seen as a product of last resort, professionals in the industry know that opinion is changing — and now a new blog post shows the different ways that people can use Home Equity Conversion Mortgages no matter their financial situation.

Over at Tools for Retirement Planning, personal finance blogger Tom Davison maps out Home Equity Conversion Mortgage strategies for three types of potential borrowers: “well funded,” “constrained,” and “underfunded.”

For instance, a “well funded” borrower may have planned well for retirement, but could use a reverse mortgage to buy a new home — either larger or smaller than the current property — or remodel his or her existing home to age in place safely and comfortably. On the other end of the spectrum, an “underfunded” retiree could take out a HECM and pay down high-cost debt, cover the cost of necessary medications, or even just keep the heat on in the winter.

In the middle, “constrained” borrowers could potentially use reverse mortgage proceeds to defer Social Security payments, supplement required minimum distributions from retirement accounts, or just to have a little extra cash to spend on small luxuries like visiting grandchildren, Davison writes.

Davison based these categories on a recent report from the Center for Retirement Research at Boston College, in which economist Steven Sass found that consumers will increasingly need to tap into home equity in retirement, but remain reluctant due to “strong behavioral and informational barriers.”

In his March 2017 brief, Sass split households aged 65 to 69 into five groups based on equity and financial wealth, and found that traditional savings only exceeded home equity for the richest fifth of the U.S. population — while home equity accounted for the overwhelming majority of retirement wealth for the second and third quintile of older Americans.

“The value reverse mortgages could bring to the aging U.S. population starts with the breadth of users and uses,” Davison writes. “The value and breadth also challenge homeowners, financial professionals, and the reverse mortgage industry to find good matches between an individual homeowner’s situation and their highest and best use of a reverse mortgage.”

Read Davison’s full piece here.


“HECM Mortgage Worked For Dad” says Personal Finance Columnist

May 30th, 2017

A Chicago-based personal finance columnist doesn’t just suggest reverse mortgages to her readers — she helped her father get one, with positive results.

Terry Savage, whose columns appear in the Chicago Tribune and other papers around the country, wrote this week about her father’s experience with a Home Equity Conversion Mortgage, which she says helped him age in place with dignity.

She describes an almost perfect HECM scenario: After taking out a reverse mortgage on his condo at age 80, Savage’s father remained at home for the next 15 years, only needing to use his long-term care insurance shortly before his death at age 95. In that time, Savage writes, her father wound up borrowing more than the condo was worth.

“My dad worried about how the balance of the reverse mortgage ‘loan’ was building up, including the interest that was charged on the money withdrawn,” Savage writes. “I had regularly reminded him that they could never force him to move out. I urged him not to worry, live longer — and beat the odds! He certainly did.”

Upon her father’s death, Savage’s family elected to allow the lender to foreclose on the property and handle its sale.

“The family had agreed at the start that we wanted Dad to live there in dignity as long as possible, and we wouldn’t worry about losing the property in the end if he outlived his equity,” she writes. “This is the way a reverse mortgage should work.”

Savage then goes through a detailed description of the reverse mortgage program, advising potential borrowers to only seriously consider a HECM if they plan to remain in the property for at least five years, and if they have savings or income to cover the mandatory obligations. She also points out that the proceeds from a HECM are not typically taxable, and that like her father, borrowers can’t “run out” of home equity or lose their homes as long as they hold up their end of the bargain.

Savage’s column marks another milestone in a streak of positive coverage in the Tribune from syndicated financial columnists; the paper ran a piece by Benny L. Kass extolling the virtues of the HECM line of credit over a traditional “forward” home equity line in March. These articles also represent a contrast from the paper’s recent news coverage of reverse mortgage fraud in Chicago, with the return of noted alleged scammer Mark Diamond to the headlines last week.

“A reverse mortgage is worth considering,” Savage concludes. “I know that firsthand.”


Get up, and get on…

Facebook Chief Operating Officer Sheryl Sandberg spoke recently about the death of her husband, telling graduates at UC Berkeley that they will face adversity in life, but they can overcome it.

“Today I will try to tell you what I learned in death,” Sandberg said in a commencement address. “Dave’s death changed me in very profound ways. I learned about the depths of sadness and the brutality of loss,” she said. “But I also learned that when life sucks you under, you can kick against the bottom, break the surface, and breathe again.” In a little over a year since Sandberg’s husband, David Goldberg, died suddenly while they were on vacation in Mexico, she has opened up from time to time on Facebook.

Most recently, she wrote a post acknowledging that she never realized how challenging single motherhood was until she was forced to experience it for herself.

But in her speech to the UC Berkeley class of 2016, the “Lean In” author spoke candidly about the wisdom she has gained in the year since she lost her husband. “I have never spoken publicly about this before. It’s hard. But I will do my very best not to blow my nose on this beautiful Berkeley robe,” she said. She told the graduates that she was sharing her experience with them because they too will face challenges and set­backs, possibly more grueling than what they have encountered before.

“The question is not if some of these things will happen to you. They will,” Sandberg said. 5/15/2016­news/sheryl­sandberg­opens­about­husband­s­death­uc­berkeley­commencement­n574206 2/2 “It is the hard days — the times that challenge you to your very core — that will determine who you are,” she said.

“You will be defined not just by what you achieve, but by how you survive,” Sandberg shared times in which she was heavily distraught over the loss of her husband, and the advice from loved ones: To pursue and make the most out of other options, to “lean into the suck,” to be grateful that the situation wasn’t more devastating, and other words of encouragement that helped her get through the year.

“When the challenges come, I hope you remember that anchored deep within you is the ability to learn and grow,” Sandberg said. “You are not born with a fixed amount of resilience. Like a muscle, you can build it up, draw on it when you need it.”

Tough words to follow. Here at Gofinancial, we are tested too, following a multitude of tests over many years now.

Getting a HECM can be like Sheryl says: ” when life sucks you under, you can kick against the bottom, break the surface, and breathe again”.  We’ve seen this phenomenal reconstruction happen so many times when our clients gain a new financial foothold on their lives after they were able to hook up to a HECM.

It will be best to reach out BEFORE a financial crisis in retirement. It will be so much easier to make the transition to enhanced financial balance when things are calm. In another story on this page, a discussion centers on whether it makes more sense to go with a HECM mortgage early or late in retirement. The assumption that you will need to balance finances with a HECM is strong and well chartered by a lot of other happy clients. The focus may be on when you transition to HECM, and not so much whether. (

See contact information in navigation bar for details — Consider stories on this page: Call and let us help, 928 345-1200. (Why should you trust me with this? Test me and find out! I can do a HECM analysis for you to see what you think. You’ll recognize the truth when you see it).



CBO’s Crystal Ball to 2047: Older Population, Higher Interest Rates

May 9th, 2017

The United States of America, 2047: The population bumps up against 400 million people, with a full 22 percent of folks aged 65 and older — or 85.8 million seniors. The national debt rises so high that the country spends more money on interest payments than all of its discretionary programs combined, a scenario that’s never been seen in a half-century of tracking such metrics. And that’s all assuming that elected officials even find a way to keep Social Security and Medicare funded at their current levels.

This stark vision comes courtesy of the Congressional Budget Office and its most recent Long-Term Budget Outlook. The nonpartisan CBO looks into its crystal ball and predicts the economic picture for the next 30 years, and the results could prove fascinating for folks who work in financial planning and lending — or, perhaps, send them screaming into the night.

Interest Rates Creep Higher, But Not Historically So

For instance, the CBO joins the chorus of other financial analysts by projecting steady increases in interest rates over the coming decades as the economy improves and the Federal Reserve moves away from the historically low federal funds rates instituted during the depths of the Great Recession. But mirroring the attitudes of many in the reverse mortgage industry after the Fed last hiked its interest rate target back in March, the office also puts these trends in the larger context of recent history,

“CBO anticipates that interest rates will rise as the economy grows but will still be lower than the average of the past few decades,” the report notes. “Over the long term, interest rates are projected to be consistent with factors such as labor force growth, productivity growth, the demand for investment, and federal deficit.”

As RMD reported at the time, rising interest rates have diverse effects on Home Equity Conversion Mortgage originators and lenders, potentially hampering needs-based borrowers with lower principal limits, but also providing opportunities to market the growing HECM line of credit and strengthening the HECM-backed securities market.

Though the CBO doesn’t address specific numbers for federal funds rate targets, the office offers projections for the interest rate on 10-year Treasury notes, predicting a rise from 2.1% at the end of last year to 3.6% in 2027 and 4.7% in 2047. That’s still a percentage point below the average of 5.8% recorded between 1990 and 2007, a period that the CBO notes was free of major fiscal crises or spikes in inflation.

The current federal funds rate target of 0.75% to 1% still falls on the historically low side of the spectrum; prior to the economic collapse in the late 2000s, the number sat at 5.25%, and it climbed as 20% during the inflationary malaise days of the Carter and early Reagan administrations.

Rising interest rates could spell bad news for the federal government, however, as they also determine the amount of money that Uncle Sam must pay on his debts. According to the CBO’s estimates, the amount of federal debt held by the public will balloon to 150% of the gross domestic product, up from 77% now — reaching figures never seen in the history of the United States. For reference, the national debt has only ever exceeded GDP during and after World War II, when the government embarked on an unprecedented defense spending spree.

A Changing Population

In the CBO’s estimate, a variety of factors will conspire to expand the American population to about 390 million as compared to around 320 million today — while simultaneously making it grayer.

The net immigration rate, which balances out the amount of people leaving and entering the U.S., is expected to rise ever-so-slightly from 3.2 per 1,000 in 2017 to 3.3 per 1,000 in 2047, while the fertility rate for folks already in America will sit at an average of 1.9 births per woman for the next 30 years, down from the pre-recession level of 2.1.

Couple that with declines in mortality rates and gains in life expectancy, and you’ve got the recipe for an older America: A baby born in 2047 can expect to live an average of 82.8 years according to the CBO’s estimates, compared with 79.2 for children born this year. And good news for readers born in 1982: You can expect an average of 21.5 more years on this mortal coil once you turn 65 in 2047, as compared to 19.4 more years for those celebrating their 65th birthdays by the end of 2017.

The Takeaway

Interestingly, the CBO notes that it bases its entire report on the assumption that the two key pillars of Social Security and Medicare will remain funded “even if their trust funds are exhausted” — a formidable “if” given political realities and the general pitfalls of making assumptions about the future of government from 30 years out.

As Jamie Hopkins, an associate professor of taxation at the American College of Financial Services, recently told a HECM industry event, Social Security and Medicare will remain funded through 2034, and any attempts to make unpopular decisions that could benefit their long-term health — such as raising the retirement age — would spell political disaster for those who attempt a change.

Perhaps none of this comes as a surprise to originators, lenders, and others who work in the reverse mortgage space: Americans as a unit are getting older, the economic outlook remains uncertain, and no one’s really sure what’s going to become of the social safety net. Meanwhile, down on the micro level, this growing crop of seniors will need to figure out ways to remain comfortable and safe in their retirement years.


The Congressional Budget Office (CBO) is a federal agency within the legislative branch of the United States government that provides budget and economic information to Congress.

Home Equity HECMs Protect Women’s Retirement Choices

Due to the fact that women live longer than men and that women still are only making 79 cents for every dollar men make, they have a more difficult time achieving retirement security. Even with statistics not in their favor, women do still have options when it comes to financially securing themselves as they age.

The first step is to get a financial plan together as early as possible, Jocelyn Wright, director of The American College State Farm Center for Women and Financial Services and assistant professor of women’s studies, said in a recent webinar hosted by the American Society on Aging and sponsored by the National Reverse Mortgage Lenders Association (NRMLA).

And part of that financial plan could include a reverse mortgage, Wright points out.

There are major life events that a large portion of older women go through, which include divorce and becoming a widow. These two life events are tough enough to get through, but they also can derail retirement savings.

One way women can get through these life events and other events similar to them is by tapping into their home equity through a reverse mortgage, Lorraine Geraci, vice president of the training division at Finance of America Reverse (FAR), explained during the webinar.

“I feel it’s imperative that we collectively provide choices to assist older adult women by sustaining financial longevity and establishing peace of mind,” Geraci said.

Obtaining a reverse mortgage will not play out the same for each woman nor will each woman use a reverse mortgage in the same way.

There are many different strategies when it comes to figuring out how to use a reverse mortgage to its fullest potential. The first step is to choose between a fixed rate and an adjustable rate home equity conversion mortgage (HECM), Geraci shared.

“An adjustable rate HECM is similar to a home equity loan line of credit except that amount of line of credit is accessible to them whenever they want and also grows while it’s in the credit line, which can increase the amount of equity available to the borrower as times goes on,” she said.

Once the borrower has chosen either a fixed rate or adjustable rate HECM, setting a strategy should be addressed next. A strategy could be anything from using the proceeds to manage long-term care payments, social security planning, income planning or to purchase a new home altogether.

“There’s a lot of folks in the baby boomer generation who would like to move to a different location and with the HECM for purchase program, they can have that option,” Geraci said.

These strategies, if implemented correctly, can change the financial situation for women who do not have an adequate amount of retirement savings and can also help them age in place.

For those new to the idea of a Reverse Mortgage, we call it a HECM to more specifically define it, please consider the magnitude of the information on this page and then call Warren Strycker for additional information, an analysis of your own opportunity and followup through the process. Call 928 345-1200 in Arizona


Selleck Asks: ‘Why Not’ Use Home Equity?

June 20th, 2017  | by Alex Spanko  | American Advisors Group, HECM, News, Reverse Mortgage

American Advisors Group this week debuted its latest television commercial starring actor Tom Selleck, who this time asks older Americans why they aren’t using the equity built up in their homes.

Set in the same finely appointed loft apartment as a previous Selleck-centric spot, the new ad finds the “Blue Bloods” star telling seniors that they’re sitting on more than $6 trillion in total home equity, citing a statistic from the National Reverse Mortgage Lenders Association’s Reverse Mortgage Market Index.

As in a previous commercial for the Orange, Calif.-based AAG, Selleck directly addresses potential borrower concerns head-on in the two-minute advertisement, titled “Why Not Use It?”

“I think reverse mortgage loans are misunderstood sometimes. Maybe some retirees just don’t trust them,” Selleck says.

“They can sound too good to be true. But the fact is, in some ways, a reverse mortgage loan is not that different than a traditional mortgage,” he continues, calling the equity that the homeowners have already paid into their properties “kind of a savings plan.”

The new ad — along with a shorter 60-second version — began running Monday on the big four broadcast networks as well as a variety of cable channels, according to a release from AAG. It marks the third time that the 72-year-old Selleck, also famous for his starring role as TV’s “Magnum, P.I.” from 1980 to 1988, has appeared in a spot for the reverse mortgage lending giant; in previous ads, Selleck has likened retirement planning to a “three-legged stool” and told viewers that, like them, he once thought a reverse mortgage was too good to be true.

“The new campaign direction focuses on the fact that many older American homeowners are struggling to fund their retirement despite the enormous amount of home equity that’s available to them,” AAG chief creative officer Teague McGrath said in the release. “Tom Selleck has a deep appreciation of this problem and understands how reverse mortgages could be a critical component in many seniors’ retirement funding.”

Selleck himself agreed.

“Reverse mortgages have been undervalued and underutilized for too long in this country,” the actor said in the release. “Senior homeowners should have a way to use their hard-earned home equity to help fund their retirement.”

“I’m one of those seniors now,” said Warren Strycker, longtime loan originator now with Patriot Trust Lending, “and I’ve had a reverse mortgage for a long time now with no regrets”.

“Come, let us reason together,” Strycker added. “Why not Patriot Lending” he adds. (See “information” tab on the navigation bar for contact information.)


HOUSING WEALTH has come forward to center stage thinking

RISK MANAGEMENT survive and thrive in retirement requires new thinking and a clear understanding of all the options.

Over the past 12 months, the Department of Labor ruling has made it abundantly clear that all advisors have a responsibility to do what is in the best interest of their clients. Part of that responsibility means staying informed about current thoughts, trends and legitimate tools that could have a positive or negative effect upon their ability to help their clients’ meet their overall goals.

Housing wealth has become one such tool. No longer can it be relegated to the back room or basement strategies. It has come forward to center stage thinking. Retirement Planning Has Changed Financial planning in the generic sense is a recent phenomenon. Retirement, in its current context, is fairly new.

For centuries, most people worked for as One Simple Strategy Every Advisor Should Know Don Graves, RICP At first glance the article title seems to suggest that a home equity conversion mortgage (HECM), also known as a reverse mortgage can be used to hedge or mitigate some of the more common risks of retirement.

But I realize that for some advisors, the very notion of reverse mortgages being implemented in financial planning is absurd. Suppose the oft-maligned and seldom suggested, red-headed stepsister of financial planning had more to her than you imagined? Could her beauty and brilliance be veiled by mythology and misperception?

What if the lowly 30-year-old reverse mortgage could help your clients preserve more assets, improve cash flow, ensure liquidity and mitigate risk? What if it allowed you to differentiate your practice, impact more clients, and make more money, would you want to take a closer look?

In a moment, you will discover two couples that did everything the exact same way, but had two completely different outcomes primarily due to their advisors’ beliefs about reverse mortgages. Historically, the more affluent retiree and their advisor have either simply dismissed the reverse mortgage or relegated it to use as a last resort. However, much has changed in the last few years.

Recent research suggests that the appropriate and strategic use of the newly restructured reverse mortgage may be helpful in positively impacting retirement outcomes. For many in the boomer generation, to Can Reverse Mortgages Hedge the Most Common Retirement Income Risks?

  • Same Savings at Retirement • Same Withdrawal Strategy • Same Amount on Same Days • Same Investments COUPLE A Ran out of savings in 23 years COUPLE B Had $1.1 million in savings 30 yrs. later long and hard as they could and then died soon thereafter.

The contemporary notion that you stop working with enough saved money to last 20, 30, 40 years is a product of modernity. For the last 75 years (at least since the advent of Social Security), people were expected to live on their personal savings, a company pension, and Social Security during retirement.

But the erosion of private pensions, the dismal lack of personal savings, and the strain on the current Social Security system has created an outlook for today’s retirees that will require financial ingenuity and new tools in order for them to protect and preserve their nest eggs. Born just after midnight, on January 1, 1946, Kathleen Casey-Kirschling, will forever be known as America’s first baby boomer.

Nearly 70 million more after her would be born up until 1964. No other group has so thoroughly changed the landscape of America quite like the boomers. Now nearly 10,000 boomers a day are turning 62.

In the middle of this last year, Kathleen was the first of the boomers to take her required minimum distributions. The boomers will leave a legacy both positive and negative, the historians opine. At the onset of retirement, there are three issues they must confront.

They will live longer than previous generations, have not saved enough to sustain their longer life span, and are more in debt than any other known previous generation. It is estimated that nearly 68 percent of new retirees will be carrying some sort of mortgage servicing debt into their retirement. This does not take into account credit cards, car payments, or student loans for which they served as a cosigner.

Surprisingly, there is one thing that boomers have in their favor–87 percent of them own a home. As a matter of fact, the average, married, retiree today will have $92,000 in savings but $192,000 in home equity. This “housing wealth” as my friend, Dr. Sandy Timmerman, founder of the Met Life Mature Market Institute, says, “will become the boomers’ salvation!”

Now if all of this was not bad enough, the new retirement paradigm is filled with unforeseen dangers. In times past, retirement was likened to ascending to the summit of Mt. Everest. Clients braved the elements and proceeded with discipline until finally they set foot atop the grand mountain of accumulated assets.

There they pulled out their flag and staked it in the ground, proclaiming “mission accomplished,” thinking the danger had passed and the hard part was over.

Unfortunately, that is not the true danger in climbing Mt. Everest. Nearly two-thirds of all mountain climber deaths transpire on the descent. Similarly, the most dangerous part of the retirement mountain occurs after the flag is planted when our clients begin to live on what they accumulated.

This is the true threat in retirement and the opportune place where skilled financial Sherpas showcase their knowledge. Good retirement income planning focuses on the dangers of descending the mountain and using all available tools to help the client arrive safely back at base camp.

Risks in Retirement

As baby boomers move into retirement there are significant apprehensions and a slew of frightening questions. Will they have enough money to last through their golden years? Will they be able to enjoy the lifestyle they imagined? Will unexpected expenses throw off their retirement plan? Could a market crash decimate their carefully built nest egg and leave nothing for the next generation?

These concerns are considered to be the 4Ls:

  • Longevity: Will I have enough to meet my basic needs?
  • Lifestyle: Will I have enough to get a steak instead of a hamburger?
  • Liquidity: Will I have access to tax-advantaged money for possible spending shocks?
  • Legacy: Will I leave a good financial memory? There are more than just those four concerns.

There are genuine and perilous risks underlying each one of them. The Retirement Income Certified Professional RICP® course that I teach at the American College lists and clarifies the 18 risks in retirement income: • Longevity risk • Inflation risk • Excessive withdrawal risk • Health expense risk • Long-term care risk • Fragility risk • Financial elder abuse risk • Market risk • Interest-rate risk • Liquidity risk • Sequence-of-return risks • Forced retirement risk • Re-employment risk • Employer insolvency risk • Loss of spouse risk • Unexpected financial responsibility risk • Timing risk • Public policy risk You can download an expanded summary of these risks at

Four Risks in Particular

Clearly identifying and managing risks in retirement income is on every advisor’s mind. Let’s look at four risks in particular and see if the reverse mortgage can add value. Longevity Risk In 1935, when Social Security was first established, the average life expectancy was only about 61 years.

Today, it has risen to in excess of 78 years and is growing steadily. Living to age 100 could soon be the norm. The necessary financial preparedness for such a length is daunting. Running out of savings in retirement is the number one concern of most retirees because of all the unknowns that exist.

In consideration of all the risks that exist in retirement, longevity is the most significant because it is a risk multiplier that only serves to magnify the others. Inflation Risk The inevitable increase in the cost of goods and services will slowly erode your client’s purchasing power.

With as little as a 3 percent a year inflation rate, your clients would see a 50 percent reduction of purchasing power over 20 years. Excessive Withdrawal Risk Life is short and capricious. Retirement for most will be long, expensive and yes, unpredictable.

Clients will face emergencies, unexpected expenses or simply want to experience some extra enjoyment. They may be forced to choose to cannibalize and/or annuitize assets prematurely.

Consequently putting increased pressure of their ability to have those funds when needed most—later in retirement. Sequence of Returns/Market Risk Sequence risk involves the actual order in which investment returns occur. When you regularly invest in a retirement plan the movement of the market up or down will not have nearly as much significance as it will when you begin to withdraw funds.

Unfortunately, when you withdraw money from your portfolio during retirement, the volatility of markets can inflict substantial damage. If you take a set amount in distributions each month, you end up selling more shares when the market is Risk Management

LONGEVITY Enough savings to meet my basic needs for life

LIFESTYLE Enough to enjoy retirement on my terms

LIQUIDITY Access to tax advantaged money when I need it

LEGACY How will I and my money be remembered low—locking in your losses rather than giving the market a chance to recover.

Let’s take a look now at how a reverse mortgage can help. Reverse Mortgages Have Come of Age If you ever wanted to ruin a good barbeque, family reunion, office party, or Thanksgiving dinner, just let someone mention that they are thinking about getting a reverse mortgage and watch what happens.

Once considered the “Rodney Dangerfield of financial products,” this lowly and maligned resource is now coming center stage. For nearly two decades, I have shared the simple truth that a reverse mortgage “is just a mortgage!” That’s it. When we boil it down to its essence, that’s all it is.

Quiz: Which Client got a Reverse Mortgage? Two clients go to their respective advisors and ask about the wisdom of obtaining a home equity loan or home equity line of credit (HeLOC) so they don’t have to use savings for emergencies, expenses, or simple things they want to enjoy. The advisor responds that setting up a HeLOC is very common and wise. So each of the retirees finds a lender, produces qualifying documents and obtains a $100,000 line of credit. They both go out and promptly spend all of the money and the following month, they both begin to make the same monthly payment at the same interest rate.

Finally on the same day, with their final payment, they both pay off the loan balance and the accounts are closed. Does anything seem unrecognizable or spooky so far?

Here’s the truth: One of those clients got a reverse mortgage and the other one did not. Can you tell the difference? A reverse mortgage is a federally insured loan for people aged 62 or better that allows them to convert a portion of their home’s value into tax-free money. They are not required to make a monthly mortgage payment or be removed from the title to their home. They must continue to pay all property related charges such as taxes and insurance. The amount of money they receive is based on their age, the home’s value (up to the lending limit of $636,150), and the current interest rates.

Today a 65-year-old could receive around 50 percent of the home’s value. For more information on rates, go to

What’s So Special about the Line of Credit

The proceeds of a reverse mortgage can be received in a lump sum, monthly payments, or as a line of credit. The difference with the reverse mortgage line of credit (ReLOC) versus a traditional HeLOC is that the reverse mortgage has a built in contractually guaranteed growth factor. (Currently, the rate is around 6 percent.) This means the unused portion of the ReLOC will continue to grow year by year. As long as the borrower lives and maintains the home and keeps their taxes and homeowner’s insurance in force, the line of credit cannot be frozen cancelled or reduced. This is regardless of the home’s future value, the income, assets or credit of the borrower. Don’t miss that line. The ReLOC has a: • Built in contractually guaranteed minimum growth factor • Allows the unused portion of the line to grow • Regardless of the home’s future value That is the secret, the one mechanism that changes it all, the eighth financial wonder of the world, the Swiss Army knife of financial planning, and the one truth that encouraged FINRA to change their position that reverse mortgages should be used only as a “last resort.”

The table on page 5 shows a $200,000 home creating a $100,316 line of credit that grows to $608,000 over a 30-year period; $204,000 grows to $1.2 million; and $311,000 grows to nearly $1.9 million. How the HECM Line of Credit Can Mitigate Retirement Income Risks Longevity Risk and Inflation Risk To guard against inflation and protect from longevity risks, advisors have traditionally moved clients into more aggressive allocations measures or inflation-protected securities and annuities etc. Imagine adding a ReLOC, early in retirement with a strategy to simply “set it and forget it” allowing it to grow for future use down the road.

Today’s ReLOC is growing at around 6 percent (with a minimum guarantee growth factor of 4 percent). With inflation at 2 to 3 percent today and perhaps averaging 4 percent over time, the HECM line of credit not only gives tremendous growth potential but is also nearly 3 percent greater than today’s inflation rate. This is a powerful hedge against both longevity risk and inflation risk. The chart on page 6 developed by my teaching colleague, Dr. Wade Pfau, shows a $250,000 home growing at 3 percent (top line) and a $125,000 ReLOC growing at 6 percent (middle line) with the lower line showing the impact of setting up the line of credit later in retirement. This data highlights the advantages of establishing the ReLOC as early in retirement as possible.

As noted recently by Dr. Pfau, “There is great value for clients in opening a reverse mortgage line of credit at the earliest possible age, particularly in a low-interest-rate environment like today.” 150w" sizes="(max-width: 300px) 100vw, 300px" />

Older Americans Have Home Equity, But Still Worry About Retirement

March 26th, 2017

A pair of recent surveys reveal the facts that many in the reverse mortgage industry know all too well: Seniors worry about how they’ll pay for retirement, don’t have pensions, and are sitting on significant quantities of home equity (some of which can be turned into cash contributions to living expenses).

Perhaps the most interesting revelation in the Employee Benefit Research Institute’s annual Retirement Confidence Survey, however, is the disparity between those who are approaching retirement and Americans who have already exited the working world. According to the institute’s data, about 60% of active workers in the United States feel confident that they can fund a comfortable retirement, while nearly 25% are “not too confident” and 16% are “not at all confident.”

That’s a significant contrast from the optimism among the already-retired set, 79% of whom feel very or somewhat confident that they’ve properly planned for a financially comfortable retirement; a full third reported feeling “very confident,” while only 8% said they weren’t confident at all.

This gulf pervades the group’s findings, with consistently higher sentiment about a variety of retirement planning topics — including the ability to pay for basic needs, medical expenses, and long-term care — among retirees than active workers, though even retired Americans had a great deal of concern about the latter metric: Almost half reported being “not too or not at all” confident about covering nursing home or home health care expenses in retirement, compared to 57% of those still in the workforce.

Meanwhile, a separate report issued by the Department of Health and Human Services’ Administration on Aging — “A Profile of Older Americans: 2016” — illustrates the vast amount of home equity in the hands of adults over the age of 75. According to the HHS report, which reflects data through the end of 2015, a full 76% of Americans in that age group own their homes, but median income among that cohort was only $31,000 per year. Of the age-75-and-up folks who owned their homes in 2015, 78% of them had no mortgage and owned their homes free and clear.

Americans in that age group tended to own older homes — with a median construction year of 1969, as compared to the overall median of 1978 — but interestingly, only 3.5% of those homeowners reported “moderate to severe” problems with regular upkeep, such as plumbing and heating systems. Those homes had a median value of $150,000, as compared to a median original purchase price of $53,000; for the overall population, those numbers were $180,000 and $127,000, respectively.

Among all Americans older than 65, including both homeowners and renters, the median income in 2015 was $31,372 for men and $18,250 for women, with only 21% of those reporting incomes of more than $50,000 — and 15% with incomes of $9,999 or less.

These stats plainly illustrate that home equity remains a vital potential source of retirement funding for older Americans. The lingering question for those in the reverse mortgage industry, though, remains how to convince a larger percentage of them that tapping into it can often be a prudent retirement option.

Quick hits

Both reports are worth checking out in full, but if you don’t have time to wade through the impressive amounts of data, here’s a bite-size encapsulation of some of the more interesting facts from each.

34% The increase in the 60+ population in the United States between 2005 and 2015, from 49.8 million to 66.8 million

69% Americans with a retirement plan who feel very to somewhat financially secure

32% Those without a plan who feel the same way

98 million The projected amount of Americans aged 65 and older in the year 2060

8.8% Percentage of older American below the poverty line in 2015

19.4% Proportion of people 65 and up in Florida, the highest in the country; nationally, that number is 14.9%. Only six other states had a percentage of 65+ residents greater than 17.0%: Maine, Vermont, Pennsylvania, Delaware, West Virginia, and Montana.

47% Percentage of workers who report less than $25,000 in retirement funds, including savings and investments

24% Workers who have less than $1,000 of any kind of retirement savings

Those interested in pursuing a FREE HECM ANALYSIS can proceed to the navigation bar “CONTACTS” and ask for one. The “ride” is free of cost and obligation, but the results will give/offer your own personal review of the facts. ( — Warren Strycker).

Incorporating Home Equity into a Retirement Income Strategy

Wade Pfau’s article Skip Navigation LinksIncorporating Home Equity into a Retirement Income Strategy was published in the Journal of Financial Planning in April 2016.The article’s Executive Summary: 150w" sizes="(max-width: 300px) 100vw, 300px" />

CBS MoneyWatch Calls Reverse Mortgages “Smart” for Seniors

March 30th, 2017

Citing the growing cabal of pro-reverse mortgage academics and the story of one Mississippi homeowner, CBS News’ MoneyWatch called Home Equity Conversion Mortgages “a smart way for seniors to tap home equity” in an article published yesterday.

MoneyWatch writer Kathy Kristof tells the story of Richard Blackmon, a 70-year-old Magnolia State retiree who initially thought that a reverse mortgagee was a scam after seeing an advertisement for the product. But faced with growing debts and unwilling to leave the “three-acre compound” where he lives, he learned more about the program and took the leap.

“Honestly, about this time last year, I was contemplating having to file for bankruptcy,” Blackmon told CBS. “I can’t rave enough about this program.”

Kristof’s piece nods to the HECM’s shadier past, but emphasizes that the reverse mortgage’s bad reputation stemmed from “some unscrupulous advisors” acting before the Great Recession. She also cites some familiar academic faces in the HECM world, Wade Pfau and Steven Sass, as well as American Advisors Group executive vice president of retail sales Paul Fiore, who told CBS about his father’s experience with a reverse mortgage loan.

Like many other popular sources, Kristof explains the growing use of reverse mortgages as pillars of a larger retirement plan, a fail-safe in case other investments experience a downturn at an inopportune time. But unlike mainstream news outlets, she frames reverse mortgages as a low-cost option in certain circumstances.

“The fees depend on your home’s value and the amount of equity you need to tap,” she writes. “However, they can be as little as 0.5 percent of the home’s value. Thus a reverse loan on a $250,000 home might cost $1,250.”

She touts the growing line of credit option, terming it a “smart” option and encouraging readers with considerable amounts of home equity to take out the loans as early as possible.

“So those who use the loans as a line of credit, borrowing sparingly — or not at all — in the early years pay virtually nothing,” Kristof writes. “Meanwhile, the amount available to borrow rises each year according to a formula. So the longer you have a reverse mortgage outstanding and unused, the more equity you’ll be able to tap.”

Naturally, Kristof counsels that the loans are not for everyone, specifically calling out borrowers under 62 — who, of course, can’t take out a government-backed HECM loan — as well as “rich” people who have no need to tap into home equity and people who intend to leave their homes within the coming few years.

Still, Kristof’s piece provides a simple, straightforward explanation of the HECM and its potential benefits from a trusted news source, along with a human success story to put a face on its positive uses.

“This was a win-win situation for me,” Blackmon told CBS. “I only wish I’d known about these loans sooner.”

Gofinancial gives you the opportunity to learn about the HECMs now. And, there’s a chat line to ask questions. See “HOME” in navigation bar to investigate.

Strategic Uses of Reverse Mortgages for Affluent

Affluent clients of financial planners can use their housing wealth a variety of ways to enhance retirement, including boosting sustainable portfolio withdrawals and delaying social security claiming. As strategic users affluent clients are quite different from many traditional users – often desperate homeowners who grabbed any remaining home equity after exhausting all their other resources. Focusing on affluent clients, this post summarizes key features of reverse mortgages and uses to increase retirement spending and reduce risks in retirement. A growing body of research on reverse mortgages in financial planning goes into depth on many of these topics.Reverse mortgages have evolved over the years, including significant improvements after 2008’s housing crisis, resulting in enhanced consumer protections, refined federal oversight, reduced costs, and better balance among the interests of clients, lenders and Federal Housing Administration’s insurance backing. The refined design is a Home Equity Conversion Mortgage (HECM). The Federal Housing Administration (FHA) administers it following rules laid down by the United States Department of Housing and Urban Development (HUD).

FHA HECM Reverse Mortgages and Affluent Clients

The new view of a FHA HECM reverse mortgage for wealth management firms is that the “Highest and Best” use of HECM reverse mortgages is to improve a client’s retirement plan – not rescue it. It is a view I’ve come to share after diving into FHA HECMs and their applications. There are a variety of ways to use them strategically to good advantage, and hopefully very rarely as a client’s last resort. My perspective comes from working with wealth management clients going into retirement with investment portfolios in the $500,000 to $4,000,000 range. Many of these clients could benefit from FHA HECMs.

Most common strategic uses:

  • Improving retirement plans: A client has a workable or nearly workable retirement plan, but desires an improvement. Increased retirement spending is an example of improved plan, as is planning to age in place at home.
  • Increasing contingency: A client has a workable retirement plan but little contingency for the unexpected and undesirable: prolonged poor markets, health-related costs, or the need for home modifications or in-home assistance.

Less common uses for wealth management clients, but valuable if the need arose:

  • Rescuing retirement income: A client’s retirement plan needs a rescue. Something they didn’t plan for happened – perhaps a spouse planned to work longer but couldn’t, or a spouse took a single life pension payout and now wishes they had elected 100% Joint and Survivor payout.
  • Absolute last resort: Clients are in dire circumstances and have no other assets or income left.

FHA HECMs Provide Guaranteed Access to Cash

Fundamentally FHA HECMs provide guaranteed access to cash made available as a loan against their housing wealth. There are three ways to access cash:

  • Line of Credit (LOC)
  • Lump Sum
  • Fixed Monthly Payments

Or they can buy a new home using a HECM to pay for around half of up to a $625,500 home, or a smaller part of an even more expensive home.

Guaranteed Access to a Growing Line of Credit

A line of credit is the most flexible way to access cash and takes advantage of a unique and powerful feature: the borrowing limit grows every month. The borrowing limit can’t be reduced or cancelled as long as the homeowner is in their home and meeting basic obligations of paying real estate tax, keeping homeowner’s insurance in force and doing basic maintenance.  That’s different is several ways from a traditional Home Equity Line of Credit (HELOC).

The graph shows a $300,000 home and the borrowing limit of a HECM Line of Credit over 30 years. The vertical bars show the home’s value growing at 3%. The loan’s compounding growth rate applies equally to the overall borrowing limit, the current amount borrowed, and the amount yet to be borrowed.  The compounding rate resets set monthly. It is the sum of the current short-term interest rate (1-month LIBOR) and a fixed component of around 4%.  Details on the compounding rate are at the end of this post.  The compounding rate is shown in the graph at short-term interest rates of near zero, 2.5% and 5%, so the compounding rates shown are 4%, 6.5%, and 9%. The graph’s acceleration as the years go by is due to the compounding effect.

The obvious result is more cash is available later – and in an amount that’s likely to grow substantially more than inflation. It may grow faster than most fixed income investments – especially those with guarantees like the FHA backing. Adding usefulness is tax treatment – any amount borrowed from the LOC is tax-free as it is loan proceeds. On a repayment an income tax deduction may be available. The tax treatment makes the LOC particularly useful for people in the 25% and higher state and Federal tax brackets.

An interesting challenge for the financial advisor and their homeowner clients is to choose what the “highest and best” use (or uses) is for their LOC. One use is to increase spending from investment portfolios. The “Highest and Best Use” section below suggests other uses. (Fungible is a delightful word that doesn’t get used often, as in “cash from a HECM LOC is fungible”: cash can easily be used for one purpose or another.)

loc growth

HECM Line of Credit growth with short-term interest rates near zero, low, and moderate

Access Cash with Monthly Payments or Lump Sum

Other ways homeowners can access cash are by a lump sum distribution or monthly income. Monthly income is a payment guaranteed to last long as the owner occupies their home, or for a period the client chooses.

At any time the homeowner can change the way they access cash. For example they could stop a planned monthly payment and get a lump sum. And they can combine access methods: a lump sum for immediate needs combined with a line of credit for later use. They can choose when, if at all, they pay down the loan balance before they leave the home. The loan becomes due when they leave their home.

Purchase a New Home

A HECM may be used to buy a new primary home. For a home valued up to $625,500, around half the purchase price can come from the HECM. (For a higher priced home, only $625,500 is considered for the HECM). The balance of the purchase price would come from other resources, including proceeds from selling a current home.

Key Facts about FHA HECM Home Equity Conversion Mortgages

  • Homeowners or their heirs have title to the home, not the lender.
  • A HECM is a non-recourse loan. The homeowners or heirs can never owe more than the home is worth. When the homeowners leave the home, if the home’s value were less than the loan’s balance, FHA mortgage insurance steps in. That’s the purpose of the FHA mortgage insurance pool, paid for by a borrower’s upfront fee and part of the monthly charge to the outstanding loan balance.
  • All owners must be at least 62 years of age.
  • HECM applies to the primary home. A minimum of 50% equity is needed.
  • The homeowner has three obligations:  pay real estate tax, keep homeowner’s insurance in place, and do basic maintenance.
  • No interest or principal payments are required, but may be made. The loan becomes due when the home is sold, the borrower changes residence, the last borrower dies or the last borrower is in a continuing care facility for 12 consecutive months with no prospect of returning home.

How Do Reverse Mortgages and Portfolios Work Together to Increase Retirement Spending?

The catalyst for attention to HECMs by the financial planning community was work by Salter, Pfeiffer and Evensky (2012, 2013) after the 2008 market downturn. They combined a HECM LOC with portfolio withdrawals in a strategy they call Standby Reverse Mortgages. In a severe market downturn, clients lived on a HECM LOC instead of withdrawing from their investment portfolio. After the market recovery repaid the HECM so it would be available if another severe downturn happened, or if the portfolio were exhausted. Client’s sustainable withdrawals improved dramatically. Using a HECM LOC as small as 8% of the portfolio ($40,000 LOC and $500,000 portfolio) noticeably increased spending. When the line of credit was larger compared to the portfolio ($200,000 LOC and $500,000 portfolio) sustainable spending increased over 200%!

Sacks and Sacks (2012) and Wagner (2013) tested six other ways to augment portfolios with reverse mortgages, such as living on the reverse mortgage first until it ran out, using it last if the portfolio ran out, using it after weak portfolio gains, or doing fixed monthly payments throughout retirement. All ways they tested improved retirement spending. Two other teams (Sacks and Sacks, and Wagner) investigated many ways of augmenting portfolio withdrawals with reverse mortgage withdrawals. In every case the client’s sustainable spending levels increased substantially!

The reasons FHA HECMs improve retirement spending include:

  • HECM line of credit provides access to a line of credit that is guaranteed to grow
  • A HECM draw is tax-free. A reverse mortgage dollar is “bigger” than a portfolio dollar by its tax burden
  • More assets are available for retirement spending when housing wealth is included
  • Sequence risk in early years is controlled when reverse mortgage funds are available early

The biggest improvements to retirement spending come when the HECM:

  • Is a larger part of cashflow: more precisely the larger it is compared to the portfolio
  • Is used for clients with high tax rates, and higher portfolio tax burdens (e.g., IRAs)
  • Is available earlier instead of later in retirement. Ideally if used early, is repaid to grow for use later.
  • When portfolio returns are lower during the client’s retirement
  • When short-term interest rates are higher, increasing borrowing limit

 Total Net Worth (Estate Value)

For some clients an important consideration may be the impact on their total net worth and not just their spending levels. The traditional desperate user tapped their home equity as their only remaining asset, so naturally depleted their estate. Affluent clients may have the opposite result, depending on how they use their housing wealth. For example, Wagner’s results 15 years into the plan showed estate sizes (portfolio + housing wealth – loan balance) were often 10 to 30% higher depending on which of five reverse mortgage scenarios were used. Perhaps the rule of thumb is: when spending is pushed to the max, estate sizes suffer, but when housing wealth is used judiciously both sustainable spending and estate size can improve.

 What is A Client’s Highest and Best Use of a FHA HECM?

As cash is flexible, HECMs can be used across a wide spectrum of client wealth and circumstances.

The four categories of HECM applications described above were:

  • Improved Retirement Plan
  • Improved Retirement Contingency
  • Retirement Rescue
  • Last Resort

Examples of specific uses a homeowner may have for a HECM: 1054w, 150w, 300w, 768w" alt="highest-and-best-use" width="529" height="342" data-attachment-id="266" data-permalink="" data-orig-file="" data-orig-size="1382,897" data-comments-opened="1" data-image-meta="{"aperture":"0","credit":"","camera":"","caption":"","created_timestamp":"0","copyright":"","focal_length":"0","iso":"0","shutter_speed":"0","title":""}" data-image-title="highest-and-best-use" data-image-description="" data-medium-file="" data-large-file="" />

Consider this information carefully — then talk to me — Warren Strycker 928 345-1200 — see more under “information” tab on home page.

Why This AARP Columnist Changed Her Mind on HECMs

Quinn pic
January 4th, 2016

Thanks to various program changes in recent years, reverse mortgages have been winning over everyone from financial advisors to community banks and the mainstream press, and even one nationally recognized personal finance commentator who has recently changed her view on the product.

Few personal finance writers are as widely read as Jane Bryant Quinn. For 30 years, she published a biweekly column for Newsweek magazine, and for 27 years she published a twice-weekly column that was syndicated by The Washington Post Writers Group to more than 250 newspapers. Quinn has also written columns for and has appeared on nationally-aired TV shows such as “CBS Morning News,” “The Evening News with Dan Rather,” “Good Morning America,” among many other programs. In her current gigs, Quinn contributes a regular column to the AARP monthly Bulletin and blogs on her own website

Over the course of her illustrious career, Quinn has established herself as one of the nation’s most reliable voices for people trying to manage their money well. But it wasn’t until recently that she shifted her perception of reverse mortgages and the role they can play in retirement planning today.
Now onto her sixth book on personal finance titled “How to Make Your Money Last” (Simon & Schuster), Quinn chatted with RMD to discuss her new book, the biggest challenges retirees face today and the factors contributing to her change of heart on reverse mortgages.

RMD: What spurred you to write “How to Make Your Money Last”?
JBQ: Making your money last is the biggest worry people have. When they are in their pre-retirement years or early retirement years, they say, “How can I be sure not to run out of money?” That’s the thing that has scared them the most.

We are all living to much later ages than we expected and we might not have saved as much as we intended, which is the problem the Baby Boomer generation is facing—partly because of the stock market in 2007-2008, or problems with the economy where they weren’t able to retire as soon as expected.

They [Boomers] are saying, “I have X amount of savings, so how do I invest and parcel out those savings so I can be reasonably sure they can last 30 years?”

What do you hope this new book will accomplish?

JBQ: First, I hope it will help alleviate worries, because if you really don’t know how to parcel out your money in a reasonable way, you’re always going to be afraid you will run out.

My hope with this book is you can figure out what a reasonable lifestyle is—I call that “right-sizing” your life, which is matching your expected income to your expected expenses and seeing how much of your savings you can withdraw every month or every year.

There are two things with this book. The first is the financial part, which is the bedrock on which a comfortable retirement is built. The other is the emotional part.

Let’s say you’re a teacher, lawyer or reporter and then suddenly you don’t have a paycheck anymore. So you not only have to figure out the financial part, but you also have to figure out the emotional part—going from a working person to an engaged private citizen retired. That is something I look ahead for myself. How do you make that transition?

You need a financial base to work from , but you also need to think about what you’re going to do for the rest of your life. “How to Make Your Money Last” also talks about the various ways of addressing that question, because that is a huge question.

Apart from those aspects, what are some other key areas of discussion included in the book? What can readers expect to learn?

JBQ: I cover the kinds of things that people need to know. There is something about the joy and challenge of life after work, and also how do you work out right-sizing your life. Doing these projections is more complicated when you’re retiring than when you are doing a normal working budget, because you have to look at the income you get from investments and savings.

I also cover when to claim Social Security, life insurance, health insurance and annuities. Then there’s retirement savings plans and what you should be doing especially if you’re part-time employed, a freelancer, or a member of the “gig economy.” There’s another section on retirement spending, retirement investing, and what are reasonable withdrawal rates from savings to have your money last 30 years.
I also talk about your home and reverse mortgages.

On the topic of reverse mortgages, how in-depth does “How to Make Your Money Last” cover these products?

JBQ: I am very positive about reverse mortgages, but I wasn’t always. I have taken a new view on them, partly as a result of the new regulations passed last year.

There was an issue with people who took lump sum reverse mortgages later in life; they went through the money, found they couldn’t pay taxes and insurance and faced the risk of losing their homes. By and large, there was an issue for people later in life when they didn’t really understand what they were getting [with a reverse mortgage].

These new regulations, however, which look at people’s income compared with what they will get with a reverse mortgage, are very valuable and they have erased my concerns that there are dangers here for people in their 70s and 80s.

Reverse mortgages have been a controversial topic in the past, with the product suffering from a negative perception. What made you change your mind, so much as to include reverse mortgages into your new book?
JBQ: The fact that older people are now being protected from themselves, or aggressive sales people who might inappropriately tell them to take out a lump sum when they’re 80, only to find out they ran through the money and are now stuck—that should not happen any more with these rules.

There has also been a sort of discovery among financial advisers using the [reverse mortgage] line of credit. It’s a wonderful hedge against inflation to give yourself future borrowing power.
If you take a reverse mortgage credit line at age 62, you could probably increase the withdrawal rate from your savings [above the classic 4% rule] because now you have one more pool of money from which you can draw from. If the market is bad, you can draw money from the credit line. This can help you increase your income in retirement from your savings and investments.

But I caution, [reverse mortgages] are only for people who intend to stay in their homes for 15-20 years, because you have to amortize those upfront costs. If you are settled in your house, want to stay there and increase your annual income, you can do that with a reverse mortgage credit line.

In your opinion, what do you view are some of the biggest hurdles or challenges facing retirees today?
JBQ: Saving money. This is particularly true with people who don’t work for companies that have 401(k) or 403(b) plans. People who tend to retire with sufficient savings are those who have company plans where money automatically comes out of their paychecks. Those are the people most likely to acquire decent retirement savings.
The other half—and it is roughly half—are people who work for employers who don’t have retirement plans, or are freelancers working in the “gig economy.” They have much more trouble saving because it’s not automatic. There’s no easy way to have money slipped out of their paycheck and set aside for them every time it comes. They are living paycheck to paycheck, but they’re spending everything.

For the average person who’s working freelance, or working where there isn’t a 401(k) plan, they can start an IRA. However, to make it saving automatic, they need to have money taken out of their bank account every month. People who are living paycheck to paycheck might be afraid to do that.

It’s one of the great virtues of our Social Security system; that if you pay taxes, you’re automatically getting a retirement plan. The same is true for people signed up for 401(k)s. But people who don’t have those employers are stuck and it’s a disgrace that how much you can save depends on where you work and not who you are.

So how does home equity fit into the equation? Home equity has long-held this reputation of being a “sacred cow,” but will it become a vital component of retirement planning for more retirees today and in the future?

JBQ: Now that there’s been a big loss of home equity and it’s on the rise again, people might be taking a different view of it because they don’t expect home equity to rise rapidly. On the whole, I think people have just gotten over the idea that their home equity will go up by large amounts, so they’ll be more inclined to treat it more sacredly than they did in the past.

I’m in favor of paying off the house before you retire. I think it’s a very valuable thing. If you don’t have mortgage expenses when you retire, that is a huge plus going ahead.

GF footnote: That’s always better (HAVING NO MORTGAGE EXPENSES) when you get a HECM too – it means more money for you. But, you can get rid of your mortgage with a HECM so that’s one more plus for you. Our take on Quinns remarks is about the same as always. She gets into the middle of the fight with her name recognition and doesn’t help anybody make a good decision. If you want the truth about reverse mortgages (HECMs) call us for the help you’ll need and get government mandated counseling (without obligation).

Jane changed her mind about HECM. What about you?

928 345-1200. Serving HECM focus nationally.


Using Reverse Mortgages to Fund Long-Term Care

January 10th, 2017

Longevity in America is at an all-time high, which means many people will be living for much longer after they retire. But this also means they will need to have more money to pay for things like long-term care.

There are numerous ways people can pay for health care in their later years, but one option worth exploring is a reverse mortgage line of credit, NerdWallet reports.

The line of credit in particular can be especially helpful for those homeowners who may not need extra funds right away, but may need to tap into them down the road if their health declines.

“As you use this available money, you don’t have to pay a monthly bill as you would with traditional home equity loans; the money is just subtracted from the equity in the home,” the article says. “The line of credit comes due either when you move out of your home or die, in which case you heard or estate could pay the loan back either through the sale of the home or other means.”

There is another case though in which the loan would become due and payable and that is if the borrower were to stop paying property taxes and homeowners insurance, or if they let the home fall into disrepair, which the article did not point out.

In addition to having the line of credit available to the borrower in case of medical emergencies, there are advantages of getting a reverse mortgage over a home equity line of credit (HELOC), the article points out.

Though a HELOC is a similar concept to a reverse mortgage line of credit, with a reverse mortgage the borrower doesn’t have to make monthly payments at all. The credit line with a reverse mortgage also has the opportunity to grow over time, but with a HELOOC it is usually a fixed amount that the lender could freeze or cancel at any time.

“Having as many resources as possible to cover long-term care needs is an important part of a holistic financial plan,” the article says. “A reverse mortgage line of credit can ensure you’ll have funds readily available at the time of need.”

When Does a Reverse Mortgage Become Due and Payable?

Whether you have a HECM or NOT, this reminder is that as one gets older, sometimes we forget important stuff — like property taxes. Counties aren’t very good about keeping you informed. It’s always smart to check into county records from time to time and make sure your taxes are paid. Consequences can be horrific.

Such is also true if you have any kind of mortgage.

Once a triggering event occurs, the reverse mortgage loan becomes due and payable. A reverse mortgage loan becomes due and payable when one of the following circumstances occurs:

All borrowers have died. When this happens, the heirs have several options. They may choose to:

  • repay the loan and keep the property (generally, with a HECM, the heirs may pay the lesser of the mortgage balance or 95% of the current appraised value of the home)
  • sell the property (for at least the lesser of the loan balance or 95% of the fair market value of the home in the case of a HECM) and use the proceeds to repay the loan
  • deed the property to the lender, or
  • abandon the property and let the lender foreclose.

(If you take out a HECM and have a non-borrowing spouse, your spouse may be able to remain in the home after you die, and the loan repayment will be deferred, so long as certain criteria is met. The rules are different depending on whether you took the loan out before or after August 4, 2014. Learn more in Nolo’s article New Rule – Spouses Not Named on Reverse Mortgages Are Protected From Foreclosure.)

The property is sold or title to the property is transferred. If the home is sold or title transferred, the loan becomes due and payable. Generally, if the property is sold, the escrow company will accept the purchaser’s money and pay off the reverse mortgage along with any other liens on the property. If you transfer ownership of the home—for example to a relative—the loan becomes due and payable.

The borrower no longer uses the home as a principal residence. The borrower can be away from the home (for example, in a nursing home facility) for only up to 12 months due to physical or mental illness; however, if the move is permanent, then the loan becomes due and payable.

The borrower fails to meet the obligations of the mortgage. The terms of the mortgage will require the borrower to pay the property taxes, maintain adequate homeowners’ insurance, and keep the property in good condition. (In some cases, the lender might create a set-aside account for taxes and insurance.) If the borrower does not pay the property taxes or homeowner’s insurance, or if the property is in disrepair, this constitutes a violation of the mortgage and the lender can call the loan due. The lender must usually allow the borrower to cure the default to prevent or stop a foreclosure. Though, reverse mortgage lenders are known for foreclosing on elderly homeowners for relatively minor mortgage violations.

After the Loan Becomes Due and Payable

Once the loan becomes due and payable, the borrower owes the lender:

  • the amount of money the lender has disbursed to the borrower, plus
  • interest and fees accrued during the life of the loan.

To avoid a foreclosure, the borrower must

  • correct the default
  • pay off the debt
  • sell the property for the lesser of the loan balance or 95% of the appraised value (or an heir may satisfy the debt by paying the lesser of the loan balance or 95% of the current appraised value), or
  • deed the property to the lender.

Understanding Reverse Mortgages: An Interview with Shelley Giordano

SOA research has shown that non-financial assets are the biggest part of retirement assets for many middle American families. The largest part of non-financial assets by far are home values. Housing is the largest item of spending for older Americans, and housing costs vary greatly by geographic area and type of housing. Reverse mortgages offer a way to use some of the value of the home while still living in it. The SOA post-retirement risk research has indicated that few retirees are taking into account home values in their retirement planning.

The 2015 focus groups indicated low interest in reverse mortgages. People thinking about planning have been asking the question: how do we take housing values into account in retirement planning? What are the options? How do we evaluate them? This interview with Shelley Giordano provides information about reverse mortgages and how they are being used today.

Can you tell us a little bit about yourself and the Funding Longevity Task Force? Yes, thank you, I always welcome the chance to brag a little about the task force. After 15 years of experience in various aspects of reverse mortgage lending, and thanks to Torrey Larsen, CEO of Synergy1 Lending, I had the chance to invite a group of distinguished academicians to meet together to see what could done about improving understanding of reverse mortgages.

So in 2012, they took the leap, flew to San Diego, and just sat around a table to discuss their emerging interest in the role of housing wealth in retirement. It was becoming clear that in a DC world, where many people are poised to be underfunded in retirement, cash flow was going to be a problem. While just about every retiree has a home, there was a dearth of serious research on how the home could be monetized. This group of respected thinkers catalyzed an accelerating interest in research that measures how the home asset can positively impact a retirement plan. The members and I volunteer our time.

Our core group includes Marguerita Cheng, CFP®, Thomas C. B. Davison MA, PhD, CFP, Wade D. Pfau, PhD, CFA, Barry H. Sacks, PhD, JD, John Salter, PhD, CFP®, AIFA®, and Sandra Timmermann, Ed.D. Recently, the task force aligned with the American College of Financial Services. Associate Professor of Retirement Income and Co-Director of the New York Life Center for Retirement Income Jamie Hopkins, JD, MBA, and I were privileged to hold our first joint meeting at MIT with Dr. Deborah Lucas, Sloan Distinguished Professor at the Golub Center for Finance and Policy.

Our stated mission is to develop and advance, for retirees and their financial advisors, a “rational and objective understanding of the role that housing wealth can play in prudent planning for retirement income.” Before 2012, the comments in the financial press, and even the pronouncements of the Financial Industry Regulatory Authority (FINRA), about the use of housing wealth as part of retirement income were not based on any serious quantitative analysis. Instead, these comments were rather “offhand,” and consistently propagated a conventional wisdom that the use of housing wealth as part of retirement income planning should only be a “last resort.” In 2012, two significant research papers were published and a well-respected blog was written, all demonstrating quantitatively that, for a sizable number of retirees, the conventional wisdom was incorrect. Indeed, for many of those retirees, their financial well-being would potentially be adversely affected by treating housing wealth as a last resort. An objective and rational approach, i.e., the quantitative analysis, used in the research revealed that housing wealth should be considered early in their retirement years and not as a last resort. The potential to help improve retirements affects a significant number of people.

We estimate that those most likely to benefit from this approach, known in the financial planning community as the “mass affluent,” total between 10 million and 15 million households, of the approximately 75 million “Baby Boomers.” How important is home equity as a retirement resource? Why is it often invisible in the retirement planning process? Well, first of all, as Dr. Robert C. Merton, Nobel Laureate in Economics and Distinguished Professor at MIT, is fond of saying, the house is an EXISTING asset. Nothing new needs to be created, people have spent their lives building wealth by paying down their mortgages but now have a financial asset that is only realized at their death. Retirees have built a retirement pie of Social Security, qualified plans, savings, perhaps long term insurance, but when it comes time to retire, 65 percent of their wealth, which is bound up in their homes, is just flat out ignored. For some, it is like trying to retire on 35 percent of their wealth.

That may be okay for wealthy people but leaves most retirees dangerously short. We have to admit that the reluctance to use home equity has some cultural basis, but is probably more influenced by the bad reputation reverse mortgage lending suffers. Although much has been done to improve consumer safeguards, most recently with the Reverse Mortgage Stabilization Act of 2013, there is 56 | FEBRUARY 2017 PENSION SECTION NEWS Understanding Reverse Mortgages:

An Interview with Shelley Giordano widespread misinformation that hampers greater uptake. Sadly, financial advisors are often times even less aware of the features of reverse mortgages than their clients who see TV commercials. Financial advisors do not get paid on initiating a reverse mortgage, their compliance officers often forbid a conversation about home equity at all, and financial planning software does not yet include reverse mortgage payments, much less illustrate sophisticated strategies. A homeowner cannot expect an enthusiastic, or even particularly informed, reception from most advisers when seeking advice on how to release equity from the home. What are the key features of common reverse mortgages? What are the common differences in products?

Around 95 percent of all reverse mortgages in the United States are Home Equity Conversion Mortgages, or HECMs, and are insured by FHA. There is a small market for jumbo mortgages for very expensive homes. But what all reverse mortgages share is a nonrecourse feature. This means that regardless of what the loan balances become, the house stands as the sole collateral. Even if the house is underwater, no deficiency judgment may ever be taken against the borrower or his heirs.

This is the crucial safeguard for retirees but shockingly, even some financial advisers continue to believe that the “bank gets the house.” This is simply not true, and has not been true since President Reagan and the 100th Congress provided for modern reverse mortgage lending with the 1987 Housing and Community Development Act. Clients can choose between fixed or variable rates, trade higher interest rate margins for lender credits on closing costs (resulting in a somewhat lower initial credit capacity), or choose in some cases to limit their first year distribution in order to reduce the FHA mortgage insurance premium from 2.5 percent to .5 percent.

Regardless of what structure they choose, these safeguards are inviolate:

1. The borrower never relinquishes title. The bank does not “get the house.” Just like any mortgaged home, the house will pass to the heirs. The heirs can pay off the mortgage or sell the house and keep the remaining equity.

2. The borrower never owes more than the house is worth. Every borrower is assessed FHA mortgage insurance premiums (MIP) that protect the borrower, as well as the lender, if the house value is underwater at loan’s end. In fact, no deficiency judgment may be taken against the borrower or his or her heirs.

3. The borrower never has to move even if he or she no longer has access to more credit. Even if the HECM loan balance exceeds the home value and/or there is no remaining new credit available, the loan is in effect as long as one member of the couple remains in the home as a principal residence and homeowner obligations such as tax and insurance are met.

4. The borrower never has to make a payment on the principal or the interest until the last one remaining dies, moves or sells. Voluntary payments are accepted but never required. Some reverse mortgage strategies include paying down the loan balance when the portfolio regains value. It may be advisable to make voluntary payments on the interest early in retirement, if convenient, in order to restrain the buildup on the load balance from tacked-on interest. Compounding interest accumulation may not have as much impact later in retirement when life expectancy is shorter and home values are likely to be higher, but managing interest in early retirement years may be a prudent strategy.

FHA does not impose a prepayment penalty. Note that all homeowner obligations must be met, such as tax, insurance and maintenance, during the life of the loan, as will any other mortgage.

Source: The 4 Nevers. (2000). Giordano The initial credit capacity is based on the younger borrower’s age, the current interest rate environment, and the housing value. A rough guide is 50 percent (for the minimum age of 62) and reaches as high as 75 percent of home value at today’s rates, but only to the current FHA lending limit of $636, 150. Higher home values are accepted but for purposes of calculating credit the lending limit represents the highest initial credit calculation possible.

Current mortgages are allowed at time of application as long as the reverse mortgage (plus other funds if needed) extinguishes the lien/s at closing. Borrowers must attend third party independent counseling before a loan may be originated. Normally, interest accumulates and for the HECM is based on the one year or one month Libor. Upfront insurance (MIP) is either .5 percent for 60 percent or less initial utilization, or 2.5 Generally, a reverse mortgage is appropriate for those who are fairly certain they will stay in the home for as long as possible.

FEBRUARY 2017 PENSION SECTION NEWS | 57 housing without the need for monthly payments or dipping into savings in order to avoid a monthly mortgage payments.

Recently we discovered that the HECM product could be used in two different scenarios to restore equivalent housing to both sides in a gray divorce! This is an option divorce lawyers need to learn. The most conservative and popular use of a reverse mortgage is to set it up as a standby line of credit to meet future unexpected spending shocks. Interest does not accumulate on the unused credit, just like a traditional HELOC. However, unlike a HELOC, the line of credit grows every month at the exact same rate the borrowed funds are compounding. For example, if the monies borrowed are compounding at the annual rate of 4 percent in any given month, the remaining line of credit will compound at the smae 4 percent rate. This increase happens regardless of the value of the underlying asset, the home. Over many years, it is possible the LOC can exceed the home value, which provides valuable diversification for an asset that has idiosyncratic risk. In addition, a HECM line of credit cannot be frozen, cancelled or reduced. The client is free to make any payments he wishes, or no payments at all. percent if greater amounts are drawn at closing. The ongoing MIP accrues at the annual rate of 1.25 percent and is assessed on current loan balance monthly. The loan may be prepaid at any time without a prepayment penalty.

How can reverse mortgages be used? What are the principal strategies? Are reverse mortgages used much to generate more regular monthly income?

Reverse mortgages can be set up as an annuity on the house, known as a tenure payment option. This provides a monthly paycheck that will continue until the last borrower dies, moves or sells. The advantage to this payment, besides meeting cash flow needs, is that since funds from a reverse mortgage are not taxable, the tax equivalent withdrawal from a qualified account is avoided. In other words, not having to draw from an account that needs to accommodate taxes can significantly reduce early depletion of precious portfolio assets.

The HECM can be used to convert a traditional mortgage with monthly principal and interest payments into a mortgage without mandatory debt service.

In addition, very few people are aware that a HECM can be used to actually purchase a new home. This allows retirees to move to a more appropriate Traditional HELOC vs. HECM Line of Credit Comparison Traditional HELOC HECM Line of Credit Line of credit (LOC) cannot be frozen, reduced or canceled if the ongoing terms of the loan are met.

✔ Line of credit grows each month, regardless of home’s value.

✔ Allows homeowner to access the equity in their home for funds they can use for purpose while owning their home.

✔ ✔ No monthly payments required.*

✔ Minimal credit requirements. ✔ Minimal income requirements.

✔ Age-based loan: Homeowners 62 and older.

✔ Government-insured loan. 150w" sizes="(max-width: 300px) 100vw, 300px" />


JOIN THE HECM “CLUB” — We are ready to help. Call 928 345-1200.

By Warren Strycker, licensed loan originator

“I am a fully licensed Mortgage loan originator in the state of Arizona, a member of the Yuma County Chamber of Commerce and a trusted 12-year veteran in the mortgage industry. My job has been to assist neighbors 62 years or older to extract cash, equity dependent, to assist in retirement income without requiring monthly mortgage payments as long as you reside in the home as your principle residence, maintain taxes, homeowner’s insurance and HOA (if applicable).

I have a HECM loan and have helped many others acquire one. If you are interested, please contact me, Warren Strycker, 928 345-1200 and ask questions. I can do a HECM loan evaluation to see if you qualify. I’ve been a “neighbor” for a long time. Thanks for taking the time to consider how a HECM loan could benefit you now.”

I am not rich or famous, but I am focused and ready to help when I am needed — 928 345-1200. I have an iPhone and a Bluetooth on my ear. You can call now. I know what to do for you, and if you and God wills, I happily will.

I work with the United States Government on a program called the Home Equity Conversion Mortgage (HECM), a focus on retirees and their incomes and the HUD program, now resuported by HUD secretary Ben Carson — a program you can trust to put you on a firmer financial footing if you are 62 and have home equity you want to spend now. My lender is Patriot Lending and they are super to work with.

And, you don’t have to feel lesser because you firm up your resources in retirement. This is not a free government program and there is EVERY reason to be proud to move into it.

This is not a free lunch. Private money makes this program run. Investors get involved because the government guarantees the result. It works because a lot of good people work together for the common good, including me.

HECM, as it is called, has more than 50 years of history, begun then by President Reagan and reaffirmed by every president since, most recently by HUD Secretary Ben Carson.

I have worked HECM with people to reorganize their finances for 12 years now, so I have a pretty clear picture of what it takes to use it. I hope you’ll believe me when I talk about some of the following people I’ve worked with lately …

Bill and Jackie…

… had to borrow money on their credit card for a $5000 AC they needed.  It’s often hot in Arizona and they didn’t have the money — so they put it on their credit card. The payments got in the way and we paid off that balance on their card. Life is better for them now and they have no more payments to make. Yes, it feels good to have helped them.


…lost considerable money in the market and needed more money in her budget to get by. The HECM helped her pay her bills and put some money aside to back up her budget which had depended on income from market profits now missing. I notice she made a few improvements on her nice little home in Yuma.

Marybeth and Jack…

…had a car payment in the way and the budget was so slim, every month was a nightmare making ends meet. The HECM paid off the car loan and the budget was balanced with money to spare. That loan closes this week, and these folks are happy with the results — just happened that their home is a singlewide manufactured so there was the problem with foundation. Most lenders wouldn’t touch it – but we did. The loan will close in a couple of weeks and they won’t have to pay the big car payment. Life will be better for them.

This is not rocket science. So many of these stories have happy endings. I hope you’ll look for one of  your own now. Tell me your story — let’s get started.

If you are one of those, I hope you’ll join me on this webpage and learn what you can to help make your life more secure financially. I’ve done this many times for folks here in Arizona – many times, so I know what to do for you. A recent client told me she trusted me. Best news I get these days.

This webpage is a focus on the HECM – now two years old this month – these pages contain information from the financial experts in this industry who explain the program we call the Home Equity Conversion Mortgage – what you probably call the Reverse Mortgage.

I’ve had one of these HECMs for a bunch of years now and I know quite a bit about the program after twelve years here in Arizona explaining it so many times to folks just like you, eager to get a new approach to their retirement finances.

What I’ve done on Gofinancial webpages is record for you what others of far greater wisdom than I have said and written about the Home Equity Conversion Mortgage – now more than 50 years of history being improved and promoted by so many just like me to help people work through their retirement finances more efficiently.

We agree with President Reagan, the HECM is an important retirement tool — and I have become a licensed loan officer to help people try one of these on for themselves. I hope you will think it is important enough to look into it.

That’s what this webpage is all about. Hands on HECM education from some of the strongest leaders in the industry – authentic information you can use to make a good decision.

I hope you will make regular visits to this webpage and that you will unload your questions on me by phone or email, so we can answer them promptly.

In the end, my hope is that I can help you make life better because you were able to put a HECM in your life that will relieve the financial pressures of retirement some of you are beginning to feel now.

I want to do a HECM ANALYSIS for you that gathers information about equity, loan costs and benefits. You’ll learn a lot and I’ll be able help you understand just what a HECM can do for you.

I hope you’ll get to know more about me as you truly consider a HECM. I’m waiting for your call now… will you ask me to help?

I’m Warren Strycker. I will serve in this capacity as long as I can be faithful, honest and trusted.  You can call now. I will keep the door open as long as I can.

928 345 1200 150w" sizes="(max-width: 300px) 100vw, 300px" />









HUD Secretary Ben Carson Praises Reverse Mortgage Program

Secretary Ben Carson affirmed his commitment to the reverse mortgage program in a Monday speech to a major advocacy group for older Americans, lauding recent program improvements and emphasizing his desire to help homeowners age in place.

“This is a top priority for my department: To give seniors more opportunities, more alternatives, more choices, and, if desired, to help more people age in place,” the Department of Housing and Urban Development secretary said in remarks at LeadingAge Florida’s annual convention in ChampionsGate, Fla.

Carson called financial health one of “three essential initiatives for our nation’s seniors,” and dedicated a large portion of that discussion to the Federal Housing Administration-backed reverse mortgage program.

“As reverse mortgages have become more popular, we have learned more about the needs of seniors,” Carson continued.

He then went on to give a detailed history of the Home Equity Conversion Mortgage program, acknowledging previous issues with the product such as imprudent draw amounts and the lack of non-borrowing spouse protections.

“These problems have lingered and need to be addressed,” Carson said, according to his prepared remarks. “Adjustments needed to be made.”

Carson ran down the recent regulations designed to help make the products safer — including amendments to the non-borrowing spouse rules, Financial Assessment, draw limits, and mandatory housing counseling programs — and promised guidance for lenders and servicers on the recently-issued HECM Final Rule over the coming months.

The remarks represent a rare deep dive into the HECM program before a wide audience by a sitting HUD secretary, and a signal that Carson’s previous commentary on self-reliance translates into a firm commitment to the reverse mortgage program.

“The Founding Fathers wanted you and me to determine our needs and our spending, not some far-off monarchy in Europe or some self-interest in Washington,” Carson said. “And our freedom is a continuous struggle. Every day we fight for freedom, looking for ways to have more choices, to make up our own minds, and to use our resources for our needs, in our own way.”

The secretary’s comments also included praise for housing counseling programs, which HUD recently supported with $50 million in grants.

“Housing counseling helps people buy a home and helps many people stay in their homes,” Carson said. “They will be able to age in place. There will be more financial freedom, more responsible practices, and greater security for seniors.”

Peter Bell, president and CEO of the National Reverse Mortgage Lenders Association, praised the secretary’s comments in a statement released Monday.

“We appreciate Secretary Carson’s articulation of all the important changes to the HECM program and HUD’s efforts to implement them,” Bell said. “NRMLA and our members stand ready to assist the Department in continuing to enhance the utility and viability of the HECM program, which has served over one million senior households since President Reagan signed the program into law.”

And just like many average Americans who have learned about the products through television spots, Carson couldn’t resist the opportunity to shout out the HECM’s most famous supporter.

“Under certain conditions senior homeowners age 62 and over could access a portion of their equity in their homes,” Carson said in explaining the program to his audience. “You’ve seen the TV commercials with Tom Selleck.”



These are perilous times — are they not?

by Warren Strycker, Gofinancial publisher

  1. Social Security creates doubt, now being referred to as an entitlement???
  2. Congress in disarray — can’t agree on anything? Can’t keep control.
  3. People coming into retirement are short on funds.
  4. Seniors are living longer than ever.
  5. Cost of medical services is rising day by day.
  6. Congressional leaders are looking at “Medicare for All”. Will you be in the “all”?
  7. HUD supports HECM to keep seniors “in place”.
  8. HECM uses home equity to balance senior income and expense.
  9. More seniors in retirement with mortgages — payments getting harder to make.
  10. “Users” are swarming this website to get acquainted with HECM.

“Finish retirement with HECM” or “Resist” — the choice is yours. The discussion trends to HECM.


See home page navigation bar for support.

But Wait, Doesn’t the Bank Own the House? “Well, that’s false” — known as fake news

March 12th, 2017

If you read the trade press, you might be led to believe that the Home Equity Conversion Mortgage industry is experiencing a kind of public-relations renaissance, as popular media outlets begin to present a more balanced picture of reverse mortgages and their potential benefits for Americans aged 62 and older.

It’s certainly true to an extent — as RMD reported last week, the vast majority of HECM mentions in the media over the past year have been either positive or neutral, according to PR tracking data obtained by the National Reverse Mortgage Lenders Association, and originators across the country have seen a shift in the tide of public perception. But of course, as even HECM boosters and several passionate RMD commenters have pointed out, everything isn’t sunshine and rainbows on the ground, and reverse mortgage professionals around the country continue to face the same nagging set of misconceptions.

Steven Sless, branch manager at Home Point Financial Corporation in Owings Mills, Md., recently related a story to RMD about sitting down with a Certified Financial Planner to purchase a life insurance policy. After opening with some small talk about their lives and finding out that Sless was in the reverse mortgage industry, the planner still had the same questions he fields from average consumers.

“There’s not a lot of knowledge, and not a lot of want, to really dive deep and understand the product and how it works,” Sless says.

That knowledge gap lies at the heart of the problem. Loren Riddick, branch manager at the Loren Riddick Team of Peoples Home Equity, Inc. in Alcoa, Tenn., says he didn’t trust reverse mortgages up until very recently, despite not knowing all that much about them.

“About six years ago, I thought it was the biggest crock of bull I’d ever heard of,” Riddick told RMD. But after taking the time to learn about the product and see how it could help certain borrowers, Riddick became a believer, and he says he’s closed more than 100 HECMs — and he’s now been around the industry long enough to have heard all of the misconceptions himself from the other side of the table.

But Wait, Doesn’t the Bank Own the House?

If your typical reverse-mortgage originator had a crisp $10 bill for every time he or she heard this question from potential borrowers, inquisitive fellow party guests, or skeptical journalists, he or she probably wouldn’t have to be working in the first place.

Riddick says this problem stems from an understandable confusion on the part of the borrower about why a bank would ever offer such an arrangement. A typical consumer understands how a bank makes money off of a forward mortgage, Riddick notes, charging interest over time on a loan used to pay for a house. But when it comes to a reverse mortgage, receiving money from a bank with seemingly nothing in return is often too much to process, and consumers thus naturally assume the bank has to take ownership of the home.

“Folks just can’t get their arms around: How does the bank make money?” Riddick says.

To combat this, Riddick generally tries to marry the concepts of forward and reverse mortgages in his clients’ minds, first asking them where they sent their forward regular mortgage payments, then inquiring as to whether or not that bank owns their home. More often than not, he says, they believe that the forward-mortgage lender also retains ownership until the loan is fully paid off.

“Well, that’s false,” Riddick says, slipping into the pitch he gives inquisitive clients. “Because if the bank owns the property, then the bank would have to sign the purchase contract. The bank would have to give you permission to build a deck, or paint a room.”

Aren’t Reverse Mortgages Expensive?

Sless called out the “stigma” of reverse mortgages as high-cost loans as the top misconception he faces on a daily basis, despite declines in the mortgage insurance premium and closing fees that aren’t all that different from those required for a forward loan, and note .

His solution: Be as clear as possible about all fees upfront, and emphasize that it’s a one-time expense. “We have to communicate effectively the benefits to the borrower — even if they’re at a 2.5% MIP due to their equity position, you’re still going to be able to recoup your costs relatively quickly,” Sless says.

Isn’t a Reverse Mortgage Only for the Desperate?

Larry Waters, a senior reverse mortgage consultant at Resolute Bank in Hayden, Idaho, says he can’t still shake the perception of HECM loans as a product of last resort — a misunderstanding that, unlike the other ones discussed in this article, may actually result in willing applicants being turned away. Waters notes he frequently receives interest from potential borrowers that have run out of savings, but who eventually cannot receive a reverse mortgage due to the Financial Assessment and other reforms that have made it significantly harder for underqualified applicants to close.

“With these last-resort cases today, it may not work,” Waters said in an e-mail to RMD. “If they have a large existing mortgage balance, combined with bad credit results, they may now be required to have a LESA [life expectancy set-aside], and then they may not have enough equity to qualify for the loan.”

Waters says the industry should focus on promoting the loans as a supplementary product for the financially healthy.

“The new message today is that people need to be more proactive and be in good financial shape to obtain this loan,” Waters says.

For more information about this website, call 928 345-1200 and ask for Warren Strycker. Email:, This is a HECM informational website and does not solicit or intend to represent any lender or loan officer in providing solutions for retirement products or services. 928 345-1200.



On my honor

On my honor, I will do my best. To do my duty to God and my country and to obey the Scout Law; To help other people at all times; To keep myself physically strong, mentally awake and morally straight.

Boy Scout Law

  • Trustworthy,
  • Loyal,
  • Helpful,
  • Friendly,
  • Courteous,
  • Kind,
  • Obedient,
  • Cheerful,
  • Thrifty,
  • Brave,
  • Clean,
  • and Reverent.

HECM — 53 years of U.S. history — get aboard!

HECM = Home Equity Converson Mortgage

The reverse mortgage is one of the most well-developed loan products in the mortgage industry. From its birth in 1961, the reverse mortgage has been through many developmental milestones to make it the safe financial tool it is today. According to The Reverse Review, the product has seen rapid growth, expansion of additional innovative loan products, improvement of practices, increased consumer awareness, and a redefining of the options available to seniors. Take a moment as we look back at the major turning points and milestones in the history of the reverse mortgage.

In 1961, the reverse mortgage is born. The very first reverse mortgage is written to Nellie Young in Portland, Maine by Nelson Haynes of Deering Savings & Loan. Haynes designs this very unique type of loan to help the widowed wife of his high school football coach to stay in her home after losing her husband.

At a congressional hearing in 1969, the concept of a reverse mortgage intrigues the Senate Committee on Aging. When a UCLA professor named Yung Ping Chen states his support for an “actuarial mortgage plan in the form of a housing annuity” that would allow homeowners to stay in their homes while enjoying their saved home equity, the chairman expresses great interest.

During the first congressional hearing concerning reverse mortgages in 1983, the Senate approves a proposal by Senator John Heinz to have reverse mortgages insured by the Federal Housing Administration (FHA). Heinz also suggests that the idea of home equity conversion should be further explored.

In 1984, American Homestead sets the foundation for government-insured reverse mortgages when it unveils the Century Plan, which is the first mortgage that keeps the loan in place until a borrower permanently leaves the residence.

In 1987, Congress passes an FHA insurance bill called the Home Equity Conversion Mortgage Demonstration, which is a reverse mortgage pilot program that insures reverse mortgages.

In 1988, HUD gains the authority to insure reverse mortgages through the FHA when President Ronald Reagan signs the reverse mortgage bill into law. The reverse mortgage government insured loan is established.

In 1989, the first FHA-insured Home Equity Conversion Mortgage (HECM) is issued to Marjorie Mason of Fairway, Kansas by the James B. Nutter Company of Kansas City, Missouri.

In 1990, the HECM program has its 1 year anniversary, with HUD reporting to Congress that the program is steadily growing.

In 1994, Congress begins requiring lenders to disclose to borrowers the total annual loan costs at the start of the application process. This allows borrowers the chance to compare lender prices and shop around.

In 1996, the reverse mortgage program is adjusted to allow for loans on residences that have up to four units as long as the borrower occupies one unit as their primary residence.

In 1997, HECM reverse mortgage lender participation is at its highest number at 195.

1998 marks the year that the HECM is officially permanent! The HUD Appropriations Act makes the program official while Congress allots funds for counseling, outreach, and consumer education. Safeguards (like full disclosure of fees) are implemented to protect borrowers from unnecessary charges.

In 2000, HUD announces an increase in origination fees to either 2% of the Maximum Claim Amount, or $2000. HUD hopes this change will encourage more lenders to participate in reverse mortgages because of the higher revenue.

In 2001, HUD and the American Association of Retired Persons (AARP) team up to begin testing and training approved counselors. They also begin the establishment of consistent HECM counseling policies and procedures.

In 2004, the FHA implements rules of HECM refinancing. HECM refinancing allows existing HECM borrowers the chance to refinance and pay only the upfront Mortgage Insurance Premium and the difference between the original appraised value and the new appraised value/FHA loan limit.

In 2005, the First HECM refinances are made.

In 2006, the national loan limit of $417,000 is established. Also that year, AARP conducts its first national survey of reverse mortgage borrowers which reveal that the primary motivation for getting a reverse mortgage for borrowers is to plan for emergencies and to improve the quality of life.

In 2008, the first baby boomers turn 62, which results in a surge of loans which exceed past records. The SAFE Act is also established that year, which requires states to implement consistent procedures when licensing and registering HECM loan originators. Also, the Housing Economic Recovery Act puts up a few safeguards for consumers such as a limit on origination fees, rules against cross-selling, and guidelines for counseling independence.

In 2009, The HECM for Purchase is introduced. For the first time in reverse mortgage history, borrowers are allowed to purchase a new home without paying monthly mortgage payments. That year, Congress also increases the HECM loan limit to $625,500; meanwhile borrower proceeds are reduced when the FHA lowers principal limits for HECM’s by 10%.

2010 proves to be a busy year for the reverse mortgage. HUD introduces a new reverse mortgage option called the HECM Saver. Characterized by lower upfront Mortgage Insurance Premiums and closing costs, the HECM Saver makes the reverse mortgage more affordable by allowing homeowners to borrow a smaller amount than the standard reverse mortgage.

Also that year, AARP conducts another national survey of reverse mortgage borrowers which reveals borrower’s motivation for getting RM to be has changed from “quality of life improvement” to “debt alleviation”.

In addition, the Federal Housing Administration makes two changes:
– They increase Mortgage Insurance Premium from 0.25% to 1.25% per year
– They lower the interest rate floor from 5.5% to 5%, which is the first time in Reverse Mortgage history.

In 2013, HUD releases new HECM policies that make the product safer, stronger, and less risky for the borrower. These changes include a policy that allows borrowers to tap into only a portion of their equity the first year. They can then tap into the rest of their equity after the first year.

In 2014, HUD began to finalize guidelines for Financial Assessment, which will begin to be implemented in 2015. Financial Assessment will require lenders to analyze potential borrowers’ income sources and credit history to determine whether or not borrowers must have a mandatory set-aside of funds from proceeds to cover necessary expenses such as property taxes and homeowners insurance. These steps are expected to yet again protect consumers and reduce the number of borrowers who might fall into default from failing to comply with loan terms like continuing to pay for taxes and insurance.

In 2017, the loan limit for HECM reverse mortgage loans increased from $625,500 to $636,150. This is the first time the HECM lending limit has been raised since President Barack Obama signed into law the American Recovery and Reinvestment Act in 2009. Announced by the FHA on December 1, 2016, it went into effect on January 1, 2017 and will continue through December 31, 2017. The increase is 150% of the national conforming limit of $424,100 and is due to rising home prices.

In its 53 years from its birth in 1961 to present day, the reverse mortgage has developed significantly, and there’s no end in sight. December 2016 saw the Federal Reserve raise interest rates for the first time since 2009, indicative of a strong economy. While higher rates can decrease the amount available from a reverse mortgage, home values have continued to climb leading to increased home equity for many homeowners. The reverse mortgage has a bright future of continually improving and getting only better with time.

Retirement is Risky Business – Here’s a List


Monday, July 3, 2017

Retirement is Risky Business – Here’s a List

After we develop a set of major personal retirement goals for our mission statement as I described in A Mission Statement for Retirement and then review them with an advisor to identify any glaring omissions, there are a large number of financial risks that every plan should contemplate. Many of these won’t come to mind when we consider a list of major retirement goals for our mission statement, but one major goal of the mission could be to mitigate as many applicable common retirement risks as we can identify.

A list of common financial risks in retirement can provide a good starting point, though this list is not exhaustive.

Let’s start with a list of retirement risks the American College developed for the Retirement Income Certified Professional® (RICP®) certification because it is the most extensive I’ve found. A little too extensive for my taste, actually. I’m going to combine risks 3 and 11 because they’re both essentially sequence of returns risk. (See the table at the end of the post for definitions.)

I have also omitted Risk 17 from my list. Timing risk is the risk that you will choose a time to retire just before the next few decades suffer economically. While that is clearly a risk everyone takes, it isn’t one over which we have any control making it relatively useless for planning purposes.

Eighteen Retirement Risks from RICP®


















Adam Cufr, an RICP, created a list of 27 risks that largely builds on the RICP list. Some of these seem redundant to me. Nonetheless, there are some that clearly should have been added to the RICP list in my opinion, including:

Asset allocation risk, though I could also argue this is market risk,

Legacy risk, and

High debt service risk, important because it is a major cause of elder bankruptcy.

I’ll split Legacy Risk into Legacy funding risk, the possibility that a retiree’s desired bequests will not be adequately funded because the household depleted its wealth and Estate Planning risk, the possibility that the retiree’s estate will not be distributed as he or she had intended.


For a third source, I like to include a list of cited reasons for elder bankruptcy from research by Deborah Thorne, Ph.D. (I wrote about this in Why Retirees Go Broke.) These include:

Credit Card Interest and Fees, or High debt service risk, as Cufr refers to it.

Illness and Injury, also called Health care expense risk,

Income Problems, such as losing a part-time job in retirement (Reemployment risk in the RICP list),

Aggressive Debt Collection, whereby retirees are unable to negotiate a settlement and feel bankruptcy is the best option. I’ll roll this under High Debt Service risk, and

Housing problems, such as the mortgage payments increased, the respondent wanted to refinance the mortgage to lower the payments but could not, or a lender threatened to foreclose.


Retirement is risky business – here’s a list.

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Housing problems is one category I believe is not already on the RICP list and should be, but I cite the Thorne study for two other reasons.

First, if a risk is one of the five major causes cited for bankruptcy then it should be given extra attention in a retirement plan.

Second, the main point of the Thorne study is that bankruptcy is most often the result of a series of interconnected financial problems that cascade into ruin. In other words, it is less likely that a household’s ruin will result from a single risk on this list than to multiple risks. These losses might occur simultaneously and be unrelated, but it is more likely that one will cause another, which may cause even more. Most survey respondents reported more than one cause for their bankruptcy. A few cited all five common reasons.

Source: Thorne, Generations of Struggle.

I’ll add Overspending risk to my list. Overspending risk is different than Excess withdrawal risk, which refers to withdrawing from a savings portfolio faster than the portfolio can recover with market gains. A household can overspend its way into crisis without even owning an investment portfolio. It is also different than High Debt Service risk or Credit Card Interest risk in that overspending is a risk whether or not it is financed spending.

I’ll also add Interconnect-ed loss risk to my list to call attention to the possibility that individual risks are not necessarily independent of one another.

From a planning perspective, this means that we can’t simply consider the possibility that the household will succumb to each risk on the list, but we must consider the possibility of simultaneous losses or even multiple, simultaneous losses that begin with a single loss.

The simultaneous collapse of the housing market and the stock market in 2007-2009 provides a recent example. For some households, foreclosure and market losses might also have led to unemployment and income loss for workers in these fields. The struggling household, in turn, might have increased credit card debt as the last remaining financial option creating a row of dominoes that tumbled into ruin.

Every retirement plan should consider all of the applicable risks on this list and their potential correlations.

The following table is my consolidation and “pruning” of the three lists discussed above. Links to the lists I curated are provided in the reference section below. Some of the explanations were taken from the RICP list (my edits are underlined.)

You can download a Word document containing this list and edit it as you like. Use it as a starting point and add risks that I missed. Risks that are unique to your household might warrant inclusion in the mission statement.


Major Cause of Elder Bank-ruptcy Risk Explanation
1 Health Expense Risk For those who had employer health care coverage, retirement may mean paying more for medical insurance (Medicare Parts B and D and Medicare Supplement policies). Even with insurance, some expenses will be paid out of pocket. Also, chronic or acute illnesses may mean more significant and unexpected out-of-pocket expenses.
2 Income Loss Risk Many retirees plan on working in retirement. Income loss risk is the inability to supplement retirement income with employment due to tight job markets, poor health, and/or caregiving responsibilities.
3 High Debt Service Risk The risk of bankruptcy resulting from an inability to service debt, especially consumer debt. May result from spending beyond budget.
4 Housing Problem Risk Risks to housing including mortgage payments increase, inability to refinance the mortgage to lower the payments, unpayable increase in property taxes or a lender threatening to foreclose. Includes reverse mortgage risk.
5 Interconnected Loss Risk The risk that a loss due to one risk might cause losses due to other risks.
6 Longevity Risk No one can predict how long he will live. This complicates planning since a retiree has to secure an adequate stream of income for an unpredictable length of time.
7 Inflation Risk When working, inflation is often offset by an increased salary. In retirement, inflation reduces the purchasing power of income as goods and services increase in price, impeding the client’s ability to maintain the desired standard of living.
8 Excess Withdrawal Risk When taking withdrawals from a portfolio during retirement to fund income needs, there is a risk that the rate of withdrawals will deplete the portfolio before the end of retirement.
9 Long-Term Care Risk Chronic diseases, orthopedic problems, and Alzheimer’s can restrict a person from performing the activities of daily living, which will require financial resources for custodial and medical care. Includes Lack of Available Facilities or Caregivers risk, Change in Housing Needs risk and Uninsurable Medical Conditions risk.
10 Frailty Risk Frailty risk is the risk that as a result of deteriorating mental or physical health, a retiree may not be able to execute sound judgment in managing her financial affairs and/or may become unable to care for her home.
11 Financial Elder Abuse Risk The possibility that a family member or caretaker might steal assets.
12 Financial Advice Risk The possibility that an advisor might recommend unwise strategies or investments or embezzle assets.
13 Fraud Risk The risk of losing one’s assets as the result of fraud or identity theft.
14 Market Risk The risk of financial loss resulting from movements in market prices.
15 Interest Rate Risk Technically, this is the risk that arises for bond owners from fluctuating interest rates. How much interest rate risk a bond has depends on how sensitive its price is to interest rate changes in the market.
16 Liquidity Risk The risk that the retiree’s assets cannot be converted to cash quickly and inexpensively enough to meet short-term expenses or debt.
17 Sequence Of Returns Risk Investment returns are variable and unpredictable. The order of returns has an impact on the how long a portfolio will last if the portfolio is in the distribution stage and if a fixed amount is being withdrawn from the portfolio. Negative returns in the first few years of retirement can significantly add to the possibility of portfolio ruin.
18 Forced Retirement Risk There is always the possibility that work will end prematurely because of poor health, disability, job loss, or to care for a spouse or family member. This event can quickly derail a retirement plan.
19 Employer Insolvency Risk Employer-provided retirement benefits are an important part of retirement security for many. If the employer has financial problems, employees may lose their jobs and in some cases their benefits.
20 Change of Marital Status Risk The loss, divorce or separation of/with a spouse is a major personal loss, but without planning can also result in a decline in economic security.
21 Unexpected Financial Responsibility Risk Many retirees have additional unanticipated expenses during the course of retirement, in many cases due to family relationships and obligations.
22 Overspending Risk The risk that a household will spend beyond its means and prematurely deplete savings or an investment portfolio.
23 Public Policy Risk An unanticipated change in government policy with regard to tax law and government programs such as Medicare and/or Social Security can have a negative impact on retirement security.
24 Legacy Funding Risk The risk that planned bequests are not funded.
25 Estate Planning Risk The risk that one’s estate will not be distributed as he or she had desired.
26 Asset Allocation Risk The risk that one’s asset allocation does not achieve expected results or is inadequately diversified.



Retirement Risk Solutions, Dave Littell, RICP® Program Director, American College.

27 Retirement Risks: Which Is (Arguably) Most Damaging?, Adam Cufr, Fourth Dimension Financial Group, LLC.

The (Interconnected) Reasons Elder Americans File Consumer Bankruptcy, Deborah Thorne Ph.D.

Generations of Struggle. Deborah Thorne (Ohio University), Elizabeth Warren (Harvard Law School), Teresa A. Sullivan (University of Michigan).

Common Risks That Can Ruin Your Retirement, Ken Hawkins.


“We are consultants first”, Warren Strycker — see “information” in navigation tab. ADVICE: “Don’t start a mortgage you can’t finish”.




Calculate HECM benefits…

Doubleclick the link below and get started…

The amount of proceeds you receive is based on the appraised current value of your home, your age and current interest rates. DOUBLE CLICK (the colored line NEXT) to access CALCULATOR.

Yes, we’ll help. Call 928 345-1200 anytime day or night  — Warren Strycker, (born with a great sense of humor until 8 pm).

*NRMLA is the initials of the HECM industry trade association.


Product vs. Process — a case for “good vibes”.

By Stephen Kelley, CSA

Updated:   08/07/2017 08:04:50 AM EDT

I have said it several times and written it in dozens of places, including books, columns, radio scripts (such as they are) and workshops: A good financial plan must be both financially and emotionally sound. I can create the most financially secure plan the world has ever seen, but unless it makes you feel emotionally secure it’s worthless.

There are many factors that cause people to worry about their money. These can be the vast unknowns, the conflicting advice people get from others who have a stake in their money, fear of losing money, fear of missing opportunities, and not knowing how to start. In my mind, these factors are in one way or another about the same thing, losing control. When we are working and have regular income, we can be more sanguine about things like market volatility. However, once we have gotten into that convertible with Thelma and Louise and driven over that ledge, it’s much more difficult. Everything that happens can have a significant, and in many cases damaging, impact on our livelihoods.

Our goal is to not only provide better outcomes for people as far as lifestyle and cash flow are concerned, but to also provide better quality of life. Fortunately, the tools we use and the philosophy behind our planning process fit this objective very nicely.

Job one in any planning process is to determine what a client really wants out of life.

Far too often, people spend all their time thinking about products and strategies, rather than process and outcomes. I believe this is a sure road to failure.

You see it in our media all the time. Many of the financial “gurus” on TV or radio get stuck in this trap. You might have heard one on TV saying, “we will never sell an annuity,” or another claiming permanent life insurance is the worst product ever sold, or another opining about avoiding reverse mortgages at all costs. My question is why? They would say because they are “bad products.” I would say they are just products that are frequently misused because they are misunderstood.

Here’s an example that just happened today, right before I sat down to write this. A man who has had some tough luck in his life came in to try and figure out how to make the best out of a very tough situation. He has a house worth around $225,000 on which he owes $80,000. In addition, he has a rental unit that brings in about $600 a month, and a Social Security benefit of $1,550 per month at full retirement age. He works in a manual job making around $16 per hour, is 64, and didn’t know what to do.

His need is about $2,000 a month. I recommended he work as long as he can and delay Social Security until at least full retirement age. If he can get to 70, that would be $2,100 a month. It turns out he has another 17 years to go on his $80,000 mortgage with a payment of $550 per month. I asked what his goal for the house was, and after he told me it was to be there for the duration, I recommended he consider a reverse mortgage.

The result of these moves would be an extra $550 per month in his pocket from paying off his house, plus about $33,000 in cash from the reverse mortgage. The delay in Social Security benefits brings that to over $2,000 a month. His final numbers would be $1,500 per month in expenses, with $2,100 a month in Social Security plus any rent he gets from his unit, which is now about $600 per month.

Of course, we then had the conversations about delaying his Social Security payouts and the desirability of the reverse mortgage. He mentioned a friend had urged him to start receiving Social Security right away, or else he could “lose” his benefits. His friend was also quick to point out how “bad” reverse mortgages are, and how he should avoid them at all costs.

Let’s look at each. First, what’s the real benefit Social Security provides? Is it about the money you can collect early, when you are working, just to make sure you get what’s coming to you? Or is it about establishing a lifelong income plan that will make you financially and emotionally secure for life? I would say it’s very much the latter. As for the reverse mortgage, his objection was, “but when I sell it there won’t be any money left.”

My response, so what? He has no kids and is never married. He wants to live in the house until he can’t any more. And while he’s living, his number one issue is cash flow. These needs are supported by the reverse mortgage, in fact, all of these are exactly what they were designed for.

When you hear the noise about various products being good or bad, pause for a moment. Ask yourself what outcome you are looking for. If the products being suggested support that outcome, and that outcome really is what you want, go for it. After learning everything you can about it, of course.

Stephen Kelley can be heard, along with his co-host Mark Perkins, on the Free-to-Retire Radio Hour on Saturday at 7 a.m. on 610 WGIR and Sunday at 12 p.m. on 980 WCAP. Steve conducts workshops on Maximizing Social Security and The Other 60% – More Now, More Later. He is the author of several books, his latest ones being “Ready-Set-Retire” and “Tell Me When You’re Going to Die and I’ll Show You How Well You Can Afford to Live.” His financial planning practice, Safety First Financial Planners is located at 33 Main St. in Nashua. He can be reached at 603-881-88a11.

EDITOR’S NOTE: Yes, there is a case for a thing called “vibes”. I sat in a Lincoln MKZ and the seat “felt good” to me. I bought it right there. A lady recently bought a car and said she could stand outside with the door open and just sit down on the seat. She didn’t have to stretch to get in. The car “felt good”. Those looking at the Reverse Mortgage may “feel good” or “not” and that may explain the entire process for them. Others knew it from the first. A Reverse Mortgage made perfect sense to them. A new spiritual quality has entered the HECM discussion.


6.75 Trillion dollars in DEAD Equity; HECM is safe for seniors

by Rob Balmer. (Posted recently on Linkedin)

40 Million Seniors, age 62+, with over “6.75 Trillion dollars in DEAD Equity” qualify for HUD’s FHA Insured & Regulated HECM program today. Yet, only 2% understand the benefit for them and how it works because of the misconceptions created by the early days of the Reverse Mortgage test, pilot, draft or beta program.

Yesteryear is over. For over 25 years now, the Government has regulated the HECM to make them safe for seniors. By year 2020, over 50 million seniors will qualify. Our mission is to have the opportunity to educate them about the HECM with an open mind. There are No two scenarios alike.

You owe it to yourself and family to explore every possible HECM option available to discover a possible “Fit and Timing” regarding your retirement which provides Peace of Mind to offset inflation.

With a HECM, the Portion of the Credit Line that is not used actually Grows at nearly 7% today, can Never be “Frozen” by a lender and there is No Monthly Payment Required. Make Deposits or Take Withdrawls on the Fly with No Tax or Penalties. You CANNOT do that with a HELOC.

You can decide with No Pressure or Obligation. No Senior should have a house payment on a fixed income today. Why make payments if you don’t have to? With the HECM, you can ELIMINATE monthly house payments and you retain full home ownership rights. No lender is added to title. FHA does not want your house, they already have enough empty houses.

Your only obligation is what you already do now, live there 6 months out of the year, maintain home, pay your property taxes & hazard insurance.

See “information” tab for details.

We worry about social security — do you?

Consider what a downward adjustment of social security benefits would mean among those well into the retirement cycle, or those on the edge of joining up.

Following is a non political digest of what is really going on in the economy. Take you brain to the top floor and look around where the following leads. You’ll be concerned about your own stake in this discussion — social security — and you have every right to worry.

Some people reading this have jobs, some don’t, but regarding last week’s 156k nonfarm payroll number I received a note asking, “Back in the Bush I and Clinton eras we supposedly needed to create 325,000 jobs per month just to break even. Where did that 325k number come from or where did it go to? If we are happy about 156k jobs being created, aren’t we about 175k short every month? Did the Department of Labor change something? Am I missing something?”

I have my opinion, but for an answer I turned to the noted MBA economist Mike Fratantoni who replied, “US labor force growth had dropped by more than half over the past decade or so. This is largely a result of baby boomers reaching retirement age while subsequent generations are not big enough to fill their slots and continue rapid growth. Moreover, immigration has slowed considerably. Older workers are working at a higher rate than previous generations. But the labor force participation rate for someone in their 60s or 70s is still a fraction of someone in their 40s or 50s. And as baby boomers push into those age cohorts, the aggregate participation rate is dropping. All in, we now need just about 100k employment growth to keep the unemployment rate steady – so the 156k is good. The proof is that wages are now growing at their fastest pace in a decade. Demand exceeds supply, wages getting bid up.” (*A term often used by learned economists.)

While we’re on the economy, in Friday’s commentary I included a piece on the direction of rates. (“Are you positive that rates are going higher? Me neither, and there are reasons why rates may stay here or actually slide back down a bit. No one has a crystal ball…”) The write-up prompted Tom C. to contribute, “Rob, the reasons that interest rates may not go up as expected are complicated and are evolving. Your report discusses near term aspects to the markets and interest rates but does not get into the longer term economic issues like retiring/aging Baby boomers here, and an aging population in Japan and Europe, negative interest rates here and all over the developed world, Keynesian economics influence here, and in most of the major economies that increases the size of government and regulations that interferes with the growth of private enterprise.”

His note went on. “In the short run the 10-year range will be in the 2.00-2.75% range through mid-2018. That is, IF Trump achieves real tax reform, both corporate and individual, dramatically cuts superfluous business killing regulations, cuts down the size of government through his different cabinet appointees cutting their departments down, and killing bad regulations, if we get a good immigration plan that allows in needed immigrants, and keeps out the poorly skilled, and he does not start a trade war with China. Then we could see real GDP hit 3 plus percent by 2019 and interest rates on the 10-year could hit 4-5% by 2020. The real long term question is do we end up looking more like Japan/Europe or can we regain the entrepreneurial, free enterprise energy that propelled the US economy after WWII? Too many people want the world to be fair – but we cannot depend on government to save the day!” Thank you, Tom.

What about the overall job market in residential lending? I asked Jim Boghos, President of The Boghos Group. “With volume off as much as 40%, underwriters who moved for higher end comp plans are now at risk for layoff as most originators have operational capacity. The current mortgage job market is squarely focused on adding originations people. Competition for established producers is about to become as fierce as we have seen in recent years. In 2017, look for acquisition of small to medium size originators, recruitment of top performing branches and mortgage brokers continuing to convert to the lender side. Top shelf retail branches and regions originating north of $8 to $10 million per month are the main targets right now. Smaller branches have equal opportunity but the larger branches will be targeted as priority for its impact. Companies that offer excellent support, operational execution and financial transparency will control the deck. Also, make sure you have a compelling story to tell. If you don’t have one, you need to develop one because there are a ton of “me too” companies out there saying the same things hoping to recruit the same people.” Thanks Jim!

Recently the commentary mentioned a $45,000 settlement in Minnesota between a title company, which had a boat/dinner cruise for clients, and the Minnesota authority. Is taking clients on a cruise illegal? It prompted Louisiana attorney Marx Sterbcow to write, “The RESPA enforcement does seem to be getting extreme as I’m seeing state attorney generals in conjunction with provincial regulators issuing subpoenas or opening up actions involving really innocuous things such as…. a tin foil container full of ribs or hot dogs. This is starting to have a chilling effect as I’m seeing companies withdraw from all legally permissible marketing & Advertising because they are seeing their friends who provided 20 ribs or 50 hot dogs cost wind up having to pay $40k-100k in ESI document production and attorney’s fees. It’s a different environment and I don’t see this slowing down regardless of who heads up the CFPB.

“Here are two different cases involving different lead regulators however the same supporting regulator is the back-seat driver: one involves a bank/mortgage company and the other involves a real estate brokerage. Readers should pay close attention since if you bought someone a hot dog or threw down the ‘buy one get second hot dog free coupon’ you just violated the law under these and need to produce a receipt to the government so you can self-incriminate yourself in your own document production. And in both cases this is exactly what the government is seeking one simple pricing differential.

“Your readers should always remember that social media is the regulators best friend so those fun pictures you posted on Facebook or Instagram just cost you $50k in ESI production because you posted a picture of you and another settlement service provider eating a hot dog at the same event and the other settlement service provider posted, ‘Thanks for the hot dog!'” Thanks Marx!

Sleuthing around a little shows some state-level differences. For example, “Documents sufficient to show the value and frequency of any rebate, discount, abatement, credit, reduction of premium, special favor, advantage, valuable consideration or inducement, fee, kickback, or thing of value, including but not limited to free or discounted meals, provided to XYZ Mortgage in XXXXXX, Alabama. In lieu of providing the actual documents, you may provide a sortable Excel spreadsheet containing the date, value and description of the specified benefits provided.”

And in Florida, “Documents sufficient to show the value and frequency of any rebate, discount, abatement, credit, reduction of premium, special favor, advantage, valuable consideration or inducement, fee, kickback, or thing of value, including but not limited to free or discounted meals, provided to REALTOR Suzy Q or XYZ real estate company in XXXXXX, Florida. In lieu of providing the actual documents, you may provide a sortable Excel spreadsheet containing the date, value and description of the specified benefits provided.”

The topic prompted attorney Brian Levy to contribute, “While ‘anti-inducement’ laws that directly impact title and insurance companies in many states can be like RESPA on steroids, under RESPA itself, an enforcement authority needs to not only prove that the hot dog was a ‘thing of value,’ but also that it was ‘in return for referrals.’ As a native Chicagoan, I have deeply held opinions on what would constitute a hot dog that could be a thing of value (none of which would involve ketchup). I also believe, given the right narrative, that even if a hot dog is a thing of value, that it could be provided as a legitimate marketing expense (or even in response to a social convention) and not simply as a kickback for referrals. Frankly, (pardon the pun) the ‘hot dog as RESPA violation’ is a ridiculous case to bring and a hard one to win for the regulator. Still that doesn’t mean that a regulator with an axe to grind can’t make life tough on regulated entity by imposing huge discovery and legal defense costs to prevail.” Thank you, Brian!

Real estate agents are home buyers’ most important source of information about new homes after the Internet. Last year, 33% of buyers learned about their new homes via a real estate agent. Agents’ influence is not declining despite consumers’ use of the Web, and for most new home transactions, Americans still prefer a real estate agent. Last year, 87% of buyers purchased their home through a real estate agent or broker-a share that has steadily increased from 69% in 2001, per the National Association of Realtors.

And bankers and lenders have thoughts on this. “Together, realtors and MLOs can ease buyer concerns around confusing paperwork and unexpected costs, making the home buying process as seamless as possible,” said Ryan Bailey, Head of Mortgage, TD Bank. “We’re invested in making a positive impact, and this is part of what makes our bank different.”

As it turned out, TD Bank released the results of its Triple Play Conference Survey, which uncovered that despite realtors’ strong home buying outlook for 2017, they are losing sleep over the home buyer experience. As a value add for their buyers, realtors should partner with mortgage loan officers (MLOs) to offer a more seamless home purchase process, especially for first time homebuyers, who are expected to be driving the market in 2017.

Key findings of the survey include that Realtors expect sales to increase in 2017. Most (55%) realtors expect home sales to increase in 2017, and 70 percent of the realtors surveyed are expecting single-family homes to be the highest type of home in demand this year (versus condos/townhomes, multi-family homes and apartments). Technology is imperative to the home search. 44% of real estate agents said online home shopping via Zillow, Trulia and/or will be the biggest technology influence on the home buying process in 2017.

Realtors brought up buyers’ top concerns. The survey showed that the top two concerns for realtors in 2017 are home inventory and mortgage qualification. Realtors said that buyers’ top concerns are confusion around paperwork, followed by unexpected costs and concerns over financing.

What do agents value most in a mortgage loan officer? Most realtors (79%) look for efficient communication and responsiveness when working with an MLO, followed by guidance with navigating the finance process, competitive rates and expertise on managing the regulatory landscape.

A little boy returned from the grocery store with his mom. While his mom put away the groceries, the little boy opened his box of animal crackers and spread them all over the kitchen table.

“What are you doing?” asked his mom.

“The box says you shouldn’t eat them if the seal is broken,” said the little boy. “I’m looking for the seal.”

If you’re interested, visit my periodic blog at the STRATMOR Group web site. The current blog is, “Are You Sure that Rates are Going Higher?” If you have both the time and inclination, make a comment on what I have written, or on other comments so that folks can learn what’s going on out there from the other readers.


For archived commentaries, or to subscribe, go to Copyright 2017 Chrisman LLC. All rights reserved. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Rob Chrisman.

“Those concerned about the facts here as it relates to  your own social security might want to talk to me about what you might do when social security tanks. This is just the facts. I think we have a solution to your worries — HECM EQUITY MORTGAGE WITHOUT PAYMENTS.” Warren Strycker NMLS247179, 928 345-1200. See “information” tab on home page for contact information.



The case for Gofinancial in the HECM discussion — ‘digital component’

While TV campaigns may spark a consumer’s initial interest, the digital component is important because nowadays, consumers often go online to learn more. This is where a lender’s Internet presence counts.

Tom Evans, VP of marketing at Finance of America Reverse, says digital marketing is a great way to connect with consumers who want to research the loan independently.

“The Internet is a great mechanism for educating the consumer. If I think I know what a reverse mortgage is and I’m not interested in being on a phone call with someone pressuring me to buy something, the Internet is my playground,” he says. “I can find everything I need without talking to someone.”

Evans says one bonus about a digital campaign is that it can allow you to collect a consumer’s contact information so that you can stay in touch with them throughout the process.

“It allows you to nurture them in a variety of different ways over time. You can use social media to reach out to people you’ve already made contact with, you can use email drip, you can even use phone calls from non-sales-based personnel to say, ‘Hey, I want to make sure you got all the information you requested,’” he says.

“All of our advertising strategies are about making a lasting connection with a consumer. They are all good in doing that, but the digital strategy does give you a little more flexibility to guide them through the process.”

Still, Evans says FAR continues to utilize traditional marketing strategies in addition to its digital campaign. Online marketing, he says, has become just one more way to reach consumers, who are increasingly selective about how they want to get their information.

“Some folks absolutely do not want to talk to anyone, they just want to learn as much as they can before they make any decisions. On the flip side of that are people who don’t even want to talk to someone on the phone, they want to have that face- to-face engagement; they want to talk to someone they feel they can build trust with,” Evans says. “It’s so amazing how varied the rainbow of purchasers is, there are so many ways people look for information and for products, and as a marketer you have to figure out how to taste the rainbow—to steal a good marketing slogan.”

Written by Jessica Guerin

Those wishing to take your HECM discussion up a notch, review the nearly hundred articles on the HECM mortgage on this page, and then see contact information in the navigation bar. Visitors here sometimes take hours of time sorting out the facts. (Gofinancial by Warren Strycker).


Keeping tabs on HECM

Explore Your Reverse Mortgage Options

By Jack Gutentag, the “Mortgage Professor”.

February 3, 2017

Sheila P. took out a HECM reverse mortgage in 2010 when she desperately needed additional income, even though her home in Nevada had fallen sharply in value during the previous 4 years. Home prices in Nevada rebounded sharply, however, and in 2016, her home had almost doubled in value. Sheila responded by refinancing her HECM, which increased her monthly payment substantially.

Most HECM borrowers are aware of the refinance option because they had the same option on their standard mortgage. HECM borrowers have other options, however, which are unique to HECMs and may not be known or fully understood. If they took a monthly payment, as Sheila did and find later that their needs would be better served by a larger or smaller payment for a different period, or by a credit line on which they could draw as needed, they can modify the transaction without charge. If they had originally taken a credit line and decide later that they prefer a steady monthly payment, they can make that switch as well.

Mortgage Management Is a Challenge on Reverse Mortgages

For a consumer, getting a mortgage poses one set of challenges, managing the mortgage after they get it poses a completely different set. The firms that service mortgages work for the lender and their major objective is to make sure that borrowers meet their payment and other obligations to the lender. Issues important mainly to the borrower usually are left for the borrower to work out.

On standard mortgages, such managerial challenges are not that difficult. In dealing with the challenge of paying down the loan balance early, for example, borrowers have access to a variety of internet-based tools. On my site alone, there are 6 calculators and 4 spreadsheets directed toward this problem.

On HECM reverse mortgages, on the other hand, it is a very different story. Except for borrowers who have drawn the maximum cash permitted on a fixed-rate HECM, the managerial challenges are greater. This is because the reverse mortgage has no terminal date — it can go on as long as the borrower lives in the house – and the borrower always has an option to change the deal in ways indicated above.

The Servicer’s Role Is Limited

I recently decided to see how the firms that service HECM reverse mortgages keep their clients informed. I did not get to look at all the servicing statements out there, but those I saw were very similar and I am sure they are typical. They do a good job of informing borrowers about the status of their HECMs at month end, including the loan balance, unused credit line, and interest rate, but they don’t project the transaction into the future. In particular, they provide no indication of how much home equity borrowers may leave in their estates. In addition, they do not indicate the borrower’s options to change the monthly payment or the unused credit line, or whether a refinance might offer better options.

A New Tool

So my colleague Allan Redstone and I decided to fill this gap with a spreadsheet. To my knowledge, it is the only tool of its type out there. It  is on my web site for anyone to use at Spreadsheets.

The spreadsheet has three components. The first can be viewed as an extension of the servicing statement, projecting the loan balance, unused credit line and homeowner equity into the future. The user can also play “what if”, changing the future interest rate and property appreciation rate that are used in the calculations.

The second component shows the borrower’s options to modify the transaction, by changing the payment or the payment term, drawing cash or repaying previous draws, or a combination. As with component one, the spreadsheet shows the implications of such program modifications for future values of the loan balance, unused credit line and homeowner equity.

The third component of the spreadsheet deals with the question of whether the program modifications the borrower entered in the second component could be obtained more advantageously by refinancing into a new Kosher HECM. The borrower is a little older, which helps, and it is possible that the property appreciation rate during those years has exceeded the 4% rate that is used by the HECM program in calculating draw amounts; that would also work in favor of a refinance. Increases in interest rates, on the other hand, would work against a refinance.

The spreadsheet uses two live interest rates posted by the lenders who deliver rate data to my web site. One is the lowest rate ignoring the origination fee, the second is the rate corresponding to the lowest origination fee. This provides two independent measures of whether or not refinancing would be in the borrower’s interest.

The spreadsheet is a management tool for those who already have a HECM, which is not a large group – about a million. The spreadsheet, however, also aims at the potential market, which is enormous. Knowing that it will be easy to keep tabs on future options may encourage seniors who are on the fence to take the reverse mortgage plunge.

SNOWBIRD MENTALITY: How to buy a vacation home in the sunbelt with NO mortgage Payments!

SNOWBIRDS: So, it’s winter at home and there’s no place nearby to go and relax. SNOWBIRDS do it every year. They take a motorhome or get a vacation home in the sunbelt, leaving the ice and snow behind.

NOW you can buy the home away from home with a HECM on your primary home in the ice belt, get up, and get on in the winter months into sunshine, golf or 4 wheeling. Why not?

JUST WRITE A CHECK! No payments if that’s your choice.

A reverse mortgage is a loan that enables Homeowners who are at least 62 years old to convert some of their home equity into cash, a line of credit, or to finance a home purchase with the freedom from monthly mortgage payments. The borrowers continue to live in their home in the summer where it’s nice and warm and a real vacation home in the winter where it’s warm and nice

The road to a comfortable retirement is paved with unexpected twists, turns and rocky terrain that can derail your journey. In the event retirees find themselves strapped for cash, there are several ways they can increase their spendable income using a reverse mortgage, says one personal finance columnist.

Reverse mortgages have often been touted as financial solutions for homeowners who are “house rich,” but “cash poor.” They can also be viable tools to help homeowners free-up funds

They can also be particularly helpful for homeowners looking to increase their monthly cash flow, while also freeing-up funds paid on housing related expenses.

“Our homes can be costly beasts,” writes finance columnist Scott Burns in a recent article published by the Houston Chronicle. “Even if there is no mortgage, there are bills to pay. The real estate tax, insurance, utility, repair and other bills remain.”

In the article, Burns provides several examples of how a reverse mortgage can increase the spendable income for a retired couple, aged 66 and who own their $300,000 home free of mortgage debt.

Burns also assumes this couple lives in a high-cost area, so the operating costs on their home are 4% of its value, or $12,000 per year. As medium-income workers, the couple’s combined benefits total $37,000 per year. After paying their shelter bills, they have $25,000 to live on.

“Can they do it? Sure,” Burns writes. “Millions of lower-income retirees get by on far less. Will they be comfortable? That’s doubtful.”

One way this couple could increase their spendable income would be by getting a reverse mortgage line of credit, or a guaranteed lifetime monthly payment.

Using an online reverse mortgage calculator, Burns finds that the couple, which he has dubbed “The Shortcashes,” would be eligible for a net credit line of $164,700, or a monthly payment for life of $938 per month, $$11,256 per year.

“So cash advances will cover the annual cost of shelter, and their spendable income increases from $25,000 to $36,256,” Burns writes. “That’s an increase of nearly 50 percent—all tax-free and without moving.”

The Shortcashes could also choose to move into a lower-cost area, particularly where the annual cost of operating a house is about 3% of market value.

“In that move they can buy a house for about $300,000 with a purchase-money reverse mortgage, putting down less than 50 percent,” Burns writes. “With the purchase-money reverse mortgage, they will have no mortgage payment and will be able to stay in the house until they die or are no longer capable of living there.”

The lower operating expenses of $9,000 will also be nice, he adds.

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What is Financial Exploitation?

Financial exploitation occurs when a person misuses or takes the assets of a vulnerable adult for his/her own personal benefit. This frequently occurs without the explicit knowledge or consent of a senior or disabled adult, depriving him/her of vital financial resources for his/her personal needs.

Assets are commonly taken via forms of deception, false pretenses, coercion, harassment, duress and threats. There is more detailed information about financial exploitation here.

These are commonly reported forms of financial exploitation* reported to Adult Protective Services agencies:

Theft: involves assets taken without knowledge, consent or authorization; may include taking of cash, valuables, medications other personal property.

Fraud: involves acts of dishonestly by persons entrusted to manage assets but appropriate assets for unintended uses; may include falsification of records, forgeries, unauthorized check-writing, and Ponzi-type financial schemes.

Real Estate: involves unauthorized sales, transfers or changes to property title(s); may include unauthorized or invalid changes to estate documents.

Contractor: includes building contractors or handymen who receive payment(s) for building repairs, but fail to initiate or complete project; may include invalid liens by contractors.

Lottery scams: involves payments (or transfer of funds) to collect unclaimed property or “prizes” from lotteries or sweepstakes.

Electronic: includes “phishing” e-mail messages to trick persons into unwittingly surrendering bank passwords; may include faxes, wire transfers, telephonic communications.

Mortgage: includes financial products which are unaffordable or out-of-compliance with regulatory requirements; may include loans issued against property by unauthorized parties.

Investment: includes investments made without knowledge or consent; may include high-fee funds (front or back-loaded) or excessive trading activity to generate commissions for financial advisors.

Insurance: involves sales of inappropriate products, such as a thirty-year annuity for a very elderly person; may include unauthorized trading of life insurance policies.

This piece is posted to explain what sometimes happens as seniors age and run out of money. The dangers of exploitation is sometimes the premise for abuse. We watch for those wishing to take over the elder household building a financial wall against intruders. “Let’s talk about it”, said Warren Strycker. A HECM loan leaves room for relatives but establishes continuing independence as elders can stay in their homes with the financial support they need. Call — let’s talk about it nationwide”,  928 345-1200.

HECM MORTGAGES are regulated by the U.S. Government where counseling is mandated for complete understanding in which family can listen in to protect and support their parents in retirement. Counselors are trained to watch for manipulation of family members in these important discussions.

Social Security will inevitably need to be altered — O’Reilly

Tip of the Day

“Protect Your Future…

…Because Social Security will inevitably need to be altered, you would be wise to immediately start saving as much money for retirement as you possibly can.” Bill O’Reilly.
 To confirm the jittery condition of social security benefits, the following was posted on Facebook from Senator Mike Lee. Regardless of the political nature of the comment or the truth of his accusation, here’s what he said:
“This is how it happens…

Last night (January 7, 2017) while you were sleeping the (U.S.) Senate voted to “steal” $150 billion dollars from the Social Security Trust Fund. I joined 34 of my colleagues in a vote to prevent this raid. I would like to thank Senator Rand Paul for leading the fight to protect  Social Security from the thieves in Washington, who seem to think that if they steal from the American people at night while they are sleeping that they will get away with it. I was proud to vote with Senator Paul on his point of order that would have protected Social Security, and I ask you to help me shine a light on what Washington has tried to hide from you in the darkness of night.

If everyone who sees this message shares it, it will reach millions of Americans. As someone who has been fighting for years to reform our broken government in Washington, I know it is exhausting, I sympathize with your frustration, and I understand your impatience. But don’t give up.

Washington wants you to give up.

Just remember, a vote to raid social security in the middle of the night in a desperate attempt to perpetuate an unsustainable spending addiction isn’t a sign of strength. It is a sign of weakness.

Editor’s Note: Those approaching or already into retirement should consider using home equity income (without payments) to shore up shortages to cover unexplained and unplanned financial events (HECM reverse mortgage) to escape this potential crunch in the event social security income is threatened in any way — See contact information in navigation bar for details.

Must-Read HECM Financial Planning Articles, Posted here

January 4th, 2017

Reverse mortgage news coverage continued in 2016, with both mainstream media outlets and professional trade publications coming around to the idea of using home equity for financial planning purposes. And for good reason, too.

This past year saw stories on a variety of financial planning topics, including the reasons that forced some advisers to take another look at reverse mortgages in retirement, and how new rules from Social Security Administration and the Department of Labor stand to impact reverse mortgages.

(Editor’s Note: These articles and more posted here on for easy access as you plot y our own course through retirement income as Congress takes up the issue of Social Security income down the road. Contact us for assistance when it becomes obvious you need to gear up on this subject. )

While the reverse mortgage industry still has ways to go in its efforts to educate more financial planners about the merits of home equity in retirement income planning, the year 2016 was another productive step in the right direction.

Here are the top-10 most-read reverse mortgage financial planning articles of the last 12 months:

  1. January 4 — Reverse Mortgages Will Change Retirement Planning in 2016

The retirement planning world saw a number of policy changes in the previous year that had implications for how retirees plan in 2016. One of the most important changes: the Financial Assessment and enhanced consumer protection rules for reverse mortgages, according to an article from Forbes written by Jamie Hopkins, associate professor of taxation at The American College in Bryn Mawr, Pennsylvania.

  1. May 26 — Former Skeptics, These Financial Planners Now Accept Reverse Mortgages

There have been many changes to the Home Equity Conversion Mortgage program in the past few years, forcing financial planners who were once skeptical to now realize how these products can benefit their clients and, in some cases, their own businesses. Two financial planners, both self-admitted skeptics of reverse mortgages, chatted with RMD about why their view has changed on the product, and why one of them even went the extra mile and launched a mortgage broker business specializing exclusively on reverse mortgages.

  1. October 18 — Why Financial Advisors Must Accept Reverse Mortgages in Retirement Planning

The negative perception surrounding reverse mortgages not only stunts the growth potential for these products to reach a wider consumer audience, but also deters financial planners from recommending the use of home equity for retirement income planning. This is a concept brought to the forefront in the book, “Reverse Mortgages: How to Use Reverse Mortgages to Secure Your Retirement,” published this year by Wade Pfau, professor of retirement income at The American College and director of retirement research at McLean Asset Management.

  1. March 6 — Financial Planning Talking Points Every Reverse Mortgage Lender Should Know

Just like any relationship, whether emotional or professional, communication is integral to developing a meaningful connection that allows each of the parties involved to effectively understand the needs and wants of their partners. While the importance of meaningful communication may sound like a cover story worthy for the front pages of glam-mags like Cosmo and Vogue, this concept is critical for reverse mortgage professionals in their ongoing efforts to forge relationships with financial advisors and other retirement professionals.

  1. March 21 — Advisers Get Crash Course on Reverse Mortgage Financial Planning Strategies

A webinar hosted by the Retirement Experts Network alongside The American College served as an educational session to teach advisers how they can fit home equity into a client’s retirement income strategy. During the session, advisers received an overview of how reverse mortgages work, including their eligibility requirements, various spending options and the different possible uses for HECMs.

  1. September 12 — New Social Security Rules Play Into Reverse Mortgage Retirement Strengths

Changes to the Social Security program enacted this year are lending credence to reverse mortgages as a viable retirement income planning strategy, according to some retirement experts during a webinar hosted by the Retirement Experts Network. The webinar discussed how rules impacting Social Security claiming strategies, including “File and Suspend,” could offer an opportunity for retirees to incorporate a reverse mortgage into their retirement income planning strategies.

  1. April 12 — Reverse Mortgages Are the Epitome of Retirement Planning Efficiency

Effective retirement planning allows investors to maintain their lifestyles while also preserving a greater legacy. When it comes to creating a retirement income plan that achieves both of these goals, reverse mortgages are the epitome of efficient planning, says one retirement income expert.

  1. March 7 — Why One Financial Planner Launched His Own Reverse Mortgage Business

Recent rule changes and demonstrative research has helped some financial planners change their minds about the use of reverse mortgages in retirement planning. But while some have simply adopted a newfound liking toward these products, other newly enlightened planners are taking a more active approach to serve their clients’ reverse mortgage needs.

  1. April 4 — New Rule Offers Opportunities for Reverse Mortgage, Financial Planner Relationships

A Department of Labor rule this year that amends the definition of fiduciary under the Employee Retirement Income Security Act of 1974 is thought to create opportunities for financial advisers and reverse mortgage professionals to form new relationships. Although the rule does not address reverse mortgages directly, its impact on financial services providers has implications for the use of home equity in retirement.

  1. January 4 — Why This AARP Columnist Changed Her Mind on Reverse Mortgages

Thanks in part to various HECM program changes in recent years, reverse mortgages have been winning over everyone from financial advisers to community banks and the mainstream press, and even one nationally recognized personal finance commentator who changed her view on the product.

Over the course of an illustrious career, Jane Bryant Quinn has established herself as one of the nation’s most read and reliable voices for people trying to manage their money well. But it wasn’t until recently that she shifted her perception of reverse mortgages and the role they can play in retirement planning today.

There you have them—the top financial planning stories on reverse mortgages in 2016. Feel free to re-read, share and reference in your ongoing conversations about reverse mortgages and retirement.

Editor’s note: The top stories list is based on traffic data received on Reverse Mortgage Daily content compiled January 1, 2016 through the publication date of this article.

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Why Reverse Mortgages are Worth a Look — Kiplinger/Planner

By PETE WOODRING, RIA, Founding Partner  | Cypress Partners
November 2016

Until recently, the subject of reverse mortgages rarely ever came up in my consultations with clients. When it was discussed, it was the client who brought it up. I’d easily dismiss the idea of a reverse mortgage because it was an expensive form of borrowing and posed unnecessary risk when there were other sources of income. Besides, tapping home equity through a reverse mortgage was always viewed as source of last resort for retirees who had insufficient capital to meet their income needs.

I’ve since reconsidered my bias against reverse mortgages and now view them as a viable tool in the context of a holistic retirement income plan in certain situations. Here’s why:

First, recent rule changes by the Federal Housing Administration (FHA) have reduced borrowing costs and lowered the risk to borrowers. It is still a more expensive form of borrowing, but not prohibitively so.

Second, considering the risks facing all retirees who rely on their own capital as a source of lifetime income—sequence of returns, longevity, inflation—it would be foolish not to consider one of their largest stores of wealth, their home, as part of their retirement income plan, even if it was never needed.

Finally, a significant body of research now shows that responsible use of a reverse mortgage can increase both the sustainable withdrawal rate and the net legacy available for heirs.

Reviewing the Basics

The basic structure of a reverse mortgage allows homeowners over the age of 62 to borrow the equity from their home up to a certain limit based on the borrower’s age, the interest rate and the amount of equity in the home. The amount borrowed, either through a lump sum or monthly payments, is paid back to the lender when the youngest homeowner sells, dies or leaves the property permanently for any reason. The money received is tax-free, and the accrued interest is tax-deductible (up to applicable deduction limit) upon repayment.

The Reverse Mortgage LOC as a Planning Tool

Another way to access the equity is through a reverse mortgage line-of-credit (LOC). As with any LOC, it can be established and accessed anytime funds are needed. Unlike a traditional LOC, the credit limit of a reverse mortgage LOC actually increases each year. The longer it is not used, the more cash becomes available. Adjustable rate mortgage (ARM) loans can be drawn and repaid indefinitely, and any funds repaid can be used in the future and will again have the growth factor applied. For fixed-rate loans, they can be repaid, but no additional funds will be available (closed-end loan). It’s these unique properties of the reverse mortgage LOC that offer retirees more planning options that can help protect their assets and improve their quality of life.

Avoid Sequence of Returns Risk

One of the biggest risks retirees face when converting their capital into income is the sequence of returns. If there is an expectation that a retiree can withdraw a certain percentage of their capital each year without the risk of outliving their income, a prolonged stock market decline early in retirement could require that percentage to be reduced or selling stocks at a loss to make up the difference. With a reverse mortgage LOC, retirees can tap their equity at a cost of 3% to 5% interest, rather than selling stocks at 10% to 30% loss. When stock prices recover, some can be sold to repay the LOC. In this way, a reverse mortgage LOC can be the best tool to use to ensure the sustainability of a retirement portfolio.

Delay Social Security Benefits

For some retirees, delaying Social Security benefits to age 70 is the recommended course if they want to maximize their benefits. Each year benefits are deferred past age 65, the benefit increases 8%. However, if income is needed before age 70, retirees can use their reverse mortgage LOC, which charges a rate of 4% to 5% (and doesn’t have to be repaid), to meet their income needs. If there is money available when Social Security benefits commence, it can be used to replenish the LOC.

Convert to a Roth IRA

For many retirees, receiving taxable income from a 401(k) or a traditional IRA can present problems when it lifts them into a higher tax bracket and subjects a larger portion of their Social Security benefits to taxation. These plans also create potential issues because they are subject to required minimum distributions (RMD) starting at age 70½.

A reverse mortgage can help address both problems. Retirees can use their home equity to convert their 401(k) and traditional IRA plans into a Roth IRA.

When converting to a Roth, the distributions from a 401(k) or traditional IRA become taxable, which must be paid at the time of conversion. The home equity can be used to pay the tax, and from that point forward, any distributions from the Roth are tax-free. In addition, income from a Roth IRA is not included in the Social Security tax calculation. The reverse mortgage LOC would be the preferred option because it can be used only as needed and replenished with any excess cash flow.

Paying for Long Term Care Costs

Long-term care insurance is a great way for retirees to shift risk for potential care costs and preserve assets for heirs, but many shy away because the premiums can be high and increase in the future. The reverse mortgage LOC can be a resourceful way to help pay long-term-care insurance premiums without impacting retirement cash flow. Since the credit line is guaranteed to grow over time, it can offset LTC insurance premiums if they rise. For retirees that choose not to insure or don’t qualify for insurance, the reverse mortgage LOC can be used to directly cover the costs of home care or a spouse’s facility care.

When considered in the context of a holistic retirement income plan, it should be considered with the guidance of an independent financial adviser specializing in retirement income planning.

Woodring is founding partner of San Francisco Bay area Cypress Partners, a fee-only wealth consulting practice that provides personalized, comprehensive services that help retirees and busy professionals to enjoy life free of financial concern.

Craig Slayen, a new partner with Cypress Partners, contributed to this article.

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It’s Time to Change How the U.S. Thinks About Aging in Place

October 20th, 2016  | by Jason Oliva Published in News, Retirement, Reverse Mortgage

Millions of U.S. homeowners will want live in their homes for as long as possible, but not everyone will accept today’s antiquated concept of what it means to truly “age in place,” according to a recent study.

It’s time to change the conversation on aging in place to better address the personal preferences of today’s older homeowners and what they expect when it comes to their aging needs, says a report released this month by HomeAdvisor, a digital home services marketplace that provides homeowners with resources for their home repair, maintenance and improvement projects.

“We must change the discourse related to housing and aging,” states the report prepared by Marianne Cusato, HomeAdvisor’s housing expert and professor of the practice at the University of Notre Dame’s School of Architecture. “The dialog must be about adding features that enhance our lives today by offering a return on investment through livability, yet also happen to support the process of aging gracefully.”

One way to start on this path, the report suggests, is by rebranding the phrase “aging in place,” which HomeAdvisor denotes as an activity for old people, and begin a discussion instead about“thriving in place”—a goal for people of all ages.

The report, which is drawn from two recent HomeAdvisor surveys—one of 279 home service professionals and the second of 586 homeowners over the age of 55—arrives in the midst of America’s swelling aging population.

With already 108.7 million people, the population of Americans age 50 and older is expected to grow by another 10 million by 2020, according to AARP data cited in the HomeAdvisor report. Meanwhile, the number of adults age 85 and older is expected to more than triple by 2050.

Discussions about aging in place inevitably include the need for retrofitting the home with certain design elements meant to foster an older person’s ability to continue living in the residence.

As the inhabitant ages and their physical limitations change, installing features like grab bars and wheelchair access ramps are manageable upgrades homeowners can make. But while installing features like these can provide easy fixes to some aging in place issues, these have become elements of last resort for “old” people, HomeAdvisor says.

Today, more cutting-edge solutions such as smart in-home technology are rising to the forefront of aging in place solutions to improve safety and livability. Nearly 70% of homeowners over age 55 believe smart-home tech could help them age in place, yet fewer than 1 in 5 (19%) have actually considered installing it for such purposes. A similarly lacking adoption trend was found even for more conventional home renovation projects.

Although the majority of adults age 50+ plan to remain in their homes for as long as possible, HomeAdvisor found only 22% of homeowners have completed aging in place renovations, while nearly one-third (31%) have never even considered making at least one project.

Among those who haven’t considered any home improvement projects for their aging-related needs, the most common reasons, according to the report, are that homeowners don’t have any physical disabilities that would require such renovations (40%) and they do not consider themselves “old” enough to need them (20%).

There is also a disconnect between the level of preparedness homeowners think they have and what they are actually doing to ready themselves, and their homes, for aging in place.

Most homeowners over age 55 (67%) consider themselves to be proactive about making aging in place renovations, however, roughly 57% of home service professionals surveyed by HomeAdvisor indicated that aging in place projects account for less than 10% of the work requests they receive.

Moreover, only 20% of pros say most homeowners who contact them about aging in place projects reach out proactively, that is, before they have urgent home improvement needs.

Most professionals said the primary reasons homeowners hire them to do aging in place renovations are accessibility (50%) and safety (43%), while only 6% say homeowners hire them to make “ease of living” improvements like lowering countertops or installing low-maintenance landscaping.

When it comes to the timing of these projects, there are several compelling reasons for older homeowners to begin “thriving in place” renovation projects sooner rather than later, says HomeAdvisor’s Chief Economist Brad Hunter.

“If homeowners start early, they can spend sufficient time researching and planning to avoid wasted time and suboptimal solutions,” Hunter says in the report. “And, homeowners can protect, and possibly even raise resale value of the home by making the home more appealing to buyers in all age groups with modifications that have a broad appeal.”

Read the full HomeAdvisor report here.

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For your retirement planning, count on living until age 95

Robert Powell, Special for USA TODAY 12:46 p.m. EDT October 5, 2016

If you knew your date of death, retirement planning would be a breeze.

Unfortunately — or maybe fortunately? — you don’t. And that can make planning for retirement extremely difficult. Does your nest egg need to last 20 years? 30 years? 40 years? And what about couples? How should couples go about planning for the likelihood that one spouse — usually the husband — predeceases the other?

Well, if you’re like most people, you’re guessing at this, and guessing quite wrong.

“Many people do not understand longevity well, and those people who plan often do not plan for long enough,” says Anna Rappaport, president of a retirement consulting firm bearing her name and chair of the Society of Actuaries (SOA) Committee on Post-Retirement Needs and Risks.

Noel Abkemeier is the founder of Abkemeier Actuarial and chair of the American Academy of Actuaries Lifetime Income Task Force. (Photo: Handout)

Becoming familiar with current life-expectancy statistics is the first order of business. “There are two aspects to addressing longevity,” says Noel Abkemeier, the founder of Abkemeier Actuarial and chair of the American Academy of Actuaries Lifetime Income Task Force. “First, understanding it, and then planning an income that will last throughout life.”

You may live much longer than you think. “There have been significant improvements in how long people survive in retirement, especially for wealthier Americans,” says David Blanchett, head of retirement research at Morningstar Investment Management.

Consider: Someone born in 1950 was expected to live to age 68.2. By contrast, someone born in 2014 was expected to live to age 78.8, according to the Centers for Disease Control and Prevention. In other words, someone born today will need to fund an extra 10 years of retirement vs. someone born 66 years ago.

What’s more, life expectancy for those alive at age 65 has also increased dramatically. In 1950, a 65-year-old male could expect to live another 12.8 years. In 2014, a 65-year-old male could expect to live on average of 18 more years. The same is true for women. In 1950, a 65-year-o woman could expect to live another 15 years. By 2014, a 65-year-old woman could expect to live another 20.5 years.

Another resource is the Living to 100 life expectancy calculator.

Financial advisers are starting to change assumptions about how long clients will live to make sure they don’t outlive savings, according to a survey by InvestmentNews. Advisers are basing retirement-income plans on an average life span of 91 for men and 94 for women, according to the survey.

“Many people do not understand longevity well,” says Anna Rappaport, chair of the Society of Actuaries (SOA) Committee on Post-Retirement Needs and Risks. (Photo: Anna Rappaport Consulting)

Consider the probabilities. One drawback with using life expectancy to plan for retirement is that it’s just an average. One-half will die before life expectancy, and the other half after. So, the better way to approach the problem is to consider the probability of living to certain ages.

Consider: There’s a 25% chance that a 65-year-old man will live to 93; a 25% chance that a 65-year-old woman will live to 96; and for a couple 65 years old, there’s a 25% chance that the surviving spouse lives to 98, according to SOA projections.

All that said, Blanchett still thinks it makes more sense for people (and planners) to use a fixed time horizon, such as planning to age 95.

Couples should consider their combined planning timeline. For couples who are 65 today, there’s a 45% chance that a wife outlives her husband by five years and a 20% chance by 15 years, according to the SOA. “Don’t forget that assets need to last until the second to die for couples,” says Rappaport.

Consider your genes and behavior. “Some factors that influence how long you live may be beyond your control,” according to the SOA. “Others depend upon the choices you make every day. A successful retirement plan will address both.”

How will you manage longevity risk? There are some time-honored ways to deal with the risk of outliving your assets. Those include the use of annuities, a sound asset-drawdown plan, delaying Social Security to age 70 for the higher wage earner, and a reverse mortgage. Read Managing Post-Retirement Risks – A Guide to Retirement Planning.

Remember, says Abkemeier, half of retirees will live longer (than life expectancy) and, to build in a cushion, individuals should plan for an additional five or more years when considering lifetime income.

Robert Powell is editor of Retirement Weekly, contributes regularly to USA TODAY, The Wall Street Journal and MarketWatch. Got questions about money? Email Bob at

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Sea shells washed up in the desert? Probably not. Somebody is playing a joke thinking this used to be the ocean. I don’t believe it was an ocean, but the shells, planted or not, make it look that way. Some have commented on this and joined the “evidence”, planted or not. Be wise and take a second look when you consider a HECM. Miracles happen, but they may also be somebody’s effort to fool you. Cautious is good.

APIWATW =  A Picture is Worth a Thousand Words

A picture has no merit unless it says something to you. That’s my mantra here.

I use pictures to frame these HECM IDEAS because they create a thought usually illustrated by normal things we spend so little time with in this busy world of ours — like two rocks stacked like a boy scout sign that “this is the way”, or two roads to nowhere to illustrate a choice of direction, a newly blooming sunflower “winking” at a new way to go, a teepee on an Indian reservation nearby to remind how housing has improved around us or a tree too large to remain in place when the wind blows, being trimmed down to a new and manageable size.

Life gets tedious…  as the song goes, so a few pictures liven up the discussion for me. I hope you enjoy them as I click away at things with my iPhone8 while the Nikon gathers dust in its branded bag under my desk.

You can get “inside my head” by joining me in this expression of things seen and unseen day after day without enjoying the tease that goes with why I choose a picture to illustrate a thought I want you to consider. You can mark this website as a “favorite” and enjoy the progression of ideas here at


Then, consider the HECM LIFESTYLE positioned in front of you if you are 62, have home equity and an issue with financial liquidity. Consider my photos as little reminders about the wonders of the world we ignore (mostly).

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48,794 Senior Homeowners take a HECM in 2016; Count the many benefits

September 7th, 2016  | by Jason Oliva Published in HECM, News, Retirement, Reverse Mortgage

48,794 homeowners took a HECM (Home Equity Conversion Mortgage) in 2016. They used their home equity in retirement to provide funding for a variety of projects, paid up their balances owed and for many of them, established a line of credit that actually earns a substantial growth percentage on their credit balances. If they don’t use the line of credit, it could become a larger amount than the mortgage they took out to establish it, and without payments in their lifetime and there’s a 50% chance the line of credit will exceed the value of the home itself.

A new webinar, co-hosted by Tom Dickson, who leads RMF’s Financial Advisor Channel, served to educate financial services professionals on refreshed ways of thinking about reverse mortgages, particularly within the context of retirement income planning. This involved a basic overview of the HECM program, including the recent program changes post-2013, as well as a variety of simulations depicting how a reverse mortgage can fit into a financial planning client’s retirement plan.

One scenario assumes a 62-year-old client with a home worth $625,500 in Pennsylvania. By taking a HECM line of credit, this client has $327,500 available to them at the time of the credit line’s inception. If the credit line is left to grow, after 10 years, the available proceeds available to the client will have grown to $613,365. By year 20, the credit line will have grown to $1,149,193.*

With this pricing option, the borrower receives a lender credit covering nearly all closing costs. The upfront cost of $125 is for a non-refundable independent counseling fee, on average, which the borrower pays directly to the counseling agency.

“This [reverse mortgage credit line] can basically provide another deferred income vehicle,” Dickson said during the webinar.

Opening a HECM line of credit can basically serve as a “put option” on the value of the home that can protect borrowers in the event that their home price falls in value, Pfau said.

“If interest rates don’t increase in the future, eventually the line of credit will grow to be more than the home value,” Pfau said. “If you start to introduce risk for home price fluctuations and the potential for rates to increase in the future, by age 82—for someone who opens a line of credit at 62—there’s a 50% chance that the line of credit can grow to be more than the value of the home.”

Unlike most retirement strategies and investments, where low interest rates could hurt, today’s current low rates are particularly beneficial for HECMs and the retirees who use them.

“Reverse mortgages are one of the interesting tools that work better in a low interest rate environment,” Pfau said. “Normally, low rates are bad for retirees—it makes retirement more expensive. Opening the reverse mortgage is one of the few strategies out there, relatively speaking, that benefits from a low interest rate environment.”

*This scenario assumes (1) 62-year-old borrower; (2) PA home valued at $625,500; (3) LOC will grow at 1.25% above the adjustable-rate mortgage, which uses the 1-year LIBOR plus a margin of 3.375%. Initial APR is 4.741% as of 6/21/16, which can change annually. Also assumed: 2% annual interest cap, and 5% lifetime interest cap over the initial interest rate. Maximum interest rate is 9.559%; (4) the growth rate remains at 5.85%; (5) no draws by the borrower.

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9 surprising ways to use a HECM (reverse mortgage) says prominent Advisor

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Learning how a HECM can help is a highly personal and confidential event

Those who consider a HECM (reverse mortgage) in order to retrench their finances or as we say, “build a retirement highrise and take the elevator to the top” in retirement don’t need to be treated like an email as part of an advertising event. This is a highly personal exchange and we bring integrity to the discussion becauses we know you care about that from lots of years of experience working with this retirement theme. You’ll like working with us at The Federal Savings Bank. We have a very positive view of the HECM and believe you have full rights to decide for yourself professionally whether or not you take control in order to use your own home equity with this solution. We answer all questions professionally.

Yes, we use emails and webpages like this one when we can because they provide quick and reliable support to deliver important information to and from those we serve as clients.

We also use postcards and personal letters and visit clients personally when we can, by phone or with inhome visits. We consider our role professionally based on integrity. We love to help.

There is no substitute for quality people-to-people communication. We earn your trust right from the get go. Call us anytime to start the discussion.

I hope you’ll trust us by asking questions and expecting straight answers as you sort out the unprofessional explanations many give and get for what used to be called the reverse mortgage. Yes, we call it the HECM (Home Equity Conversion Mortgage) because that is so much more an accurate description — the reality of using home equity to shore up retirement finances — the reality of home equity ownership.

You should be aware that not all those who give information about what they refer to as the “reverse mortgage” are aligned with the truth as we know it and will sometimes shade real issues to support their own sales efforts with competing products.

Thanks for expecting integrity here at As 12 year HECM VETERANS, WE BELIEVE IN THE Home Equity Conversion “Mortgage” as it opens the door to use of your home equity in retirement. WE BELIEVE IN YOUR RIGHT TO USE IT WITH INTEGRITY. Review the many HECM articles here taken from a cross section of professionals and get more information to plug into this unique service on your behalf.

As part of government regulation, you will experience HECM COUNSELING to help sort out the facts if there are unanswered questions. Furthermore, prospective borrowers are not bound by any agreement until 3 days after a HECM CLOSE in case you forgot to ask an important question about HECM.

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Will Government confiscate HOME EQUITY to aid SOCIAL SECURITY fund shortages?

By Warren Strycker

There are new people in charge of our government now. We suggest there will be battles ahead for home equity as it relates to the social security fund. Your home equity may not be as safe as you thought.

Wonder no more. A kind of “Brexit” is being presented for voters to ward off further government intrusion into private business. Seniors are among them concerned about social security income they depend upon.

And, President Trump may not be as conservative as you thought. (He is, after all, a populist first). And, in order to save the Social Security Fund, there will be a lot of discussion about home equity. (You can say you saw it here first, but it won’t matter in the long run who said it first because these kind of things start in the “back room” first. My bet is that those discussions have already been launched to trim the expanding national debt.

My concern, because I work with the seniors almost exclusively now, suggesting they use  home equity while they have control of it, that the time may come soon, when a more powerful than ever motivated government will suggest, and then order, homeowners to give up their home equity in lieu of receiving social security which continues to lose financial worthiness year by year.

If you find that some kind of outrageous conspiracy theory, not to worry. I’m just suggesting that a government upside down financially with a 20 trillion debt might resort to some unusual ways to balance its budget. (It’s happened before).

Can anyone with knowledge of our government budgeting process, suggest another more obvious view to balance the federal budget than to access home equity?

Blame me if I’m wrong, but I believe that a government may eventually “confiscate” home equity to balance out eventual  social security insolvency of that retirement account. Senior home equity is now viewed in the trillions, and growing. All that money in one place gets the attention of lawmakers who don’t balance their budgets. That is the reason you hear me say publically now that if you have home equity, you should consider using it while you can, assuming you may not always have that opportunity.

You were told, as I was, that real estate (your home) would always grow by 6-7% annually, and then we learned it went the other way, after the 2000 financial crisis, and in many places, it is just now being valued at those 2000 levels. Sometimes, when values are high as they are again now, there is consideration of using the money while they are at those levels (much in the same way, investors would use their money when values are at peak levels as they are now. For many, a HECM decision was more difficult when home values were low because appraisals came in lower based on homes being sold at lower levels. Right now, that is not the case (again), but there is no guarantee your home equity will remain at the level it is now.

Don’t get us wrong. Government will not just steal your equity. They are smarter than that. Trump is a real estate guy so he knows equity pretty well, wouldn’t you say? Look for ways for you to be “persuaded” to use home equity or lose your social security benefit. More and more, there is less of us believing that you “earned” this benefit — there will be more talk of using it for the “benefit” of the nation, and less about your earned income benefit.

Just sayin’…

“Consider the use it or lose it mentally and consider this option — (equity) NOW while you can.”

Consider then now, how you would spend newfound money in retirement if you came to believe it would be a wise option? Consider that this discussion about government intrusion on home equity requires consideration on your part to take away the temptation government may have to block you from your own home equity by thinking of upstanding and wise ideas to spend the money before “they” do. Think about it.

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9 surprising ways to use a HECM (reverse mortgage) says prominent Advisor

By Mary Beth Franklin

Reverse mortgages allow homeowners age 62 or older who own their home outright or who have a small mortgage balance to convert the equity in their primary residence into a liquid, tax-free asset. Borrowers can take their money in a lump sum or as a monthly payment, or set up a line of credit. Interest accrues on borrowed funds. Unused lines of credit continue to grow at the same compounded interest rate as the cost of money.

Financial advisers who dismissed reverse mortgages in the past may want to take a second look. Consumer protections have increased and set-up fees have been dramatically reduced. Leading researchers believe reverse mortgages could solve some of the income challenges of retirees who saved too little to finance a retirement that could last decades. Click through to find out the various ways to use a reverse mortgage — some of them may surprise you.

Pay off an existing mortgage

Using a lump sum from a reverse mortgage to pay off a traditional mortgage balance instantly increases a retiree’s monthly cash flow and reduces portfolio withdrawal needs. “It really improves the odds for retirement success to not carry a mortgage into retirement,” said Wade Pfau, professor of retirement income at The American College of Financial Services.

Replace a home equity line of credit

Unlike a HELOC, a reverse mortgage can never be reduced, frozen or cancelled, and there are no monthly loan repayment requirements. A reverse mortgage is not due until the borrowers sell the home, move out permanently or die. The estate or heirs can never owe more than the house is worth, even if it is less than the amount borrowed.

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Protect your portfolio

“Should your portfolio decline significantly in value, borrow from the line of credit for your needs, then repay the loan when your portfolio recovers,” said John Salter, associate professor of personal financial planning at Texas Tech University. Interest payments are tax-deductible if retirees itemize their deductions on their income tax returns.

Fund future long-term care or income needs

A 62-year-old couple with no long-term-care insurance may want to set up a reverse mortgage line of credit. With a home worth $625,000, their initial line of credit at current interest rates would be worth $327,375, according to Tom Dickson, founder of the Financial Experts Network. Left untouched, the equity line would be worth $613,365 in 10 years and $1,149,143 in 20 years, said Mr. Dickson, a co-designer of the reverse mortgage modeling now part of MoneyGuidePro. The couple could tap the loan for future long-term care costs, as long as they remained in their home, or to serve as a deferred annuity if they needed additional income in the future.

Create a Social Security bridge

Supplement income with monthly payments from a reverse mortgage either for a set number of years (term) or for as long as you live in your home (tenure). Term payments can provide an income bridge to allow a retiree to delay claiming Social Security until benefits are worth the maximum amount at age 70, said Shelley Giordano, author of “What’s the Deal with Reserve Mortgages?” (People Tested Media, 2015).

Manage taxes

Proceeds from a reverse mortgage are tax-free. Tapping a reverse mortgage can decrease withdrawals from taxable retirement accounts, reducing income taxes and the amount of Social Security benefits subject to income taxes. For higher-income retirees, tax-free reverse mortgage payments can reduce their modified adjusted gross income that can trigger higher monthly Medicare premiums.

Pay Roth conversion taxes

Sometimes the only thing preventing a retiree from converting a traditional retirement account to a Roth IRA is the amount of income taxes owed on the converted amount. Tax-free proceeds from a reverse mortgage can pay Roth conversion taxes all at once or over several years, reducing future income taxes and possibly reducing future Medicare premiums.

Buy a new home

A reverse mortgage can be used to purchase a new home. Rather than using all of the proceeds from a home sale, downsizers can use some of the sale profits and take out a reverse mortgage to make up the balance, resulting in a new home without monthly payments and additional cash to add to savings for future needs or to supplement current income.

Gray divorce strategy

Older couples can use a reverse mortgage to divide a marital housing asset in a divorce. In one scenario, the spouse remaining in the home can take a lump sum distribution from a reverse mortgage to buy out the other spouse. In a second scenario, the marital home can be sold and each ex-spouse can use some of the proceeds from the home sale and each of them can get a reverse mortgage to buy their respective new homes, according to Shelley Giordano, chair of the reverse mortgage industry’s Funding Longevity Task Force.

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You can HECM to buy another home (with no monthly payments)? HERE’S HOW!

With a home-equity conversion mortgage, seniors can finance the purchase of a new home without monthly payments

Illustration: Chris Gash
By Anya Martin
July 20, 2016 10:47 a.m. ET
HECMS are typically seen as a way for seniors to remain in their homes while drawing income from their property. But a reverse mortgage can also be used to buy a home.

Here’s how it works: Seniors 62 or older buying a primary residence make a down payment and pay closing costs. They then get a lump-sum loan that goes toward the home purchase. No monthly payments are required to pay down the debt. Instead, interest accrues on the loan, and the principal and interest are usually due when the last co-borrower or spouse on the loan moves out or dies.

Most reverse mortgages are FHA-insured loans called home-equity conversion mortgages, or HECMs. The loan amount is a percentage of the home’s appraised value, up to $625,500. That percentage starts at about 52% of the purchase price and rises with a borrower’s age, going up to about 75%.

In general, interest rates on lump-sum HECMs range from 4.25% to over 5%, says Peter H. Bell, president and CEO of the National Reverse Mortgage Lenders Association, a trade group.

If desired, a senior with a reverse mortgage can leave a portion of the proceeds in a line of credit for future use. Interest is charged only on money that is drawn from the line of credit. HECMs that are lines of credit have interest rates starting in the 3% range, but these are adjustable rates that may change throughout the life of the loan, Mr. Bell adds.

Retirees often have trouble meeting underwriting requirements for regular mortgages, which are based on income more than assets, says Richard Mandell, CEO of One Reverse Mortgage, a subsidiary of Quicken Loans. A reverse mortgage “gives retirees the opportunity to move to a different home that better suits their needs, be closer to family or live in a warmer climate,” he adds.

‘If desired, a senior with a reverse mortgage can leave a portion of the proceeds in a line of credit for future use.’

A top concern has been that seniors will draw down their home equity too rapidly, forcing them to exhaust other savings, says Jamie Hopkins, co-director of the New York Life Center for Retirement Income at the American College of Financial Services in Bryn Mawr, Pa. But used strategically, buying a home with a reverse mortgage allows seniors to invest in higher-yield investments than their home.

Ray and Janet Massey wanted a 3,300-square-foot house with a pool in Katy, Texas, a suburb of Houston, but it was listed at about $533,000. Their previous home, also in the Houston area, was worth only $370,000, with a mortgage that had to be paid off, Mr. Massey says.

The Masseys made a $240,000 down payment, and their reverse mortgage paid for the home. They put down another $250,000 to qualify for a line of credit with a variable rate, currently 5.73%, says Mr. Massey, a 72-year-old retired sales manager at an auto-dealership. He and Janet, who at 71 still works as a packaging-sales executive, have access to money if they need it. But any amount they don’t draw grows annually at the current adjustable-rate—even if home values drop, he adds. (Footnote: A growth factor on HECM lines-of-credit nearly makes up for the cost of borrowing so using the money is almost free).

“We’re happy because we don’t have a monthly payment and we can put our money in a safe [federally insured] investment,” Mr. Massey says.

If senior borrowers want to tap more equity from their home than an HECM can provide, two lenders offer jumbo reverse mortgages. Finance of America Reverse offers a loan that typically goes up to $2.25 million and is available in 14 states. The American Advisors Group has a loan that is usually capped at $3 million and is currently available in eight states. Qualification rules and terms of the loan vary by the lender. More considerations:

• Foreclosure possible. Even though the homeowner is not making mortgage payments, a lender could foreclose if certain required expenses, such as property taxes, homeowners’ insurance premiums and homeowners’ association fees, aren’t paid.

• Not under construction. Currently HECM loans cannot be used to pay a builder for a home that is not completed. The FHA is considering a proposed rule that could lift that restriction, Mr. Bell says.

• Non-recourse loan. Reverse-mortgage loan amounts are based solely on the home value at the time of underwriting, which in the case of a purchase is the purchase price. So if the home loses value, neither borrower nor heir is responsible for making up the difference upon a sale.



HECMs help planners deploy strategies to ensure clients won’t outlive their money

By Mary Beth Franklin

Carolyn Dayton: Wondered if she could take money out of her house, rather than her IRA.

Carolyn Dayton had achieved a major goal of many retirees. She owned her home free and clear with no monthly mortgage to erode her retirement income.

But after retiring from her job as a computer business consultant more than a year ago, Ms. Dayton, 67, watched nervously as the investments in her individual retirement account rose and fell amid a volatile market. Meanwhile, the value of her three-bedroom, two-bathroom home in the San Francisco Bay area steadily increased.

“My investments haven’t been doing great, but I have a whole pile of money tied up in my house,” said Ms. Dayton, who paid $600,000 for her home 12 years ago. Today it is worth $900,000. “Rather than take money out of my IRA when it is low, I thought I could take money out of my house when it is high. You know, buy low and sell high.”

Without realizing it, Ms. Dayton had stumbled onto one of the most innovative — and controversial — ideas in financial planning today: How to incorporate home equity into a retirement income strategy.

Dayton3(Related read: 9 surprising ways to use a reverse mortgage)

“Having a buffer asset can help manage sequence of returns better and make a retirement income plan more efficient,” said renowned retirement researcher Wade Pfau, a professor of retirement income at The American College of Financial Services and a principal at McLean Asset Management. Translation: A reverse mortgage can reduce the risk of clients outliving their savings by allowing them to use loan proceeds during down markets rather than tap a shrinking nest egg.


Mr. Pfau analyzed several recent studies on how to use a reverse mortgage as part of a comprehensive retirement income strategy. His conclusion: There is great value for clients in opening a reverse mortgage line of credit at the earliest possible age, particularly in a low-interest-rate environment like today.

Once established, the available line of credit continues to grow each year, even if the underlying value of the house does not appreciate. In addition to serving as a hedge against portfolio depletion, a standby reverse mortgage line of credit can serve as long-term-care insurance or a deferred annuity, using the home as collateral instead of paying insurance premiums.

Mr. Pfau’s advice to financial advisers: If you had dismissed reverse mortgages in the past as inappropriate for your clients, they’re worth a second look. Otherwise, you may be missing out on a crucial way to improve clients’ retirement security.

“Prior to 2011, reverse mortgages were expensive and really only made sense in the case of financial hardship. Today, the costs can be on par with a traditional home mortgage.”– John Salter, associate professor of financial planning at Texas Tech University.

Reverse mortgages allow older homeowners to convert the equity in their primary residence into a liquid, usable resource. Borrowers must be 62 or older and must either own their home outright or use the proceeds of the reverse mortgage to pay off the balance of their existing mortgage. They retain ownership of the home and must continue to maintain it and pay their property taxes and homeowner’s insurance.

Distributions are tax-free and can be taken as monthly payments for a fixed period of time, as long as the borrower remains in the house, as a line of credit or as a combination of payout options. Interest accrues monthly only on the amount borrowed, not on unused lines of credit. No repayment is required until the last borrower sells the house, moves out permanently or dies. Because it is a nonrecourse loan, the borrower or heirs can never owe more than the home is worth, even if that value is less than the loan balance.

It’s undeniable that the reverse mortgage industry has been plagued with a sleazy image thanks to its outdated celebrity pitchmen, aggressive sales tactics and occasional horror stories of widows being forced out of their homes. But the industry landscape has changed dramatically over the past few years. Reform of the federally insured Home Equity Conversion Mortgage program has increased consumer protections, introduced underwriting to weed out unsuitable candidates and significantly lowered costs.

The Reverse Mortgage Stabilization Act of 2013 now prevents reverse mortgage borrowers from using too much equity too soon and protects spouses who are too young to be co-borrowers on the loan by ensuring they can remain in the house after the older spouse dies. However, they are not able to borrow additional money.

(More from Mary Beth Franklin: A widow’s Social Security dilemma)

Initial setup fees have been dramatically reduced. The upfront mortgage insurance premium has been slashed from 2.5% to 0.5% of the loan amount as long as the borrower taps less than 60% of the available balance in the first year. Mortgage closing costs — for title insurance, appraisal and attorney fees — are about the same as a traditional mortgage or home equity line of credit, and some lenders provide credits to offset upfront expenses, adding it to the cost of the loan. In many cases, the borrower’s out-of-pocket cost to establish a reverse mortgage may be as little as $125 — the price of the mandatory consumer counseling fee.

“Prior to 2011, reverse mortgages were expensive and really only made sense in the case of financial hardship,” said John Salter, a financial planner and associate professor of financial planning at Texas Tech University, who has been researching and writing about the HECM program for years. “Today, the costs can be on par with a traditional home mortgage,” he said. But unlike a traditional mortgage or home equity line of credit, borrowers do not need to meet income qualifications, which can be challenging for retirees, and a reverse mortgage line of credit cannot be frozen, reduced or cancelled as happened to many traditional mortgage borrowers during the housing crisis.

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HECM borrowing limits are based on available home equity, the age of the youngest borrower, interest rates and lender margin. Depending on their age, homeowners can tap about half of the home’s appraised value up to a maximum home value limit of $625,500. The older the borrower and the lower the interest rate, the higher the available loan amount.

“For anyone 62 or older with no mortgage, it makes sense to establish a reverse mortgage line of credit — especially for $125,” said Mr. Salter, who is a partner at Evensky & Katz/Foldes in Lubbock, Texas. Some of his retired clients who rely on oil and gas royalties used a reverse mortgage to supplement their monthly income when oil prices dropped precipitously.

(Related read: Medicare, reverse mortgages and the complexities of retirement planning)


Ms. Dayton, who has been divorced for many years, discussed her idea of taking out a reverse mortgage on her Danville, Calif., home with her adult daughter and Patricia Passon, her financial adviser of more than 30 years.

“I am so happy to have my financial adviser working with me on this,” Ms. Dayton said. “She understands the financial lingo so she could translate all the different offers for me.”

Ms. Passon, principal at Encompass Financial Advisors Inc. in Beaverton, Ore., had little actual experience with reverse mortgages but had read numerous research articles and attended several webinars on the subject. She created a spreadsheet to analyze and compare offers from various reverse mortgage lenders and finally settled on a reputable reverse mortgage firm, a finance company that covered all the upfront costs in exchange for a slightly higher lender margin.


Based on the maximum allowable home value of $625,500, Ms. Dayton qualified for a $375,000 line of credit. She draws $1,000 a month in tax-free reverse mortgage payments to supplement her Social Security benefits and nonretirement investments, allowing her IRA to grow untouched for a few years.

“Now I can sleep at night, and I have no concerns about running out of money,” Ms. Dayton said. That leaves her plenty of time and energy to devote to her role of doting grandmother to her three grandchildren.

Unfortunately, not all financial advisers are as able — or willing — as Ms. Passon to discuss reverse mortgage options with their clients.

“Advisers have been slow to grasp how reverse mortgage lending has changed,” said Shelley Giordano, chairwoman of the Funding Longevity Task Force, an industry-backed group of leading retirement income specialists, and author of “What’s the Deal with Reverse Mortgages”(People Tested Media, 2015).

“If the first impulse is to counsel clients to wait until the portfolio is depleted before establishing a HECM line of credit, the adviser is giving outdated advice,” Ms. Giordano said. “And compliance officers who forbid conversations with clients on how a significant asset, the home, can improve retirement outcomes are not meeting an appropriate standard of care,” she added

“I am so happy to have my financial adviser working with me on this, She understands the financial lingo so she could translate all the different offers for me. Now I can sleep at night, and I have no concerns about running out of money,” Ms. Dayton said.

Adviser reticence is likely tied to an investor alert, first published in 2010, from the Financial Industry Regulatory Authority Inc. warning Americans about aggressive marketing campaigns that promoted reverse mortgages as a cost-free way to finance retirement lifestyles or risky investments. The agency toned down its criticism slightly in 2014 when it reissued the alert in the wake of the program reforms. Finra noted that reverse mortgages can help seniors manage their finances if used responsibly.

While employing a reverse mortgage to extend the life of a portfolio is a popular research topic, most homeowners actually use the loans to pay off an existing mortgage, reduce other debt or increase their monthly income.

In the past, it was not common to carry a mortgage into retirement. In 1989, only 11% of homeowners ages 65 to 74 had a mortgage, with an average balance of $29,000, according to LIMRA Secure Retirement Research. But not anymore. By 2013, 43% of these households carried a mortgage, with the average debt totaling $136,000.


Monthly mortgage payments can severely strain a retirement budget. Just ask Shelly Moss, a rabbi in the Phoenix area. At 66, he would like to retire soon without worrying where the money will come from to pay his wife’s extensive medical bills, which have ravaged their savings. But when his financial adviser, Dennis Channer of Cornerstone Investment Advisors in Boulder, Colo., suggested a reverse mortgage, the rabbi was skeptical.

Mr. Channer said he often includes a reverse mortgage calculation in retirement income plan discussions to educate clients about their options. Those include lowering their taxes by combining tax-free reverse mortgage payouts with smaller distributions from fully taxable retirement plans. That strategy also can help higher-income clients avoid surcharges on their monthly Medicare premiums.

Mr. Moss and his wife, Barbara, set up a reverse mortgage earlier this year and used it to pay off their existing mortgage, slashing $2,000 from their monthly spending.

“It gives us breathing room,” he said.

A recent survey by The American College suggests reverse mortgage education could be vital for a new generation of retirees determined to remain in their homes. The survey of more than 1,000 people between the ages of 55 and 75 with at least $100,000 in investible assets and at least $100,000 in home equity found that 83% wanted to remain in their current home as long as possible. Despite a strong desire to age in place, only 14% of the respondents said they had considered a reverse mortgage, and just 30% earned a passing grade on basic knowledge about the financing tool.

Separately, a new study by Northwestern Mutual found that two-thirds of Americans believe there is a chance they will outlive their savings.

“Advisers and consumers need to start thinking about home equity, including reverse mortgages, as part of the retirement income planning process,” said Jamie Hopkins, co-director of The American College’s New York Life Center for Retirement Income Planning.

Mary Beth Franklin is a contributing editor to InvestmentNews and a certified financial planner.

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Facebook Family member takes the HECM step; Whataboutyou?

Another MEMBER OF MY FACEBOOK FAMILY took the step this month to get a HECM to ACCESS HOME EQUITY to make their retirement ends meet again.

Some of you will consider that reckless. With the close of this HECM in June, this family will pay off all their bills and have considerable resources in a line of credit next year. They are set for the next leg of their journey through retirement -- and there is a lot to celebrate. Will you take the same step? If you are 62 and have more than 50% home equity, Call me at 928 345-1200 from ANYWHERE IN THE UNITED STATES. Let's talk about it.

Don’t let life suck you under — you can kick against the bottom, break the surface and breath again — Facebook’s Sheryl Sandberg.

Interesting, wouldn’t you say?

Two out of three Americans would not be able to raise $1000 easily in an emergency, we are told, and yet at this point, only 2% of them — at eligible age and qualifying equity — would get a HECM. 86% of you want to retire safely in your homes.


Homeowners who have put this money away in the equity of their home can use it to draw on when they need $1000 (and much more) to use it when they need to, or when they want to, or ….

Clearly, most of us don’t understand HECM, and most of us won’t ask even when it’s easy to do so.  There is substantial conflicting information to sort out because it is in an unfair marketplace where others have their own products to tout. So, it may take longer for some folks to get a hold of this concept. The information is available here on this webpage for your evaluation.

Here’s the HECM, like a HELOC without payments — remaining proceeds you don’t need or want, goes to your heirs — just like you hoped.

“Here I am”. Warren Strycker, for HECM, 928 345-1200 — anywhere in the United States from right here in the desert to serve you — trained, experienced over 12 years now, internet savvy and willing — I work for the right reasons. You’ll see.

It is clear to me that a lot of you will be doing HECM ahead just because it is making considerable sense now because many will need to use the equity in their homes to survive retirement. No longer do all those interested in the HECM come with bills they can’t pay. Some million dollar homes support the HECM lifestyle. If that knocks on your door, it’s probably time to open it and take a look for yourself — don’t you think? A HECM line of credit supports the rest of your time in retirement. If you don’t spend it, so much the better, but if you have it there to spend, life can be a lot better for you and it is a lot better for you to have an LOC you don’t need than to not have one when you do.

Research for “HECM” on these pages.

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Banking on home equity; Part of Retirement Plan; Eligible again and again.

This story “borrowed” from treasured friend, Larry Waters, loan originator long associated with reverse mortgages and featured in Reverse Mortgage Daily recently.

There is the misconception that a person can only be eligible for one reverse mortgage in a lifetime, but the opposite is actually true.

A lot of people aren’t prepared for retirement and are just getting by right now, but with inflation and health care costs continuing to increase, they will realize the need for another option.

Consider this prospect  in Spokane, Wash., where she was living alone after her adult children moved away. The woman wanted to sell her home to downsize, but it needed some upgrades, mostly aesthetic things.

Initially, she went to a realtor and at the time, he didn’t even know about reverse mortgages, nor did she. The woman then went to the bank to try to get a regular mortgage, but was denied because she didn’t have the income she used to when her husband was alive.

The bank actually brought up the idea to her about a reverse mortgage.

Over the next five years, she obtained three reverse mortgages.

The first loan was to cover all of the renovations on her home so she was able to sell it for top dollar and move to a smaller home. She took out a set amount of loan proceeds initially and then took the rest in a line of credit. She then took the proceeds she made from selling her first home and paid off the loan and bought a second home in cash.

Once in the second home, the client said she wanted to free up some cash and took out a second reverse mortgage through a line of credit. She didn’t need an income stream each month. She was pretty frugal and only used it when she had unexpected expenses.

A few more years down the road, the woman contacted explained that she wanted to move again because she didn’t like her neighbor. There were also new homes being built downtown that were built specifically to accommodate seniors.

Again, she was able to pay off her last reverse mortgage and the result was a third reverse mortgage. This time  the loan was a  HECM for Purchase.

With each reverse mortgage she also was responsible for paying all of the closing costs and other fees.

People need to know that a reverse mortgage isn’t necessarily a one and done deal, A lot of times they think it’s the last thing that they’ll do, but sometimes things change and they want to move. It can work for five or 10 years and then could possibly help them again to downsize or move to another location.

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TFSB business card

Home equity is sweet spot for peaceful retirement using all the financial tools at your disposal

You’ve worked hard to become a homeowner. And, you want to make smart decisions on how to use your home’s equity so you can get the most out of your money. Whether you put your home equity toward debt consolidation or tuition payments, securing a home equity loan or line of credit can help finance the areas of your life that you may need help with or use it for a savings account to building retirement resources.

With a home equity loan or home equity line of credit (HELOC), you can use your home’s equity to consolidate debts, finance a college education, make home improvements and much more including a reverse mortgage. You can find affordable borrowing solutions to use your home equity wisely, based on your unique needs and lifestyle.

Using home equity to consolidate debt

Since equity loans and lines of credit can often carry lower interest rates, using your home equity for debt consolidation might be a smart decision for you. If you have existing credit card, student loan or auto loan debt with high interest rates, you can use your loan or line of credit to consolidate and pay off this debt – possibly with a lower interest rate.

Using home equity to invest in your future

Investing in your future, or in the future of your college-bound teen, may be a smart financial decision. Use your home equity line of credit or loan to finance a college education, whether it is your child’s or your own, and capitalize on the benefits of higher education.

Using home equity to invest in your home

Funding home improvements and renovations with a home equity loan or home equity line of credit can add significant value to your home.

Using home equity to support retirement

Funding a HECM MORTGAGE requires at least a 50% stake in your home equity, so if this is in your plans, be sure you don’t mortgage your home beyond the halfway mark on home equity so you can get a HECM, pay off the mortgage to eliminate the payments and ride home on  your home equity (with no payments).

If you are able to keep mortgages out of the way, you’ll have a nice cache after you pay off the mortgage to streamline your retirement expenses. Also, make sure you are credit eligble and don’t have a new mortgage on the table within the last year.

In this way, your home purchase eventually turns into a bank in which you borrow your own money (equity) without payments to add to any 401k funds or tax deferred annuities you’ve purchased over the years.

For more information about HECMs, home equity and reverse mortgages contact Warren Strycker NMLS 247179,  928 345-1200. More information at home tab: Information.

Two thirds of Americans would have difficulty raising $1000.

NEW YORK (AP) — Two-thirds of Americans would have difficulty coming up with the money to cover a $1,000 emergency, according to an exclusive poll released Thursday, a signal that despite years of recovery from the Great Recession, Americans’ financial conditions remain precarious as ever.

These financial difficulties span all income levels, according to the poll conducted by The Associated Press-NORC Center for Public Affairs Research. Seventy-five percent of people in households making less than $50,000 a year would have difficulty coming up with $1,000 to cover an unexpected bill. But when income rose to between $50,000 and $100,000, the difficulty decreased only modestly to 67 percent.

Even for the country’s wealthiest 20 percent — households making more than $100,000 a year — 38 percent say they would have at least some difficulty coming up with $1,000.

“The more we learn about the balance sheets of Americans, it becomes quite alarming,” said Caroline Ratcliffe, a senior fellow at the Urban Institute focusing on poverty and emergency savings issues.

Harry Spangle is one of those Americans. A 66-year-old former electrician from New Jersey, Spangle said he thought he would always have a job and “lived for today” but lost his job before the downturn. He said he would have to borrow from friends or family in order to cover an unexpected $1,000 expense.

“I have a pension and I am on Social Security, but it’s very limiting,” he said. “It’s depressing.”

Having a modest, immediately available emergency fund is widely recognized as critical to financial health. Families that have even a small amount of non-retirement savings, between $250 and $749, are less likely to be evicted from their homes and less likely to need public benefits, an Urban Institute study found.

“People are extremely vulnerable if they don’t have savings,” Ratcliffe said. “And it’s a cost to taxpayers as well. Lack of savings can lead to homelessness, or other problems.”

Despite an absence of savings, two-thirds of Americans said they feel positive about their finances , according to survey data released Wednesday by AP-NORC, a sign that they’re managing day-to-day expenses fine. The challenge for many often come from economic forces beyond their control such as a dip in the stock market that threatens their job or an unexpected medical bill, risks that have shattered the confidence of most in the broader U.S. economy.

Yet when faced with an unexpected $1,000 bill, a majority of Americans said they wouldn’t be especially likely to pay with money on hand, the AP-NORC survey found. A third said they would have to borrow from a bank or from friends and family, or put the bill on a credit card. Thirteen percent would skip paying other bills, and 11 percent said they would likely not pay the bill at all.

Those numbers suggest that most American families do not have at least $1,000 stashed away in an accessible savings account, much less under their mattresses, to cover an emergency.

Americans’ struggle to save isn’t new. Three CBS News and The New York Times polls going back to the mid-1990s — the most recent one done in 2007 before the downturn — show a majority of Americans would have some difficulty covering a $1,000 emergency. The AP-NORC results also correlate with a 2015 study by the Federal Reserve in which 47 percent of respondents said they either could not cover a $400 emergency expense or would have to sell something or borrow money.

And the struggle impacts retirement savings as well. When AP-NORC asked if they will have enough savings to retire when they want to, 54 percent of working Americans say they are not very or not at all confident they will have enough. Only 14 percent say they are confident they can retire on time.

The findings in the AP-NORC poll illuminate how many Americans’ frustrations over the economy, income inequality and insecurity about their financial futures has contributed to this dizzying presidential election season.

Billionaire businessman Donald Trump became the presumptive nominee for the Republican Party largely on a populist platform of kicking out undocumented immigrants, renegotiating free trade agreements and a promise to “Make America Great Again.” On the left, socialist Sen. Bernie Sanders of Vermont captured voters with a message of dismantling Wall Street and higher taxes on the rich.

The reasons why Americans don’t save are complex. One economist says it’s a holdover from the ’70s and ’80s, when high inflation ate into the value of money stashed in a savings account. Others say U.S. tax policy rewards saving money for retirement or taking out a mortgage to buy a home over short-term emergencies.

The Great Recession and lack of wage growth in recent years have not helped. In the same AP-NORC poll, 46 percent of workers said their wages have remained stagnant in the last five years, and another 16 percent said they’ve actually seen salary cuts. Meanwhile, costs for basic needs, such as food, housing and health care, have risen.

“The lack of (savings) is symptomatic to other financial problems that families are having,” said William R. Emmons, a senior economic adviser at the Center for Household Financial Stability at the Federal Reserve Bank of St. Louis. “Many families are still struggling with debt from the housing bubble and borrowing boom. And the recent economic stresses make it much more likely families are going to be fighting basic financial issues.”

Mitchell Timme, 26, said that his wages have remained basically flat for the last few years while his cost of living has increased. Once everything is paid “there’s nothing left to save,” he said.

“It definitely adds stress to everyday life. It hangs over you. While it’s not something you would complain about every day, it’s there. And it weighs on you,” Timme said, who works at a security company in Phoenix.

It may not be entirely bad that some Americans do not have much cash savings, Emmons said. In the poll, 21 percent of Americans say they would strongly consider the option of putting the unexpected $1,000 bill on a credit card to be paid in full when their statement came due.

“For financially stronger families, having access to low-cost credit is completely acceptable,” he said.


The AP-NORC poll of 1,008 adults was conducted April 14-18 using a sample drawn from NORC’s probability-based AmeriSpeak panel, which is designed to be representative of the U.S. population. The margin of sampling error for all respondents is plus or minus 3.7 percentage points.

Respondents were first selected randomly using address-based sampling methods, and later interviewed online or by phone.

The AP-NORC Center:


Ken Sweet covers the banking industry and consumer financial issues for The Associated Press. Follow him on Twitter at @kensweet.


See contact information in navigation bar for details.


Use home equity HECMs to fund long term care or not if not needed?

Home equity HECMs can provide funding for the cost of long term care at home. Those seeking to stay home and away from the nursing home should look into providing the funding without having to purchase a long term care insurance policy where funds are often lost if not needed. With a HECM, a line of credit can support these costs as well as keep home equity funds in place for other uses. This is part of the new audience that is coming into play now from the HECM industry. Funds held in place for this need can flow through to the heirs if not needed. Contact Warren Strycker from anywhere in the United States for more information, 928 345-1200.

LONG BEACH, Calif.–It is no secret that Americans are aging, but what is too often lost is that most people will need help as they grow older.

Unfortunately, America does not have a strategy to deal with this growing demand. For some, this help comes in the form of needing just a little bit of assistance in the home with such tasks as cooking meals or getting groceries. For others, it is more comprehensive daily help in assisted living or nursing home care.

As chair of the newly created federal Commission on Long-Term Care, I believe it is imperative for Americans to understand that 70 percent of us who live beyond the age of 65 will need some form of long-term care, on average for three years.

This is a particularly significant statistic given the reality that our nation’s system of care is outdated and lacks the tools to meet the needs of our growing senior population.

To better understand Americans’ attitudes and perceptions around aging and long-term care, as well as levels of preparedness for future care, the Associated Press–NORC Center for Public Affairs Research conducted a national poll of adults age 40 and older with funding from The SCAN Foundation, which I head.

Implications of these findings are profound considering the population of adults over 65 will double to nearly 72 million people — 19 percent of the U.S. population — by 2030.

Counting on Family Members

For starters, most Americans today are operating under the assumption that they can count on family members to help care for them in a time of need.

About two-thirds believe they can look to their families for significant support and even more people think they will get at least some support from their families in a time of need.

However, in spite of these assumptions, nearly six in 10 are not even having conversations with family about their future desires and preferences for care.

This is not about having the death conversation — what you want to happen to you when you die. This is about having the life conversation — defining how you want to live in light of changing health needs and daily physical struggles that may emerge as you age.

Perhaps, even more remarkably, 30 percent of Americans would rather not even think about getting older at all. This denial about aging and future care needs can be of serious detriment to individuals who are suddenly thrust into a situation in which they need care and do not know where to turn for help.

Misunderstanding Medicare

Americans also have major misconceptions about the costs of long-term care and about who — or what — will pay for these needs when the time comes.

While more than half (57 percent) of Americans 40 or older report having some experience with long-term care, most are not aware of how expensive it is. Almost half (44 percent) mistakenly believe that Medicare pays for ongoing care at home by a licensed home health care aide. And more than one in three Americans (37 percent) incorrectly believe it pays for ongoing care in a nursing home.

A mere 27 percent of older adults surveyed are confident that they will have the resources to pay for the care they need as they age. This confusion about how services are paid for leads to a lack of knowledge on how to plan and, again, individuals find themselves in situations of need with no idea of where to turn for help.

African Americans and Latinos were especially worried. Well over half of blacks (57 percent) said expressed concern about being able to pay for needed care, compared to 45 percent of Hispanics and 41 percent of whites.

Also, half or more of African Americans and Latinos said they worry about becoming a burden on their families, in contrast to just over one in three whites. And almost half of blacks surveyed were concerned that they may leave debts to family related to long-term care, compared to just over one in four Hispanics and whites.

The prospect of ending up in a nursing home proved somewhat more troubling for African Americans (57 percent) than for Hispanics (44 percent) and whites (40 percent).

Promising Solutions

However, there is promise for innovative approaches to solving these issues: Americans across the political spectrum show majority support for public policy solutions to transform the nation’s system of long-term care. More than three-quarters of Americans support tax breaks to encourage saving for long-term care expenses; just over half support a government-administered long-term care insurance program similar to Medicare.

Solutions on how to effectively plan for future care are not partisan concerns but universal ones, with affordable and accessible services for older adults a priority for all.

The new poll reflects a serious gap in knowledge and awareness that leaves individuals and their families struggling to fend for themselves when it comes to paying for these services.

However, what this poll also shows is that people support a better model, a toolbox that offers a suite of services with viable options for individuals to stay in their homes and communities whenever possible.

The timing for this poll is critical as our window for action is short. Americans are clearly asking for solutions and mechanisms to begin to prepare for their future care needs so that we all can age with dignity, choice, and independence.

Bruce Chernof, M.D., FACP, is the president and CEO of The SCAN Foundation. This article is adapted from an earlier version published by the nonprofit Altarum Institute’s Health Policy Forum. This article appears on New America Media’s Aging With Security page with support from The Atlantic Philanthropies.

Home equity HECMs can provide funding for the cost of long term care at home. Those seeking to stay home and away from the nursing home should look into providing the funding without having to purchase a long term care insurance policy where funds are often lost if not needed. With a HECM, a line of credit can support these costs as well as keep home equity funds in place for other uses. This is part of the new audience that is coming into play now from the HECM industry. Funds held in place for this need can flow through to the heirs if not needed.

See contact information in navigation bar for details.

22 Social Security facts you should know

By Joseph Stenke

The original Social Security Act provided only retirement benefits for wage and salary earners. In 1939, benefits were added for family members after the worker’s death or retirement. Most amendments have expanded the scope of the Social Security program — by extending coverage to more groups of persons, by increasing benefits or by increasing the wage base for taxes and benefits.

Today, the largest and most common programs under the Social Security Act and its amendments are: (i) Federal Old-Age (Retirement), Survivors and Disability Insurance (OASDI), (ii) Temporary Assistance for Needy Families (TANF), (iii) Health Insurance for Aged and Disabled (Medicare), (iv) Grants to States for Medical Assistance Programs for low income citizens (Medicaid), (v) State Children’s Health Insurance Program for low income citizens (SCHIP) and (vi) Supplemental Security Income (SSI).

The rules regarding Social Security are complex and change frequently. Important topics for 2016 include the ability of same-sex couples to receive benefits, the impact of federal government gridlock on benefits received and changes imposed by the 2015 Bipartisan Budget Act.

Given this complexity, those approaching retirement are bound to have questions about when to claim benefits, how benefits are taxed and how their individual claiming strategy should fit into their overall financial plan. Read on for answers to many of these questions.

  1. Who is covered by Social Security?

Most workers are covered by Social Security and if they work long enough will be entitled to retirement benefits and/or disability.

However, certain individuals are not covered by Social Security. Individuals who started working for the federal government before 1984 are not covered by Social Security, except those who elected to transfer into the system during a 1987 transition period. Those who are not covered by Social Security are instead covered under the Civil Service Retirement System.

Also, certain individuals who work in the railroad industry are not covered by Social Security. Instead, these workers are covered under the Railroad Retirement System, which is governed by the Railroad Retirement Act.

Finally, there are other special circumstances where an individual would not be covered by Social Security. These include certain farm workers, workers of a family business or domestic workers.

  1. In general, who can receive Social Security benefits and what do the phrases “Normal Retirement Age” (NRA) and “Full Retirement Age” (FRA) mean?

Who can receive social security benefits?

A disabled insured worker under age 65.

A retired insured worker at age 62 or over.

The spouse of a retired or disabled worker entitled to benefits who is age 62 or over; OR has in care a child under age 16 (or over age 16 and disabled), who is entitled to benefits on the worker’s Social Security record.

The divorced spouse of a retired or disabled worker entitled to benefits if age 62 or over and married to the worker for at least 10 years.

The divorced spouse of a fully insured worker who has not yet filed a claim for benefits if both are age 62 or over, were married for at least 10 years, and have been finally divorced for at least two continuous years.

The dependent, unmarried child of a retired or disabled worker entitled to benefits, or of a deceased insured worker if the child is under age 18, OR under age 19 and a full-time elementary or secondary school student, OR aged 18 or over but under a disability that began before age 22.

The surviving spouse (including a surviving divorced spouse) of a deceased insured worker if the widow(er) is age 60 or over.

The disabled surviving spouse (including a surviving divorced spouse in some cases) of a deceased insured worker, if the widow(er) is age 50 to 59 and becomes disabled within a specified period.

The surviving spouse (including a surviving divorced spouse) of a deceased insured worker, regardless of age, if caring for an entitled child of the deceased who is either under age 16 or disabled before age 22.

The dependent parents of a deceased insured worker at age 62 or over.

In addition to monthly survivor benefits, a lump-sum death payment is payable upon the death of an insured worker.

Normal Retirement Age and Full Retirement Age

For many years Normal Retirement Age (NRA) meant the age when someone was eligible for benefits that were not reduced for taking early benefits (see Q 182 and Q 205). But recently this phrase has come to mean, among planners and the general public, the age when many people “normally” apply for benefits, which is when they are generally first eligible — at age 62.

As a result of this shift in language, a new phrase has developed among planners and the public to describe the age when unreduced benefits may be received — Full Retirement Age (FRA). As may seem obvious, FRA refers to the age at which a person qualifies for full Social Security benefits. This age is now determined by a person’s year of birth and for those born in 1960 and later is now age sixty-seven. This shift in terms has started to affect guidance put out by the Social Security Administration (SSA), although the SSA still uses both phrases to describe when unreduced benefits may be taken.

For the 2016 edition of Social Security & Medicare Facts the phrase “Normal Retirement Age” is used in the place of the phrase “Full Retirement Age” to describe the age at which unreduced benefits may be taken.

  1. When will same-sex couples be eligible to receive spousal Social Security benefits?

On June 26, 2015, the United States Supreme Court issued a decision in Obergefell v. Hodges, holding that same-sex couples have a constitutional right to marry in all states. As a direct result of this decision, it is clear that more same-sex couples will be recognized as being married for the purposes of determining their entitlement to Social Security benefits and as well as Supplemental Security Income (SSI) payments.

This has been a changing area of law. In June 2013, the Supreme Court ruling in United States v. Windsor, established that same sex couples who were married in a jurisdiction where same-sex marriages are recognized were eligible for spousal benefits, such as the spousal survivor benefit, the spousal retirement benefit and the lump sum death benefit. At that time, the Social Security Administration reviewed its own policies regarding same-sex marriage after the Supreme Court decision, and concluded that same-sex couples who are legally married in one state remain married for federal tax purposes even if they reside in a state that does not recognize their marriage. In addition, the SSA is now recognizing same-sex marriages that took place outside of the United States.

The Social Security Administration recommends that someone who is the spouse, divorced spouse, or surviving spouse of a same-sex marriage or other legal same-sex relationship to immediately apply for benefits. Immediate applying will preserve the filing date, which can affect benefits. Social Security is now processing some retirement, surviving spouse and lump-sum death payment claims for same-sex couples in non-marital legal relationships and paying benefits where they are due. In addition, the Social Security Administration considers same-sex marriage when determining SSI eligibility and benefit amounts.

  1. What federal agency administers the Social Security or OASDI program?

The Social Security Administration. The central office is located in Baltimore, Maryland. The administrative offices and computer operations are housed at this location.

The Social Security Administration is an independent agency in the executive branch of the federal government. It is required to administer the retirement, survivors and disability program under the Social Security and the Supplemental Security Income (SSI) programs. The commissioner of the Social Security Administration is appointed by the President and approved by the Senate and serves a term of six years.

In recent years, the Social Security Administration has increasingly provided its services through its website at Many of the services that were traditionally carried out through local Social Security offices or through the mail can now be done online. These services allow a person to apply for benefits, get a Social Security Statement, appeal a decision, find out about qualifying for benefits, estimate future benefits, and do other activities related to the management of benefits.

Alternatively, the local Social Security office is the place where a person can apply for a Social Security number; check on an earnings record; apply for Social Security benefits, black lung benefits, SSI and Hospital Insurance (Medicare Part A) protection; enroll in Medical Insurance (Medicare Part B); receive assistance in applying for food stamps; and get full information about individual and family rights and obligations under the law. Also, a person can call the Social Security Administration’s toll-free telephone number, 1-800-772-1213, to receive these services. This toll-free telephone number is available from 7:00 a.m. to 7:00 p.m. any business day. From a touch-tone phone, recorded information and services are available 24 hours a day, including weekends and holidays. People who are deaf or hard of hearing may call 1-800-325-0778 between 7:00 a.m. and 7:00 p.m. Monday through Friday.

Regular visits to outlying areas are made by the Social Security office staff to serve people who live at a distance from the city or town in which the office is located. These visits that are made to locations are called contact stations. A schedule of these visits may be obtained from the nearest Social Security office.

Social Security Administration regional offices are located in Atlanta, Boston, Chicago, Dallas, Denver, Kansas City, New York, Philadelphia, San Francisco and Seattle. Approximately 1,400 Social Security offices throughout the United States, Puerto Rico, the Virgin Islands, Guam and American Samoa deal directly with the public. Each region also has a number of teleservice centers located primarily in metropolitan areas. These offices handle telephone inquiries and refer callers appropriately. To find a local office, visit the Social Security Administration website at

The Office of Hearings and Appeals administers the nationwide hearings and appeals program for the Social Security Administration. Administrative law judges, located in or traveling to major cities throughout the United States, hold hearings and issue decisions when a claimant or organization has appealed a determination affecting rights to benefits or participation in programs under the Social Security Act. The Appeals Council, located in Falls Church, Virginia, may review hearing decisions.

The Office of Central Records Operations maintains records of an individual’s earnings and prepares benefit computations.

  1. How can a person check on his Social Security earnings record and receive an estimate of future Social Security benefits?

The Social Security Statement containing both an estimate of benefits and a record of earnings is available either online or by the mail. To access the statement online, a person must create a my Social Security account at This account also allows a person to manage personal information such as changing an address or the way in which a direct deposit is received.

To receive the statement by mail, a person should fill out Form SSA-7004 (Request for Social Security Statement). The form is available at the Social Security Administration’s website at, at any Social Security office or by calling the Social Security Administration’s toll-free number, 1-800-772-1213. A statement of total wages and self-employment income credited to the earnings record and an estimate of current Social Security disability and survivor benefits and future Social Security retirement benefits will be mailed to the individual.

If all earnings have not been credited, the individual should contact a Social Security office and ask how to correct the records. The time limit for correcting an earnings record is set by law. An earnings record can be corrected at any time up to three years, three months and fifteen days after the year in which the wages were paid or the self-employment income was derived. “Year” means calendar year for wages and taxable year for self-employment income. An individual’s earnings record can be corrected after this time limit for a number of reasons, including to correct an entry established through fraud; to correct a mechanical, clerical or other obvious error; or to correct errors in crediting earnings to the wrong person or to the wrong period.

The Social Security Administration must provide individuals, age 25 or older, who have a Social Security number and have wages or net self-employment income, with a Social Security account statement upon request. These statements must show: (1) the individual’s earnings, (2) an estimate of the individual’s contributions to the Social Security program (including a separate estimate for Medicare Part A Hospital Insurance), and (3) an estimate of the individual’s current disability and survivor benefits and also future benefits at retirement (including spouse and other family member benefits) and a description of Medicare benefits.

Earnings and benefit estimates statements are automatically mailed on an annual basis to all persons age twenty-five or over who are not yet receiving benefits.

This earnings and benefit estimates statement contains the following information:

(1) The individual’s Social Security taxed earnings as shown by Social Security Administration records as of the date selected to receive a statement.

(2) An estimate of the Social Security and Medicare Part A Hospital Insurance taxes paid on the individual’s earnings.

(3) The number of credits (i.e., quarters of coverage, not exceeding 40) that the individual has for both Social Security and Medicare Hospital Insurance purposes, and the number the individual needs to be eligible for Social Security benefits and also for Medicare Hospital Insurance coverage.

(4) A statement as to whether the individual meets the credit (quarters of coverage) requirements for each type of Social Security benefit, and also whether the individual is eligible for Medicare Hospital Insurance coverage.

(5) Estimates of the monthly retirement, disability, dependents’ and survivors’ insurance benefits potentially payable on the individual’s record if he meets the credits (quarters of coverage) requirements. If the individual is age 50 or older, the estimates will include the retirement insurance benefits he could receive at age 62 (or his current age if he is already over age 62), at full retirement age (currently age 62 to 67, depending on year of birth) or at the individual’s current age if he is already over full retirement age, and at age 70. If the individual is under age 50, the Social Security Administration may provide a general description, rather than estimates, of the benefits that are available upon retirement.

(6) A description of the coverage provided under the Medicare program.

(7) A reminder of the right to request a correction in an earnings record.

(8) A remark that an annually updated statement is available upon request.

  1. What will happen to Social Security benefit payments when the Trust Fund becomes insolvent?

Social Security and disability benefits are financed through the payroll tax. In 2015, the revenue collected by this tax went to pay out benefits that were due. The payroll tax was insufficient to pay out all benefits, so the balance was made up by interest payments due on government bonds held in the Social Security trust funds.

In 2015, the trust funds that help finance both Social Security and disability benefits were projected to run out in 2033, according to the intermediate assumptions of the Office of the Chief Actuary in the Social Security Administration.

If nothing is done to reform Social Security, then it is projected that starting sometime in 2033, beneficiaries will receive only 77 percent of the benefits currently projected as being payable. In other words, the projected payroll tax revenues will be sufficient to pay only 77 percent of the projected benefits.

  1. If a husband and wife are both receiving monthly benefits, do they receive one or two monthly payments?

If a husband and wife have both worked, they will each be paid their own Social Security benefit by direct deposit to their designated bank account.

However, monthly benefits payable to a husband and wife who are entitled on the same Social Security record and are living at the same address are usually combined in one payment.

  1. Are Social Security benefits subject to federal taxes?

Up to one-half of the Social Security benefits received by taxpayers whose incomes exceed certain base amounts are subject to income taxation. The base amounts are $32,000 for married taxpayers filing jointly, $25,000 for unmarried taxpayers, and zero for married taxpayers filing separately who did not live apart for the entire taxable year.

There is an additional tier of taxation based upon a base amount of $44,000 for married taxpayers filing jointly, $34,000 for unmarried taxpayers, and zero for married taxpayers filing separately who did not live apart for the entire taxable year.The maximum percentage of Social Security benefits subject to income tax increases to 85 percent under this second tier of taxation. (The rules listed in the paragraph above continue to apply to taxpayers not meeting these thresholds.)

After the end of the year, Form SSA-1099 (Social Security Benefit Statement) is sent to each beneficiary showing the amount of benefits received. A worksheet (IRS Notice 703) is enclosed for figuring whether any portion of the Social Security benefits received is subject to income tax.

  1. In general, how is the PIA computed under the “wage indexing” method?

It is based on “indexed” earnings over a fixed number of years after 1950. (Indexing is a mechanism for expressing prior years’ earnings in terms of their current dollar value.) Previous computations used actual earnings and a PIA Table. The “wage indexing” method uses a formula to determine the PIA.

Step I. Index the earnings record

Step II. Determine the Average Indexed Monthly Earnings (AIME)

Step III. Apply the PIA formula to the AIME

  1. Who should use the “wage indexing” benefit computation method?

The “wage indexing” method applies where first eligibility begins after 1978. First eligibility is the earliest of:

(1) the year of death,
(2) the year disability begins, or
(3) the year the insured becomes 62.

However, if the worker was entitled to a disability benefit before 1979, and that benefit terminated more than 12 months before death, another disability, or age 62, the new method will be used in determining the PIA for the subsequent entitlement.

  1. What earnings are used in computing a person’s Average Indexed Monthly Earnings (AIME)?

The AIME is based on Social Security earnings for years after 1950. This includes wages earned as an employee and/or self-employment income.

Only earnings credited to the person’s Social Security account can be used and the maximum earnings creditable for specific years are as follows:

$118,500 for 2016 $51,300 for 1990
$118,500 for 2015 $48,000 for 1989
$117,000 for 2014 $45,000 for 1988
$113,700 for 2013 $43,800 for 1987
$110,100 for 2012 $42,000 for 1986
$106,800 for 2009-2011 $39,600 for 1985
$102,000 for 2008 $37,800 for 1984
$97,500 for 2007 $35,700 for 1983
$94,200 for 2006 $32,400 for 1982
$90,000 for 2005 $29,700 for 1981
$87,900 for 2004 $25,900 for 1980
$87,000 for 2003 $22,900 for 1979
$84,900 for 2002 $17,700 for 1978
$80,400 for 2001 $16,500 for 1977
$76,200 for 2000 $15,300 for 1976
$72,600 for 1999 $14,100 for 1975
$68,400 for 1998 $13,200 for 1974
$65,400 for 1997 $10,800 for 1973
$62,700 for 1996 $9,000 for 1972
$61,200 for 1995 $7,800 for years 1968-1971
$60,600 for 1994 $6,600 for years 1966-1967
$57,600 for 1993 $4,800 for years 1959-1965
$55,500 for 1992 $4,200 for years 1955-1958
$53,400 for 1991 $3,600 for years 1951-1954


  1. How are Average Indexed Monthly Earnings (AIME) computed for a self-employed individual whose self-employment came under Social Security after 1951?

The same formula and starting date (1951) are used as in the computation for employees. In many cases, this will mean that years of zero earnings must be used in the AIME contribution.

Example. Dr. Smith, a physician, came under Social Security in 1965. He applies for retirement benefits in 1995 when he reaches age 62. Earnings and months in 35 years must be used in computing his AIME (40 elapsed years, 1955-1994, less five). Social Security earnings in his elapsed years are at the maximum creditable amount in 1965-1994.

Although Dr. Smith has covered earnings in only 30 years before 1995, the total earnings for these 30 years must be divided by the number of months in 35 years (420). His AIME is computed by indexing his earnings from 1965-1992, adding actual earnings in 1993 and 1994 to total indexed earnings, and dividing by 420. Thus, his AIME is $3,127 ($1,313,559 ÷ 420).

Recomputation to include Dr. Smith’s earnings in 1995 (assuming they are at least $61,200) will give him an AIME of $3,273.

  1. An individual is considering early retirement at age 55. If she retires at 55 with NO earned income for the next seven years, how will this affect her benefits at age 62?

Benefits are based on the highest 35 years of indexed earnings. The effect in this case is generally that the highest earning years are often the last years of employment, therefore benefits may not be as high as estimated by the Social Security Administration.

  1. Do Social Security benefits increase by continuing to work and contributing to Social Security?

It depends. When benefits are computed, Social Security uses the highest 35 years of indexed earnings. If the current earnings exceed the lowest year used in the computation, the benefits will increase. If the current earnings are less, then there will be no change.

  1. How are a beneficiary’s benefits figured when he is entitled to a reduced retirement benefit and a larger spouse’s benefit simultaneously?

The beneficiary will receive the retirement benefit, reduced in the regular manner. That is, the PIA is reduced by 5/9 of 1 percent (1/180) for each of the first 36 months that he is under Full Retirement Age (FRA) when benefits commence, and 5/12 of 1 percent (1/240) for each month in excess of 36. The beneficiary will also receive a spouse’s benefit based on the difference between the full spouse’s benefit (1/2 of his or her spouse’s PIA) and his or her PIA. This spouse’s benefit is reduced by 25/36 of 1 percent (1/144) for each of the first 36 months that he is under Full Retirement Age when benefits commence, and 5/12 of 1 percent (1/240) for each month in excess of 36.

  1. What are the general rules for loss of benefits because of excess earnings?

When the beneficiary is older than the Full Retirement Age (FRA) (see Q 27), no benefits are lost because of his earnings. If he is under the Full Retirement Age, the following rules apply:

If no more than $41,880 is earned in 2016 by a beneficiary who reaches the Full Retirement Age in 2015, no benefits will be lost for that year.

If more than $41,880 is earned in 2016 before the month the beneficiary reaches Full Retirement Age, one dollar of benefits will ordinarily be lost for each three dollars of earnings over $41,880.

If not more than $15,720 is earned in 2016 by a beneficiary who is under the Full Retirement Age for the entire year, no benefits will be lost for that year.

If more than $15,720 is earned in 2016 by a beneficiary who is under the Full Retirement Age for the entire year, one dollar of benefits will ordinarily be lost for each two dollars of earnings over $15,720.

No matter how much is earned during 2016, no retirement benefits in the initial year of retirement will be lost for any month in which the beneficiary neither: (1) earns over $1,310 as an employee if retiring in a year prior to the year he reaches Full Retirement Age, nor (2) renders any substantial services in self-employment.

The initial year of retirement is the first year in which he is both entitled to benefits and has a month in which he does not earn over the monthly exempt wage amount (as listed previously) and does not render substantial services in self-employment.

When the monthly earnings test applies, regardless of the amount of annual earnings, the beneficiary gets full benefits for any month in which earnings do not exceed the monthly exempt amount, and the beneficiary does not perform substantial services in self-employment.

The attainment of Full Retirement Age in a year determines which test applies. The Full Retirement Age test applies if the beneficiary attains Full Retirement Age on or before the last day of the taxable year involved. The “under Full Retirement Age” test applies if the beneficiary does not attain Full Retirement Age on or before the last day of the taxable year.

Example. Dr. James, who reports his earnings on a calendar year basis, reaches Full Retirement Age (66 years old) on June 18, 2016. The under Full Retirement Age test ($15,720 for 2015) applies for calendar year 2015, and the Full Retirement Age test ($41,880) applies for calendar year 2015. However, none of Dr. James earnings earned in June through December, 2015, count toward the $41,880 limit.

Example. Miss Norton, who reports her earnings on the basis of a fiscal year ending June 30, attains Full Retirement Age (66 years old) on September 15, 2016. The under Full Retirement Age test ($15,720) applies for her fiscal year July 1, 2015, through June 30, 2016. The Full Retirement Age test ($41,880) applies for her next fiscal year; however, only earnings earned in July and August, 2015 count toward the $41,880 limit.

  1. How are “excess” earnings charged against benefits?

In determining the amount of benefits for a given year that will be lost, two factors must be taken into consideration: (1) the amount of the person’s “excess” earnings for the year, and (2) the months in the year that can actually be charged with all or a portion of the excess earnings potentially chargeable in the initial year of retirement.

Both wages earned as an employee and net earnings from self-employment are combined for purposes of determining the individual’s total earnings for the year. Only “excess earnings” are potentially chargeable against benefits. If a person is under the Full Retirement Age (FRA) for the entire year and earns $15,720 or less (in 2016) for the year, there are no “excess earnings.” If earnings for the year are more than $15,720, one-half of the amount over $15,720 is “excess earnings.” In the year a person reaches the Full Retirement Age, he or she can earn up to $41,880 (in 2016) before losing benefits. However, only earnings earned before the month the person reaches Full Retirement Age count toward the $41,880 limit. See Q 184 for a discussion of the Full Retirement Age.

Excess earnings are charged against retirement benefits in the following manner. They are charged first against all benefits payable on the worker’s account for the first month of the year. If any excess earnings remain, they are charged against all benefits payable for the second month of the year, and so on until all the excess earnings have been charged, or no benefits remain for the year. However, a month cannot be charged with any excess earnings and must be skipped if the individual:

(1) was not entitled to benefits for that month,
(2) was over Full Retirement Age in that month,
(3) in the initial year of retirement he or she did not earn over $1,310 (using 2016 figures) if he or she retires in a year before the year he or she reaches Full Retirement Age, or
(4) he or she did not render substantial services as a self-employed person in that month.

If the excess earnings chargeable to a month are less than the benefits payable to the worker and to other persons on his account, the excess is chargeable to each beneficiary in the proportion that the original entitlement rate of each bears to the sum of all their original entitlement rates.

Example 1: Dr. Brown partially retires in January 2016 at the age of 62. Based on his earnings history and the age he starts receiving benefits, his Social Security benefit is $1,200 per month. He practices for three months in 2016 and earns $30,000. The remainder of his initial year of retirement is spent in Florida playing golf. Despite the fact that Dr. Brown has excess earnings in 2016 that would, under the annual test, cause a benefit loss of $7,140, he will lose only the $3,600 in benefits for the three months during which he performed substantial services in self-employment, because 2016 is his initial year of retirement.

Example 2: Dr. Smith, who partially retired in 2015 at age 62, practices for four months in 2016 and earns $32,000. As 2015 is his second year of retirement, the monthly-earnings test does not apply. His benefit will be reduced by $1 for each $2 of earnings over $15,720. This means that Dr. Smith’s benefits in 2015 will be reduced by $8,140 (one-half of the amount in excess of $15,720).

Example 3: Mr. Martin is 66 years old and has not retired. He earns $45,000 a year. Mr. Martin receives Social Security retirement benefits of $700 a month. Because he is over the Full Retirement Age, he loses none of his benefits by working.

The annual exempt amount is not prorated in the year of death. In addition, the higher exempt amount applies to persons who die before their date of birth in the year that they otherwise would have attained Full Retirement Age.

  1. What kinds of earnings will cause loss of benefits?

Wages received as an employee and net earnings from self-employment. Bonuses, commissions, fees, and earnings from all types of work, whether or not covered by Social Security, count for the retirement test. For example, earnings from family employment are counted – even though such employment is not covered by Social Security. Earnings above the Social Security “earnings base” are counted. Income as an absentee owner counts as “earnings” for the retirement test. If the person renders substantial services as a self-employed person (even in another business), such income also will count as “earnings” for the taxable year in the initial year of retirement.

The following types of income are not counted as “earnings” for purposes of the retirement test:

Any income from employment earned in or after the month the individual reaches Full Retirement Age (FRA). (Self-employment income earned in the year is not examined as to when earned, but rather is prorated by months, even though actually earned after Full Retirement Age.)

Any income from self-employment received in a taxable year after the year the individual becomes entitled to benefits, but not attributable to significant services performed after the first month of entitlement to benefits. This income is excluded from gross income only for purposes of the earnings test.

Damages, attorneys’ fees, interest, or penalties paid under court judgment or by compromise settlement with an employer based on a wage claim. However, back pay recovered in such proceedings counts for the earnings test.

Payments to secure release of an unexpired contract of employment.

Certain payments made under a plan or system established for making payments because of the employee’s sickness or accident disability, medical or hospitalization expenses, or death.

Payments from certain trust funds that are exempt from income tax.

Payments from certain annuity plans that are exempt from income tax.

Pensions and retirement pay.

Sick pay, if paid more than six months after the month the employee last worked.

Payments-in-kind for domestic service in the employer’s private home, for agricultural labor, for work not in the course of the employer’s trade or business, or the value of meals and lodging furnished under certain conditions.

Rentals from real estate that cannot be counted in earnings from self-employment because, for instance, the beneficiary did not materially participate in production work on the farm, the beneficiary was not a real estate dealer, etc.

Interest and dividends from stocks and bonds (unless they are received by a dealer in securities in the course of business).

Gain or loss from the sale of capital assets, or sale, exchange, or conversion of other property that is not stock in trade or includable in inventory.

Net operating loss carryovers resulting from self-employment activities.

Loans received by employees, unless the employees repay the loans by their work.

Workers’ compensation and unemployment compensation benefits.

Veterans’ training pay.

Pay for jury duty.

Prize winnings from contests, unless the person enters contests as a trade or business.

Tips paid to an employee that are less than $20 a month or are not paid in cash.

Payments by an employer that are reimbursements specifically for travel expenses of the employee and that are so identified by the employer at the time of payment.

Payments to an employee as a reimbursement or allowance for moving expenses, if they are not counted as wages for Social Security purposes.

Royalties received in or after the year in which a person reaches Full Retirement Age, to the extent that they flow from property created by the person’s own personal efforts that she copyrighted or patented before the taxable year in which she reached Full Retirement Age. These royalties are excluded from gross income from self-employment only for purposes of the earnings test.

Retirement payments received by a retired partner from a partnership, provided certain conditions are met.

Certain payments or series of payments paid by an employer to an employee or any of his or her dependents on or after the employment relationship has terminated because of death, retirement for disability, or retirement for age and paid under a plan established by the employer.

Payments from Individual Retirement Accounts (IRAs) and Keogh Plans.

In other words, a person can receive almost any amount of investment or passive income without loss of benefits.

  1. How does the Annual Earnings Test work?

If you take Social Security benefits before reaching Full Retirement Age (FRA), and you earn income in excess of the annual earnings limit, your Social Security benefit will be reduced. Only “earned income” applies — NOT investment income. The annual earnings test limits (in 2016) earnings to $15,720. If your earnings exceed $15,720, Social Security will withhold one dollar of benefits for each two dollars that exceeds the earnings test limit.

During the year you reach Full Retirement Age, and up until the month you reach Full Retirement Age, Social Security will deduct one dollar for every three dollars you earn over the annual earnings limit, however you can earn up to (in 2016) $41,880 during the year you reach Full Retirement Age.

Once you reach Full Retirement Age, you are no longer subject to the annual earnings limit; you can earn as much as you like without incurring a reduction in your Social Security benefits. Your social benefits may however still be subject to income taxes.

  1. What is meant by “substantial services” in self-employment?

Whether a self-employed beneficiary is rendering “substantial services” in the initial year of retirement is determined by the actual services rendered in the month. The test is whether the person can reasonably be considered retired in the month. In applying the test, consideration is given to such factors as:

(1) the amount of time devoted to the business (including all time spent at the place of business or elsewhere) in any activity related to the business (including the time spent in planning and managing, as well as doing physical work);
(2) the nature of the services;
(3) the relationship of the activities performed before retirement to those performed after retirement; and
(4) other circumstances, such as the amount of capital the beneficiary has invested in the business, the type of business establishment, the presence of a paid manager, partner, or family member who manages the business, and the seasonal nature of the business.

Generally, services of 45 hours or less in a month are not considered substantial. However, as few as fifteen hours of service a month could be substantial if, for instance, they involved management of a sizeable business or were spent in a highly skilled occupation. Services of fewer than fifteen hours a month are never considered substantial.

The amount of earnings is not controlling. High earnings do not necessarily mean that substantial services were rendered, nor do low or no earnings mean that they were not rendered.

NOTE: The “substantial services” test is used only for the initial year of retirement. After that, the amount of earnings alone determines whether benefits will be lost.

  1. If a self-employed person also receives wages as an employee, what portion of income is subject to tax as self-employment income?

Only the difference between the maximum earnings base for the year and the wages received as an employee is subject to tax as self-employment income.

Example 1. Mr. Smith, an attorney, is employed as a part-time instructor for a law school, and his salary is $30,000 a year. During 2016, Mr. Smith earned an additional $100,000 from his private practice, which counts as $92,350 for Social Security purposes (i.e., 92.35 percent of $100,000). Only $88,500 of his net earnings from self-employment is subject to the OASDI self-employment tax ($118,500 – $30,000). Note, however, that all of Mr. Smith’s wages and $92,350 of his self-employment income are subject to the HI self-employment tax, because all wages and self-employment income are subject to the HI tax.

No self-employment tax is due unless net earnings from self-employment are at least $434 for the taxable year ($400/92.35 percent). Nevertheless, in some cases, the amount of income subject to OASDI self-employment tax may be less than $400.

Example 2. Assume the same facts as in Example 1, except that Mr. Smith’s salary as a law instructor is $118,300. Mr. Smith’s net earnings from self-employment after application of the 92.35 percent factor ($92,350) exceed $400, and therefore must be reported. However, only $200 is subject to the OASDI self-employment tax ($118,500 – $118,300), but the entire $118,300 is subject to the HI tax.

  1. For Social Security purposes, what is meant by the term “wages”?

“Wages” mean pay received by an employee for employment covered by the Social Security Act. The maximum amount of wages subject to the Old-Age, Survivors and Disability Insurance tax (OASDI) and credited to a worker’s Social Security record for any calendar year cannot exceed:

$4,800 paid in any of the years: 1959-1965
$6,600 paid in any of the years: 1966-1967
$7,800 paid in any of the years: 1968-1971
$9,000 paid in the year: 1972
$10,800 paid in the year: 1973
$13,200 paid in the year: 1974
$14,100 paid in the year: 1975
$15,300 paid in the year: 1976
$16,500 paid in the year: 1977
$17,700 paid in the year: 1978
$22,900 paid in the year: 1979
$25,900 paid in the year: 1980
$29,700 paid in the year: 1981
$32,400 paid in the year: 1982
$35,700 paid in the year: 1983
$37,800 paid in the year: 1984
$39,600 paid in the year: 1985
$42,000 paid in the year: 1986
$43,800 paid in the year: 1987
$45,000 paid in the year: 1988
$48,000 paid in the year: 1989
$51,300 paid in the year: 1990
$53,400 paid in the year: 1991
$55,500 paid in the year: 1992
$57,600 paid in the year: 1993
$60,600 paid in the year: 1994
$61,200 paid in the year: 1995
$62,700 paid in the year: 1996
$65,400 paid in the year: 1997
$68,400 paid in the year: 1998
$72,600 paid in the year: 1999
$76,200 paid in the year: 2000
$80,400 paid in the year: 2001
$84,900 paid in the year: 2002
$87,000 paid in the year: 2003
$87,900 paid in the year: 2004
$90,000 paid in the year: 2005
$94,200 paid in the year: 2006
$97,500 paid in the year: 2007
$102,000 paid in the year: 2008
$106,800 paid in any of the years:

$110,100 paid in the year:



$113,700 paid in the year: 2013
$117,000 paid in the year: 2014
$118,500 paid in the year 2015-2016

Employees pay the tax on wages up to the base amount from each employer, but receive a refund on their income tax returns for the excess of total taxes paid over the tax on the base amount. Each employer pays the tax on wages up to the base amount for all of its employees. In addition to the regular Social Security tax on wages, all wages are subject to the Part A Medicare Hospital Insurance tax (HI).

The maximum earnings base is automatically adjusted each year by the Social Security Administration, if average nationwide (covered and noncovered) total wages have increased.

Note that the maximum amount of wages subject to the OASDI tax is also the maximum amount credited to a worker’s record. For example, if an employee is paid $118,500 or less in 2016, the full amount of wages will be subject to OASDI tax and will be credited to the Social Security record for benefit purposes. But if an employee is paid $120,000 in 2016, only $118,500 will be subject to OASDI tax and credited to the Social Security record (but HI taxes will be paid on the entire $120,000). In other words, earnings in excess of the maximum amount for a particular calendar year are not considered wages for Social Security coverage purposes.

A stabilizer provision protects the system from trust-fund depletions that could occur when price increases outpace wage gains. This stabilizer provision goes into effect if reserves in the trust funds providing retirement, disability, and survivor benefits fall below 20 percent of what is needed to meet outgo for a year. When the stabilizer takes effect, automatic cost-of-living benefit increases will be based on the lower of the annual percentage increase in the Consumer Price Index or the annual percentage rise in the nation’s average wage.

Later, if the fund reserves exceed 32 percent of what is estimated to be needed for a year, recipients will be entitled to extra cost-of-living increases, to compensate for losses in inflation protection resulting from having benefit increases tied to wage levels.

This story originally appeared on

For those unable to balance household budgets on Social Security alone, consider using a HECM mortgage to access home equity.

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Talking to a new HECM (PLUS) audience

and draw limitations, the most likely borrowers
against their home equity have changed. If the old industry
mantra was simply eliminate your forward mortgage
payments, the new mantra is a more complex look at
fi nancial planning. How do you best utilize a HECM in
conjunction with other savings tools? And what can you
use it for?

These statements open a whole bunch of new dialogue with those thinking about a HECM now. It is no longer billed as the loan of last resort, though it may well be the last loan you’ll need in retirement.

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It will answer a lot of your questions upfront.

Banker Bio Flyer_warren strycker


A Third of Older Adults’ Budgets is Spent on Housing

May 8th, 2016  | by Alana Stramowski Published in News, Retirement, Reverse Mortgage

For many aging Americans, about one-third of their living expenses will be spent on housing, according to a recent report from the U.S. Bureau of Labor and Statistics.

Housing was the greatest dollar expense among households age 55 and older at $16,219, representing 32.9% of total annual expenditures, the report states. As age increased, so did the share of household income spent on housing.

Among aging adults, their total annual expenditures spent on housing begin to decrease after age 55, but the percentage of how much income they are spending on housing increases, the survey states.

For adults ages 55-64, housing costs ($18,006) represent roughly 32% of their annual expenses, compared to 36.5% for those age 75 and older ($13,375).

“Housing was the greatest expense in average dollar amount and as a share of the household budget for older households,” said Ann Foster, an economist in the Office of Prices and Living Conditions, Bureau of Labor Statistics.

The number of older Americans continues to grow each year. By 2050, Americans 65 and older will grow to 83.7 million, which is almost double the estimate of 43.1 million in 2012, according to the Census Bureau.

Today, the vast majority (79%) of households age 55 and older are homeowners, and roughly half (47%) of them own their homes free of mortgage debt.

Compared to their younger counterparts, older households are less likely to be encumbered by mortgage debt. Of those in the 55-64 age group, 44.2% were mortgage debt free, compared to the 82.5% in the 75-and-older age group.

On the other hand, 43% of households ages 55-64 continue to carry mortgage debt, whereas 30% of those 65-74 and just 14% of the 75 and older demographic are still paying their mortgage.

As aging adults spend a sizable share of their income on housing, the data suggests they may face additional challenges later in life when coupling these costs with other expenses, such as health care and transportation.

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HECM Mortgages Play Vital Role in Planning for the Costs of Aging

Buckle up; aging can be difficult; you can make it easier/better with HECM

YOU CAN DO A PRIVATE HECM — IN A BUNCH OF THE UNITED STATES with a knowledgeable 12 year veteran of this product located in YUMA, AZ — SO, WHY WOULDN’T YOU DO IT NOW? Nobody would have to tell anybody you did it … and you would be “HAPPY AS A CLAM”WITH YOUR EXTRA MONEY
These are my answer to questions “experts” wrote in a magazine recently about HECMs (reverse mortgage to the uninformed). There seems to be a lot of people ready to smear the REVERSE MORTGAGE. CONSIDERING the value  of a HECM, you have to wonder why, don’t you? A well positioned magazine was left in my office this week after an application signing so I’ll answer the questions they asked, here… (You tell  me if you think I’m wrong about this???)
  • How long to you plan to stay in the house? How ’bout a better question? How long do you plan to live anywhere? But it’s not a bad question. If you are moving soon, consider a HECM somewhere else.
  • Is there another way to meet your money needs? No. The equity in your house is yours to spend, isn’t it? — you can use it and never repay it. What’s not to like?
  • Will your home suit you as you age? Probably not. Use some of the money you’ve been paying on your mortgage and improve it as you age — add grab bars, ramps, improved technical gadgets, eat out more often. Give some to the church, kids, poor people, ???
  • Can you live there if something happens to your  spouse? (They really did ask this one, believe it or not). How will you live anywhere else if something happens to your spouse? Life gets harder anywhere, doesn’t it? Make sure the spouse is listed as a borrower and the issues are reduced. Plan now to stick it out if you can.
  • IF YOU CAN’T — SELL THE HOUSE AND PAY OFF THE MORTGAGE ANYTIME YOU WISH. What’s not to like? Together you will solve the aging issues better if you have a HECM.
  • People who ask you take take another round at a forward mortgage with payments don’t always have your best interest. Buckle up folks, aging is hard, but a HECM makes it easier, not harder — and if you still have equity, you can use it and thrive in retirement.
  •  Thank you.
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About “Sequence of Returns Risk” in the HECM discussion

March 6th, 2016  | by Jason Oliva Published i HECM, News, Retirement, Reverse Mortgage

Just like any relationship, whether emotional or professional, communication is integral to developing a meaningful connection that allows each of the parties involved to effectively understand the needs and wants of their partners.

While the importance of meaningful communication may sound like a cover story worthy for the front pages of glam-mags like Cosmo and Vogue, this concept is critical for reverse mortgage professionals in their ongoing efforts to forge relationships with financial advisers as well as other retirement professionals.

The financial services industry is complex and within the retirement planning microcosm, it can seem as though advisers speak a different language. For reverse mortgage lenders, that can seem to only widen the divide between them and planners.

The truth of the matter is that reverse mortgage lenders and financial planners meet with a similar clientele. Typically, these clients are older adults who, in most cases, have built a substantial amount of home equity during their lifetimes and they’re entering retirement with the same goal: not outliving their money.

U.S. seniors had about $5.76 trillion in aggregate home equity last year and that number continues to rise each quarter, according to the most recent readings from the National Reverse Mortgage Lenders Association/RiskSpan Reverse Mortgage Index for the third quarter of 2015.

However, among Americans ages 55 and older—those nearest to retirement who should already have built significant savings—29% report having no savings or pension, according to a survey conducted last year by the Government Accountability Office. GAO’s research also consistently showed that people ages 55-64 are less confident about their retirement, with many planning to work longer to afford it.

The enormous stockpile of housing wealth among this older demographic, coupled with their unpreparedness and lacking confidence, offers an opportunity for reverse mortgage professionals to engage financial planners in a meaningful dialogue about how a Home Equity Conversion Mortgage (HECM) can best serve their clients’ needs.

But reverse pros need to be able to talk-the-talk, and that requires knowing the proper financial planning lingo to show that a reverse mortgage, when used strategically, could be the solution to any number of retirement road bumps.

“Reverse mortgage loan originators need to have a fundamental understanding of what financial advisers are trying to accomplish with their clients, which is basically to have their money last as long as they will be alive—but also taking into consideration that there will be market volatility,” said reverse mortgage industry veteran Shelley Giordano, who chairs the Funding Longevity Task Force, a group of financial planners and professionals focused on the strategic use of housing wealth in retirement.

Market volatility presents a real opportunity for the use of reverse mortgages in retirement planning, especially when considering the downward pressure faced by the Dow Jones and S&P 500 indices since the beginning of this year.

For many retirees who have a sizeable portion of their savings invested in stocks and other market instruments, having a resource that isn’t directly impacted by the ups and downs of the market could provide some extra protection for their retirement. Given the recent market volatility, reverse mortgage professionals must convey this message as they approach financial advisers.

Sequence of returns risk

Depending on a retiree’s allocation of market-related investments, dips in the financial markets could have an adverse effect on a person’s ability to retire comfortably.

As financial planning research has demonstrated—and widely publicized in the mainstream media lately—the strategic use of home equity can greatly increase the spending horizon of a person’s portfolio to last them for a 30-year retirement, particularly when using the line of credit option.

In this case, the reverse mortgage is used largely as a reserve, where a borrower draws from the loan only when his portfolio experiences a lower return. As retirees make withdrawals from their investments, negative returns that stack up early on during this period when a person is accessing their funds subjects them to what is known as sequence of returns risk.

For retirees who are living on the income they earn from retirement investments, this sequence risk is a primary concern which can cause some people to begin selling off assets for much lower than their worth.

“Understanding sequence of returns risk is important because if you have to sell-off too many assets in retirement because they are undervalued, and if there’s an extended period where there is a bad sequence of returns, that can be very dangerous,” Giordano said.

It is important for originators to have at least a basic understanding of sequence of returns risk so they can mention it in their conversations with financial advisors.

“Reverse mortgage experts need to know about Sequence of Returns Risk because this is one of the best ways a reverse mortgage can be incorporated into an overall financial or retirement income plan,” said Jamie Hopkins, professor of taxation at The American College in Bryn Mawr, Pa. “It [reverse mortgage] is one of the few assets someone might have where they can really get income that’s not correlated to the market.”

Hopkins, who is a frequent commentator on reverse mortgages for Forbes, has presented at several reverse mortgage industry conferences to discuss how reverse pros and financial planners can learn to speak the same language when it comes to serving their borrowers and clientele.

According to Hopkins, sequence of returns risk is going to be an even bigger concern as less people in the future retire with traditional pensions.

“All of a sudden, you’re going to have more people worried about sequence risk,” he said. “High net worth clients are equally concerned about this risk—it’s not a risk that only applies to a small subset of retirees.”

For reverse mortgage originators, the point is to at least have a basic understanding of sequence of returns risk, even if that means just being able to mention this concept to a financial advisor.

“If an originator can mention sequence risk and say reverse mortgages can stand in for having to make withdrawals early in retirement when the portfolio is undervalued, then they have a basis to start learning what researchers like Dr. Barry Sacks, Wade Pfau, Tom Davison and John Salter are writing about,” Giordano said.

Using a reverse mortgage to buffer against market swings and sequence risk falls within the greater context of portfolio sustainability, which is another important financial planning talking point originators should bear in mind.

Portfolio survival

Many financial advisers base their plans on the idea of portfolio survival. This is the essence of retirement planning. As advisers run Monte Carlo simulations to determine the likelihood that their clients’ assets will be able to survive a certain number of years, and under what circumstances and scenarios this will be possible, two major objectives are minimizing sequence of returns risk and improving cash flow.

A reverse mortgage helps accomplish both of these goals by reducing what advisers call the “withdrawal rate” from the portfolio. For example, if a retiree finds himself subject to sequence risk and he needs to sell 7-8% of his portfolio’s assets every year, under this strategy the portfolio might not survive a lengthy retirement.

“If we get too high of a withdrawal rate, we know that can actually deplete your portfolio fairly quickly,” Hopkins said. “A lot of financial advisers are looking for ways to lower that withdrawal rate, especially early in retirement so it increases the survivability or success of the portfolio.”

For further strategic discussion about how the HECM works to use home equity wisely in retirement mode, contact Warren Strycker who represents The Federal Savings Bank nationally, 928 345-1200.

It can be your “fish in the water” security when you turn 62.


Common Reverse Mortgage Myths Debunked During HECM Counseling

March 29th, 2016

From an educational standpoint, Home Equity Conversion Mortgage (HECM) counselors are the first line of defense in the ongoing struggle to dispel the most common reverse mortgage myths and misconceptions.

Mandatory HECM counseling provides seniors with the necessary exposure to make an informed decision about getting a reverse mortgage. Like originators, the job of a HECM counselor is also rooted in education as they help prospective borrowers more clearly understand the inner workings of reverse mortgages.

Despite this dual effort on the educational front, and the wide variety of positive press from the mainstream media lately, several reverse mortgage illusions have yet to evaporate into the ether.

Borrowers, in fact, still own their homes

One of the most common misconceptions of reverse mortgages is that borrowers automatically relinquish ownership of their homes once they obtain a HECM.

Perhaps the result of negative media representation in the past, the lingering effect of this myth has obscured the truth about reverse mortgages among the general public. The reality is often a pleasant revelation for seniors once they undergo HECM counseling.

“Seniors are under this misconception that they don’t own the home anymore—the lender does,” said Sherry Tetreault, a Tenn.-based certified credit counselor with ClearPoint Credit Counseling.

Although many prospective borrowers already have some knowledge of reverse mortgages, having done their own research prior to the counseling session, Tetreault, who has been a credit counselor for 16 years and a HECM counselor for seven years, admits that the misunderstanding about the transfer of homeownership continues to be one of the most frequently asked questions during the counseling process.

“They are always surprised to learn they still, in fact, own the home even with a reverse mortgage,” she said.

No payments necessary?

The internet provides a wealth of knowledge on just about anything. With a few keystrokes and clicks, even unsavvy web browsers can find the most basic information on reverse mortgages to aid them in their quest for knowledge.

Unfortunately, not everything published on the internet is vetted for accuracy. So it’s not beyond reason to be naturally suspicious of financial products that offer extra cash flow without requiring a monthly payment in return.

“Most of the time, when seniors are coming for counseling, they are skeptical about why they are able to get this [reverse mortgage] loan and not have to make payments,” Tetreault said.

Tetreault’s job then is to clarify that the funds obtained from a reverse mortgage must be repaid at a later date, and that just because borrowers aren’t required to make monthly payments toward the loan balance, they are still required to maintain their property taxes and homeowner’s insurance.

Clarifying what makes the reverse mortgage become due and payable creates some surprise among prospective borrowers, Tetreault said, but it also opens the door to other questions that seniors might not have thought about previously, such as what happens if they do not pay property taxes and insurance payments on time.

“We talk about what their responsibilities are as reverse mortgage borrowers to make sure they do not put themselves at risk of foreclosure,” she said.

The million-dollar question

HECM counseling is a necessary stepping stone in the older homeowner’s journey to get a reverse mortgage. This decision is typically prompted by a significant need, whether that is the result of an unexpected personal issue or even the intrigue of using home equity to supplement retirement wealth.

In many cases, the million-dollar question is: how much money can I get from a reverse mortgage?

One of the things ClearPoint does off-the-bat is ask counselees how they plan to use the money they receive from a reverse mortgage; whether that means using these funds for daily or future expenses, paying off debt, etc.

In understanding what the loan proceeds will be used for, Tetreault said counselors can help prospective borrowers determine if a reverse mortgage is really the right product for them, or if there are other alternatives that might fit best with their financial plans.

At the end of the day, the decision to get a reverse mortgage hinges upon education and the awareness of what other resources are available to seniors that can help them accomplish their personal needs.

“Education empowers consumers,” Tetreault said. “Whether seniors take that information and decide to get the reverse mortgage or not, at least they are educated and have an understanding of all the choices and options available to them.”


See contact information in navigation bar for details.


Advisors Get Crash Course on Reverse Mortgage Financial Planning Strategies

March 21st, 2016  | by Jason Oliva Published in HECMNewsRetirementReverse Mortgage

There is a widespread movement in the reverse mortgage industry to educate professionals such as Realtors and home care workers about how Home Equity Conversion Mortgages can possibly better serve their clients. But most of all, the push for greater reverse mortgage education has largely focused on the financial planning community.

Thanks to recent HECM program changes in the last few years, sensationalist stories that besmirched reverse mortgages in the past have largely given way to media coverage highlighting the much-needed makeover of the HECM product from a loan of last resort to a retirement income planning tool seriously worth considering.

“Reverse mortgages have this negative image in the U.S. for some reasons that were never really fair to begin with,” said Wade Pfau, professor of retirement income at The American College, during a recent webinar hosted by the Financial Experts Network, a Pittsburgh-based company that focuses on educating financial advisors on reverse mortgages.

Many of these legacy issues with the HECM program do not relate to clients today who plan on using a reverse mortgage as part of a coordinated retirement income planning strategy, Pfau noted.

“These issues related to the idea that people were desperate; they did not have sustainable financial plans in place, and basically, a reverse mortgage would have let them kick the can down the road a little further,” he said.

The webinar was held primarily as an educational session to teach advisers how they can fit home equity into a client’s retirement income strategy. During the session, advisers learned an overview of how reverse mortgages work, including their eligibility requirements, various spending options and the different possible uses for HECMs.

About half of the webinar focused on portfolio coordination for retirement spending, with an emphasis on using home equity as a standby reverse mortgage line of credit to create retirement income efficiencies by managing sequence of returns risk—a concept which has been the focal point of research from Pfau, as well as other researchers such as Barry Sacks, Harold Evensky and John Salter, who also participated on the webinar.

Of the more than 200 webinar sign-ups, most of which were financial advisers, approximately 57% tuned into the session—an attendance rate that reflects a higher than average participation rate, according to Tom Dickson, founder of the Financial Experts Network.

Advisers’ interest in the reverse mortgage subject matter became even more apparent during the webinar’s question and answer portion, with much of the questions focused on learning more about what happens when the HECM becomes due; how a reverse mortgage can assist with tax bracket management; as well as the best way to overcome client objections.

“It’s how you present it [a reverse mortgage],” said John Salter, associate professor of financial planning at Texas Tech University. “You do get some pushback, but you have to explain all of the benefits [of using home equity], especially with the winner being set up a reverse mortgage right now and not use it.”

An easy way for advisers to start the conversation about reverse mortgages with their clients, Salter added, is to let them know that research points to early access—especially for the line of credit option—as the best way to use home equity as part of a retirement income plan.

When it comes to recommending a reverse mortgage for clients, it turns out that most advisers have already done so, according to the results from an attendee survey distributed after the webinar provided to RMD.

Answering the question, “Have you ever recommended a reverse mortgage?” 42.8% of advisers responded “yes, for clients that can use income,” while 8.7% responded “yes, for clients that had a conventional mortgage.”

On the flip side, 30.7% of attendees said they have not recommended reverse mortgage because their clients “never needed it,” while 17.5% said “no, because I thought they were too expensive.”

Written by Jason Oliva

See contact information in navigation bar for details.


New Research Shows Financial Planning Value of Tenure HECMs

March 3rd, 2016  | by Jason Oliva Published in HECM, News, Retirement, Reverse Mortgage

Reverse mortgages have been the subject of much financial planning research over the past few years, the emphasis of which has focused on how these products add to the value of a retirement income plan. While planners have largely focused their research on the line of credit option, few have explored the effectiveness of the reverse mortgage tenure option in the context of financial planning.

Reverse mortgages provide a means to generate more retirement income than can be obtained from retirement savings alone—and the tenure option does so in a direct way, says a recent report published in the Journal of Personal Finance.

The report, “Reverse Mortgages, Annuities, and Investments: Sorting Out the Options to Generate Sustainable Retirement Income,” was written by Joseph Tomlinson, FSA, CFP, managing director of Tomlinson Financial Planning in Greenville, Maine; alongside Shaun Pfeiffer, Ph.D., CFP, associate professor of finance and personal financial planning at the Edinboro University of Pennsylvania; and John Salter, Ph.D., CFP, AIFA, associate professor of personal financial planning at Texas Tech University and a partner and wealth manager at Evensky & Katz Wealth Management in Coral Gables, Fla. ad Lubbock, Texas.

The study examines how using either reverse mortgage option (line of credit or tenure) can generate improvements in sustainable retirement income, particularly when combined with single-premium immediate annuities (SPIAs).

Although the popular financial approach to generating retirement income has been to rely on systematic withdrawals from investments, such as stocks and bonds, the researchers suggest planners have two additional options worth considering: reverse mortgages and annuities.

“Such options may be particularly useful for clients whose finances are constrained and they need to either generate more retirement income or make the income more secure,” write Tomlinson, Pfeiffer and Salter.

An issue for planners, they suggest, is how to choose among these two options and how to combine these alternatives in a way that best meets client needs.

Ideal candidates for annuities, particularly SPIAs, are those who need more security so that their retirement income will last for life, and can tolerate the illiquidity that a SPIA entails, according to the study. Whereas for reverse mortgages, ideal candidates are those who need additional retirement income, plan to stay in their home for life, have adequate long-term care insurance and do not plan on leaving a bequest.

“With the reverse mortgage options, purchasing a SPIA improves the security of retirement income, but does not increase the income,” the study states. “Combining SPIAs with reverse mortgages provides a way to gain additional retirement income security, but without much impact on the overall level of retirement income.”

Researchers ingrain their analysis around a scenario involving a husband and wife as borrowers, a couple which they believe presents a more typical situation for financial planners. Specifically, researchers assume the couple lives in a $400,000 home and that the husband is 65 and the wife is 63.

Based on August 2015 interest rates, for this couple the initial principal limit they would receive from a Home Equity Conversion Mortgage (HECM) would be $212,000, according to researchers’ calculations based on the reverse mortgage calculator provided by the National Reverse Mortgage Lenders Association.

Under this scenario, a borrowing couple utilizing the reverse mortgage tenure option would be able to obtain $1,130.36 per month. Assuming setup fees were financed ($212,000 – $10,826), the available amount for borrowing would be $201,174.

By comparison, researchers note that a SPIA purchased with $201,174 would pay $955.21 per month, based on market rates as of August 2015 for SPIAs sold directly.

“The SPIA advantage is that payments continue until both members of the couple are dead, whereas tenure payments only continue until the home is vacated,” the study states. “For couples who can put plans in place to utilize home care if needed and keep their home as long as possible, the tenure option can be expected to provide payments for a duration similar to a SPIA.”

The term tenure payment calculation is based on an interest rate that is the sum of the annual Mortgage Insurance Premium of 1.25% and the HECM Expected Rate, which is the sum of the 10-year LIBOR swap rate—about 2.3% in August 2015—and a Lender’s Margin, which may vary by lender, but was set at 2.5% in the NRMLA calculator as of the date of the research’s publication. The researchers’ example of the 65-year-old husband and 63-year-old wife assumes a 4.8% HECM Expected Rate.

“The tenure payment calculation uses a higher expected duration than the SPIA, which would lower the payout rate, but a higher interest rate, which would raise the payout, and the interest rate more than offsets the duration,” the study states. “So based on current pricing, tenure payments ($1,130.36) will exceed SPIA payments ($955.21) when the SPIA purchase amount is set equal to the HECM Net Principal Limit.”

Researchers then move onto how the reverse mortgage options and SPIAs, either separately or together, can be integrated with systematic withdrawals to improve retirement outcomes.

Per the already established scenario featuring the 65- and 63-year-old husband and wife, researchers also assume this couple—who have a $400,000 home with no mortgage—also has $1 million in tax deferred savings.

Additionally, their Social Security income is $30,000, which will increase each year for inflation, and is assumed to reduce to $200,000 in real dollars when either member of the couple dies. It is also assumed that this couple has their savings allocated 60/40 in stocks/bonds and rebalanced to this allocation annually.

Compared to relying only on systematic withdrawals from investment accounts, the use of either reverse mortgage option (LOC or tenure) was found to greatly increase consumption—$70,881 median consumption for the line of credit, compared to $74,735 for tenure payments and $64,287 for systematic withdrawals.

Because of the assumption that withdrawals are taken from savings before tapping the line of credit, the line of credit option depletes savings but leaves some home value. Tenure, on the other hand, depletes home value more and leaves remaining savings.

“Overall, the tenure option does somewhat better than the LOC in terms of both consumption and bequest measures,” researchers state. “This reflects tenure not depleting savings and thereby leaving more money invested in stocks, the potentially highest return asset.”

Because the tenure option pays out a higher rate than the SPIA, the study indicates it is necessary to allocate $238,061 for SPIA purchase, compared to the $201,174 borrowing limit used to generate tenure payments.

The SPIA option leaves median consumption about the same, but does reduce consumption risk, according to researchers who note that under the SPIA home value is preserved for late-in-life needs or a bequest.

“If the goal is to maximize consumption without a bequest concern, the reverse mortgage options win out over the SPIA,” the study states. “If bequests are important, the decision requires evaluating tradeoffs between consumption and bequest.”

The research from Tomlinson, Pfeiffer and Salter is the first to seriously consider how the reverse mortgage tenure payment option compares with the use of a SPIA.

Besides the need for more research on this topic, the researchers conclude that there will also be a need for planning software capable of handling combined analysis of reverse mortgages, annuities, and systematic withdrawals on a customized basis for financial planning clients.

View the report in the Journal of Personal Finance.

Both HECMs and SPIAs are available at Consider them with Licensed-Appointed-Insured, Warren Strycker, 928 234-1200, Can-anything-good-come-out-of-Yuma-Arizona? (Yes).

This ole house has a HECM — so I guess I’ll just keep hangin’ on . . .

(Danger, this ode continues to change without notice).


I’m  gonna need this house some longer…

Looks like I’m gonna need this house some more…

Got time to fix the shingles,

Got time to fix the floor,

Got time to oil the hinges,

or listen to them yawn.

This ole house has a HECM so I’ll just keep hangin’ on.


There’s still time to mend the windows

through which outside nature peaks …

I’ve replaced them with some new ones

before wet weather leaks.

This ole house has a HECM so I’ll just keep hangin’ on.


I’m gonna need this house some longer,

Looks like I’ll need this house some more,

so there’s still time for workin’

before I go to meet the saints…

This ole house has a HECM so I’ll just keep hangin’ on.


Got a second or third round stay here,

I’ll hear the stories told…

Got another term on the way now…

There’s still lots to unfold.

This ole house has a HECM so I’ll just keep hangin’ on.


Yes, you can aide me in this saga,

Lend a hand and give an ear.

Fetch me a question about the HECMs

And shift me into gear.


Call Warren Strycker, 928-345-1200 anywhere in the United States

–(and open the information flood gates).

If you’re 62 and have 50% or more home equity, you may be eligible.

You can help me stay in my house by staying in yours.

Let’s HECM.



For 90-Year Old Advisor, HECM Work is Satisfying

  1. February 23rd, 2016  | by Jason Oliva Published in News, Retirement, Reverse Mortgage

Everyone has a reason for doing something—a motivation that drives them to a higher purpose in life. While some may plot the the next phases of their lives in an organized storyline, others find their true callings as a byproduct of life’s unexpected circumstances.

At least that’s how it all turned out for John Kennedy, a Seattle-based Home Equity Conversion Mortgage (HECM) advisor for top-20 reverse mortgage lender The Federal Savings Bank. At 90 years old, Kennedy has been actively focused in the reverse mortgage industry for the past two decades—almost as long as the HECM program has been in existence.

Conventional wisdom would indicate that most 90 year olds would have retired long before their ninth decade, but Kennedy isn’t like most 90 year olds. Rather, he’s chosen to remain active in the reverse mortgage industry for the better part of 20 years.

A World War II veteram, public speaker and author of articles focused on financial planning, Kennedy prefers to limit his clientele to his peers, many of whom are predominantly seniors. Apart from his work with The Federal Savings Bank, Kennedy is also a founder of the Aging in Place Council of Washington, charter member of the Alliance for Retired Americans, as well as a member of both the Puget Sound Alliance for Retirement Americans and National Council of Senior Citizens.

Kennedy recently caught up with Reverse Mortgage Daily to talk about what drew him into the reverse mortgage industry and why he continues to remain focused on HECMs to this very day.

RMD: How long have you been focused on reverse mortgages?

JK: I first began investigating HECMs in 1995. I don’t know when I wrote my first application, but it was somewhere between 1995 and 1999.

I’ve been involved with reverse mortgages for about 20 years.

RMD: What initially attracted to you begin working with reverse mortgages in the first place?

JK: I’m a financial planner by trade. I was originally licensed in securities back in 1960. At that time, I was a mutual funds salesman for Putnam Mutual Funds, and I was dualy licensed in securities and life insurance. I then got involved with Financial Freedom Senior Funding Corporation in its early days during the 1990s, which was just a natural maturation from what I had done before.

Somewhere around 1999-2000, HUD made regulations that would not allow a person to be involved with reverse mortgages who was also licensed in life insurance. They felt it was a conflict of interest, so I had to choose between being licensed in life insurance or licensed in securities.

Why choose reverse mortgages? [At the time] practically no one was involved in reverse mortgages; I was one of the first people in the State of Washington to get involved with them.

It used to be that I was getting a lot of customers just from making a solicitation either by mail or some kind of advertising, or by giving seminars at the local library. I would get customers because people had their home and read about being able to borrow and not pay it back.

[In deciding between securities and reverse mortgages] it was just a matter of which is the better product? I knew a lot of financial planners, so I could refer securities business to them.

RMD: Why have you continued to focus on reverse mortgages for so long?

JK: Of course, it was so I could make some income and I was pretty good at it. I have an in-depth background and understanding of reverse mortgages amongst the top people in the industry. It’s something I know.

I get a self satisfaction out of helping people do something they don’t know how to do. At 90 years old, you don’t really get retired. I feel I’m much more productive in helping people solve their financial problems.

So [continuing to focus on reverse mortgages] is partly a matter of self satisfaction and partly a matter of necessity.

RMD: How long have you been with The Federal Savings Bank?

JK: I’ve been with The Federal Savings Bank for over a year now, so it hasn’t been too long. They are a good organization, federally chartered so I can do business in all 50 states rather than just one.

And the company has some powerful people to work with, including [Senior Vice President, HECM Division] Rob Balmer, [Executive Vice President] Mike Crossett, and [Senior Vice President, HECM National Division] Maggie O’Connell, who I’ve known since the 1990s when we were both with Seattle Mortgage Company.

RMD: Reverse mortgages have undergone some serious program changes since the late 1980s, when HUD rolled out the Home Equity Conversion Mortgage program. How have you kept up to speed on all of the new rules since then?

JK: Mostly by the internet. There is an awful lot of information on the internet. That, and of course my employer, The Federal Savings Bank, keeps me up to date and informed. They are a solid organization and have some very capable people. Of course, the company was created by veterans—mostly West Point graduates—which is pretty impressive.

RMD: I understand you are a veteran as well.

JK: I’m a veteran of World War II. I was born in 1925 and the war [for the U.S.] started in 1941. When I graduated high school in 1943, I went directly into the U.S. Navy. All of the able-bodied men went into the service, while the female population went to work in the factories, shipyards and so forth. We had an all-out effort.

I spend about 30 months in the Navy during WWII, and after I got out in 1946, I qualified for the G.I. Bill of Rights and went to college.

RMD: Did you find any similarities between serving in the military and working in the reverse mortgage industry?

JK: Not necessarily. I didn’t know about investments at that time. When I was in high school and then went to the Navy, my major interest was sports—I was a jock.

I didn’t know what Pearl Harbor was, but I soon learned on December 7, 1941. It was a Sunday and I was walking home from church, and somebody came out and said the Japanese bombed Pearl Harbor.

So I went into the Navy and when I got out I qualified for the G.I. Bill of Rights and went to school. Instead of using [the grant] for vocational school, I used it to study philosophy and graduated from Seattle University. I then went to Loyola University in Chicago to study psychology.

That gave me a lot of insight into many, many things and has been a basic background of my life since then. With my degree in philosophy and psychology, I learned than I can learn any subject matter just by going to the university and getting all the books they had on a particular subject on their curriculum.

RMD: So how did you make the transition from philosophy and psychology to the finance world?

JK: At the time, I was married. I had a wife and a child, and that kind of changed the program. I had to figure out what to do to make a better living than what they pay an amateur psychologist. At the time, society was different—there wasn’t a great demand for psychologists, except for teaching, but it wasn’t a practical vocation back then. So I changed direction at that time to industrial sales back home in Seattle. It was a matter of adjusting to circumstances.

After a period of years, I was working with Crucible steel company, but it wasn’t a very fulfilling job. That’s when I became interested in finance and got recruited as a mutual funds salesman for Putnam. It was just a matter of finding a vocation, which was a bit more satisfying than selling steel.

RMD: In your experiences, what was the most impactful change that has happened since you’ve been doing reverse mortgages?

JK: Of course, the 2008 financial problems were quite impactful. That scared people out of doing almost anything.

Prior to the crash of 2008, people were starting to increase their use of reverse mortgages. Because of the housing market bubble, they could take advantage of housing values that were rising too fast.

When we had the crash, people not only got scared, but the values of their homes went down and some of them got underwater [on mortgages]. The whole economic system got blown up. It was a national catastrophe. That was serious for everybody.

RMD: In your opinion, what are some of the biggest misunderstandings of reverse mortgages that you’ve encountered with people?

JK: There has been a lot of misinformation and there has been a lot of negative publicity, and so a lot of people are having negative attitudes toward reverse mortgages and don’t really want to investigate them because of that.

The fact is that most people don’t have a background in finance or economics, so it’s difficult for them to have a feeling of confidence in their judgement in regards to a financial product like reverse mortgages. That is partly the problem, but mostly it has been misinformation.

The publicity and public relations, in my opinion, are the most powerful things for reverse mortgage.

For more information about this website, call 928 345-1200 and ask for Warren Strycker. Email:, This is a HECM informational website and does represent a lender and loan officer in providing solutions for retirement products or services. 928 345-1200. See Home page “Information” tab for contact information.



TIME: HOMES Are Big Assets Hiding in Plain Sight


Home equity is often considered one of the biggest assets retirees have, but many people are not taking advantage of this critical source of wealth hiding in plain sight under their roofs. For some retirees, a reverse mortgage may be worth considering in retirement, according to a recent TIME Magazine article.

The topic of reverse mortgages and their use in retirement planning recently found its way into the latest issue of TIME dated February 15, 2016. The article, written by Dan Kadlec, discusses how reverse mortgages, which were once scorned for high costs and risky full-draw loans, are now getting another look from financial planners.

“Experts now argue that this type of loan can be safe and even wise—as well as a key source of income that homeowners short on savings and planning to stay put should set up the minute they become eligible at age 62,” Kadlec writes.

For many retirees who own their homes mortgage-free, reverse mortgages could be a viable solution to helping them fund their longevity.

About 36% of owner-occupied homes are mortgage-free, and for homeowners age 65 and older, this share jumps to 65%, according to U.S. Census Bureau data referenced by Kadlec, who also notes that even amid a so-called “retirement-income crisis,” $12 trillion in home equity is lying on the table, to be used for either peace of mind or to preserve a legacy.

“This is the asset hiding under your nose,” said Shelley Giordano, chair of the Funding Longevity Task Force, a group of financial advisors who have been focused on leveraging housing wealth in retirement, in the TIME article.

While reforms in recent years such as the elimination of full-draw lump sum loans, Financial Assessment and non-borrowing spouse protections have made reverse mortgages stronger products, TIME notes that the biggest breakthrough has been financial planning research that shows the benefits of loan utilization early in retirement.

That is one reason Kyle Winkfield, a financial planner in Washington, D.C., recommends homeowners who have a potential savings shortfall obtain a reverse mortgage line of credit earlier rather than later.

“It’s better to have this and not need it than to one day need it and not have it available,” Winkfield told TIME.

By setting up a reverse mortgage line of credit, and not using it until other savings are depleted can produce stronger results nor homeowners than those who wait until other retirement funds are dry, the article suggests.

“Tapping the equity line only when stocks are down, giving your portfolio a chance to recover, has similar benefits,” Kadlec writes. “The next time a silver-haired star urges you consider a reverse mortgage, it may be a sound suggestion.”

For contact information, open “Information” tab on the home page.



HECM Borrowers Report High Satisfaction Levels, demonstrate choices

Editorial note:  This information demonstrates entrance to or out of the HECM (Reverse Mortgage) process is designed to allow access and egress without harm. Counseling is provided upfront to screen out those not interested. The application is not a legal document and doesn’t require anyone to finish. Even at the close, borrowers are allowed out of the contract they signed without cost after a three day rescission period. There is no reason to believe the HECM is a trap of any kind out of which you cannot “reverse” yourself and some do so without harm. (

March 13th, 2016


Reverse (HECM) mortgages can serve a variety of needs for the borrowers who use them. While some motivations to obtain these loans are more obvious than others, borrowers report high satisfaction overall when it comes to using a reverse mortgage to foster independence and improve well-being, according to the results of a recent survey.

A wide majority (83%) of seniors who received Home Equity Conversion Mortgage (HECM) counseling and decided to follow through with a reverse mortgage said they were “satisfied” or “very satisfied” with their decision, according to a survey conducted by researchers from Ohio State University, and funded by the MacArthur Foundation and the Department of Housing and Urban Development (HUD).

The survey,” Aging in Place: Analyzing the Use of Reverse Mortgages to Preserve Independent Living,” combined HUD loan data; administrative data from households who received HECM counseling, as well as survey data collected on these households three to nine years after receiving counseling for a reverse mortgage.

Researchers’ goal was to gain a better understanding of reverse mortgages and their impact on borrowers’ financial security, well-being and independence in old age.

To explore these relationships, Ohio State researchers Stephanie Moulton, Donald Haurin, Cazilia Loibl and J. Michael Collins analyzed seniors who received HECM counseling from ClearPoint Credit Counseling Solutions between 2006-2011. This population included seniors who obtained a reverse mortgage and retained it; those who took a reverse mortgage and then later terminated it; and those who decided not to take a reverse mortgage after receiving counseling.

In total, 1,761 people participated in the survey. Of this population, 68% obtained and retained their reverse mortgage; 6% obtained a reverse mortgage and then later terminated the loan; and nearly one-quarter of respondents decided against getting a reverse mortgage altogether after completing HECM counseling.

The average age of survey participants was 70 years old at the time they received counseling. Approximately one-third of them were women living in single-person households, and 17% had a four-year college degree.

While a majority of respondents expressed satisfaction with their reverse mortgages, even those who eventually terminated their HECMs (78%) also felt “satisfied” or “very satisfied.” Meanwhile, among those who decided against getting a reverse mortgage, 60% reported satisfaction with their decision to not follow through with a HECM.

When researchers asked survey participants the extent to which they agreed with the statement, “Having a reverse mortgage improved the quality of my life,” 76% of active borrowers and 65% of terminated borrowers agreed with the statement.

On average, the annual income of participants was about $31,000, or $2,600 per month. Besides home equity, the median amount of assets among this group was only $2,000. Just under half of respondents (45%) reported no assets at the time of HECM counseling other than their home, effectively making the reverse mortgage their only source of wealth.

Supplementing income (42%) and paying off other mortgage debt (39%) were the top intended uses for seniors who obtained a HECM. Other plans included using a reverse mortgage to pay for home improvements (24%), provide financial help for family members (19%), to delay using other sources of retirement wealth (16%) and to pay for ongoing health expenses (14%).

Although there has been a lot of discussion about using a reverse mortgage line of credit to lock-in home equity as an insurance against declining home values, only 10% of survey respondents reported using a HECM in this regard. Just 6% said they planned to use a reverse mortgage for big purchases such as a new property, a car or vacation.

Aside from gauging borrower satisfaction, a critical part of the research aims to study the impact of reverse mortgages on long-term financial stability and well-being. This, according to researchers, will require longer-term tracking of borrowers to estimate the outcomes of households who obtained reverse mortgages compared to those who did not.

One indicator of household well-being is the condition of living environment. Based on the survey results, many (85%) active reverse mortgage borrowers report the condition of their home is “good” or “very good.” Similarly, 81% of terminated loan borrowers and 76% of non-borrowers rated their living conditions at the same levels.

Although all groups of HECM borrowers report high satisfaction with their home conditions, the data indicates that active HECM borrowers have higher levels of satisfaction than their survey peers. While this could be due to a direct effect of the reverse mortgage, researchers suggest it could also be that homeowners who opt into a reverse mortgage have homes that are in good condition prior to getting a loan. This suggests further detailed analysis is needed.

In order to gauge the impact of HECMs on factors of well-being, researchers say they need to establish a comparison group of otherwise similar seniors who did not originate a HECM. Two future studies from the Ohio State University researchers plan to address this area of study.

First, researchers note they will be comparing the long-term credit outcomes for seniors who originated HECMs to similar seniors who extracted equity through another channel, such as a HELOC, cash-out refinancing or second liens. Second, researchers plan to compare its survey respondents to a nationally representative sample of seniors, in efforts to compare HECM borrowers to non-borrowers in the areas of finances, health, housing and  recission general well-being.

These analyses, which are currently in process, are slated for completion by August 2016.

For those seeking a reliable path to obtain information about how to obtain to these products anywhere in the United States, Contact Warren Strycker, 928 345-1200 or email or


HECM is key means of funding retirement — credibility scores


Written by Jessica Guerin

Public perception has been described as a social phenomenon defined by the difference between fact and popular opinion. It is the reputation of a product or person— a judgment fueled by emotion, rumors and cultural prejudices and given a voice by the mainstream media.

Reverse mortgages (HECMs) have long suffered from a negative public perception. The problem is the result of several factors, including common misconceptions about a somewhat complicated financial product that have been hard to dispel. Most Americans simply don’t understand the ins and outs of the product, with many holding on to the false belief that the bank owns a borrower’s home. Even some financial professionals are uninformed about the details of the loan.

Of course, it would be remiss to deny that the product has had its issues in the past. The woes of non-borrowing spouses entering into foreclosure have inspired many attention-grabbing headlines, and the long-ago misdeeds of some bad apples who pushed borrowers to purchase other financial products with their proceeds didn’t help matters. Then there were unfit borrowers who were running through their money, leaving nothing left for taxes, insurance or living expenses. The fact is that the product is designed for senior citizens, and society is rightfully protective and emotional when it comes to their well-being. Stories about seniors failing to thrive with these loans gave rise to a negative sentiment about the product and its usefulness.

But after years of productive dialogue between the industry and lawmakers, the reverse mortgage program has adopted new rules to safeguard it from the blunders of the past. It’s a unique and complicated product, and it took time for officials to understand the guidelines needed to maximize its effectiveness. With new protections in place for non-borrowing spouses, expanded rules to police industry participants, and a financial assessment to ensure the loan’s suitability for a borrower’s circumstance, reverse mortgages are a better, stronger and safer product than ever before.

The truth is there is no other product out there that allows older Americans to access their home equity, and statistics indicate that many will need to utilize this valuable asset to support their retirement.

Recently, research and commentary from noted academics and financial professionals have outlined the benefits of strategically using one’s home equity through a reverse mortgage, insisting that one’s housing wealth should become an important factor in retirement planning. The media appears to be catching on, citing the latest research and noting that recent program revisions have provided extra safeguards for consumers. With all of this momentum gathering in 2015, some are noticing a change in the tide. The public conversation about reverse mortgages is trending toward positive, and many are predicting that public opinion will follow suit.

Pushing the Needle

In 2015, a handful of academics and financial professionals published research and publicly commented on the use of reverse mortgages in retirement planning.

Joe Tomlinson, an actuary and financial planner, researches and writes about investment options and retirement planning. In April of last year, Tomlinson published a paper on Advisor Perspectives, a website that specializes in “actionable advice for financial advisors.” Titled “New Research: Reverse Mortgages, SPIAs and Retirement Income,” the paper examines how Single Premium Immediate Annuities and monthly tenure payments or line of credit withdrawals from a reverse mortgage could be utilized along with investment portfolio withdrawals to stabilize one’s retirement income.

“Retirees need longevity protection and additional funds. Annuities and reverse mortgages can meet those needs,” Tomlinson writes. “While annuities have been researched extensively, reverse mortgages haven’t received as much attention. We need research on how to fit these two products together in overall retirement plans.” Tomlinson concludes that financial planning software that can analyze the coordinated use of annuities and reverse mortgage proceeds needs to be developed to assist middle-income seniors whose savings cannot provide sufficient retirement income.

In October, Nobel Prize-winning economist and MIT finance professor Robert Merton drew the finance world’s attention to reverse mortgages. Speaking at a wealth management conference before members of more than 140 wealth advisory firms, Merton said he believes that reverse mortgages will become an essential component of retirement savings. The house is the largest and sometimes only major asset for many in the working middle class, he said, and reverse mortgages are well suited to tap that wealth. “Americans have wrongly steered clear of reverse mortgages,” Merton said. “This is going to become one of the key means of funding retirement in the future.”

Jamie Hopkins, an associate professor of taxation at The American College and associate director of the school’s New York Life Center for Retirement Income, has also become a vocal proponent of reverse mortgages. Hopkins said he began researching the HECM’s role in retirement planning after reading research by Barry Sacks, John Salter and others in the Journal of Financial Planning. Their work inspired him to explore strategic uses for home equity in retirement planning, and the frequent Forbes contributor often writes about his belief in the value of the product. “Using a reverse mortgage is no longer just for the cash poor and house rich,” Hopkins wrote in an article last May. “Instead, reverse mortgages can be used strategically as one part of a retirement income plan designed to build a buffer against sequence of returns risk early in retirement, help defer Social Security benefits or reduce cash outflow from traditional mortgage payments.”

In November, The Journal of Retirement published an article examining various ways in which a reverse mortgage can be strategically used in retirement income planning. Written by Tom Davison, partner at the financial planning firm Summit Financial Strategies, and Keith Turner, a reverse mortgage advisor with Retirement Funding Solutions, the paper explores how different strategies can suit different types of borrowers. “Today, there is an evolving understanding of reverse mortgages as a valuable financial planning tool,” Davison and Turner write. “Reverse mortgages are now seen as well suited for retirees—not only homeowners who are underfunded and turn to a reverse mortgage as a last resort, but also those who enter retirement well-funded.”

Finally, a paper published in November by Wade Pfau, a professor of retirement income at The American College of Financial Services, outlines six different strategies for using reverse mortgages. Titled “Incorporating Home Equity into a Retirement Income Strategy,” Pfau’s paper illustrates that taking out a reverse mortgage as a last resort produced the least successful outcome, while taking a reverse mortgage line of credit at the beginning of retirement, and allowing the credit line to grow before tapping it, proved to be the most successful strategy.

“Strategic use of a reverse mortgage can improve retirement outcomes,” Pfau writes. “There is great value for clients to open a reverse mortgage line of credit at the earliest possible age.”

Picking Up on the Trend

Perhaps spurred by the uptick in positive commentary from the finance world, the mainstream media seems to have changed its tune about the value of HECMs. According to NRMLA, 93 percent of news articles about reverse mortgages in 2015 were neutral or positive.

Big-time newspapers like The Wall Street Journal, USA Today and The Boston Globe published articles last year explaining how a reverse mortgage can be used in conjunction with other strategies to enhance a retirement portfolio. Web coverage was equally positive with sites like, and detailing why home equity should be an important part of the overall retirement picture.

“A lot of the positive and neutral news coverage we saw in 2015 came from articles about retirement planning that included general information about how reverse mortgage loans work and the features, benefits and responsibilities to consider before applying,” says Jenny Werwa, NRMLA’s director of public relations. “What I like about these mentions is that they put reverse mortgages in the context of other financial tools and strategies that are already familiar to consumers, so that tells us that we are getting more mainstream, which is very positive.”

Mike Kent, president of Liberty Home Equity Solutions, says he thinks recent product changes have helped elevate the conversation about HECMs. “I believe the changes made to the product over the last year, such as maximum draw limitations and credit-based underwriting, and the changes made regarding non-borrowing spouses, have made the product much safer and more appealing to the general public,” Kent says, adding that new research has helped tip the scales. “These papers have been very supportive and have really helped to change the opinion of many in the retirement planning field regarding the value of a reverse mortgage in overall retirement planning.”

Sherry Apanay, chief sales officer at Finance of America Reverse, credits NRMLA’s collaboration with industry lenders for the recent surge of positive press. “I believe it’s apparent that NRMLA’s P.R. campaign has had a huge positive impact. The campaign is funded by a group of large and small lenders that are committed to the success of the reverse mortgage industry, and even more importantly, are committed to ensuring that accurate information about reverse mortgages is available so consumers can make informed decisions.”

Apanay says positive press coverage is a major element to the market’s growth. “One word: credibility,” she says. “When a trusted publication provides balanced reporting and a positive perspective on reverse mortgages, it helps.”

Teague McGrath, chief marketing officer at AAG, also stresses the value of positive coverage in the mainstream media. “These outlets are powerful when you consider their strength in the areas of potential reach and perceived credibility. Forbes has something like 45 million unique online visitors and WSJ about 20 million. The WSJ has the highest-paid subscriber base in their print news. And when you consider these are one-stop news stores for your business, financial, lifestyle/arts, technology, health and auto news, positive coverage in these outlets translates to greater exposure and increased consumer awareness.”

Sustaining the Momentum

It remains to be seen what 2016 will bring for the industry, but many are hopeful that the year will see a period of much-needed stability after so much change. Armed with a stronger product, many reverse professionals are eager to see this positive momentum continue full steam ahead.

“Public perception is definitely improving,” says Kent. “As we see the positive changes in opinion in articles written about the reverse mortgage product, public opinion follows. We are seeing a corresponding excitement about the product in the general borrowing public.”

While the latest coverage is promising, some industry veterans believe there is a lot of work that still needs to be done to turn things around.

“I believe the positive articles have made an impact, but unfortunately the negative stuff seems to stick around longer and permeate ‘belief systems,’ whether or not they are based on fact,” says Apanay. “I think we still have some work to do.”

McGrath agrees. “We need consistent, amplified positive coverage to create a significant upward shift in reverse mortgage loan volumes.”

To help advance the cause, reverse professionals can continue to spread with word among professional partners and their local media. Combatting inaccurate coverage online is another great way to advance the message. NRMLA’s Blog Squad seeks to do just that, enlisting members of the industry to comment online and correct misinformed reporting.

“It’s important to correct inaccuracies and misconceptions about reverse mortgages that appear in publications,” Werwa says. “We encourage all professionals in the industry to use the comment section in online articles to post positive messages and facts about the product, the industry and our borrowers.”

McGrath also says the industry needs to be vocal when it comes to the press. “When we see a controversial, contentious and all-round negative article, we need to respond and correct it as an industry. Likewise, we should promote articles that depict reverse mortgage loans accurately and positively as a viable financial planning tool for retirement. Borrower stories and articles promoting expert opinions can combat the negative, outdated articles and new groundbreaking studies need to be funded. The bottom line is we just need more of us in the industry to make this our mission, with consistently greater frequency.”

Apanay says reverse professionals can help propel the product forward by acting with integrity and furthering their product education. “A larger number of originators need to be more interested in serving the seniors’ need than making a sale. Don’t misunderstand me, we’re all here to make a living, but there’s a right way and a wrong way. Serving seniors is how this industry was built and with numerous changes over the past several years, I think we’ve lost some level of integrity and expertise. A commitment to education from every loan originator is key! If you don’t fully understand the math, you have no business taking a loan application. If every company, every loan originator, raises the bar on education, we can improve the product’s reputation. It’s a great product, but may not be the solution for everyone, and it’s our job to help consumers figure that out.”

Kent echoes this idea. “Educate, educate and educate. The goals of every organization should be to educate and inform the consumer about the reverse mortgage product. If we do a good job educating and informing, borrowers will be able to make the decision about whether the product is right for them.

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Top HECM Financial Planning Stories of 2015

Consider these “sunrise” stories published in 2015 and start your study.

For the reverse mortgage industry, 2015 was a big year for retirement research as financial planners, likely spurred by the arrival of the Financial Assessment in April, published a series of papers, studies and reports demonstrating the effective uses of reverse mortgages in retirement income planning—more than any other year in recent memory.

While RMD recently published its most popular stories of 2015 already, none of the top-10 posts included in this list featured articles on the many advancements of reverse mortgage financial planning research that surfaced this year.

Rather than let the tireless efforts of researchers fall by the wayside, the plethora of this research, which ultimately raises awareness of the effectiveness of reverse mortgages for both consumers and the advisers who work with them, deserves honorable mention.

That being said, here are the top-10 most read reverse mortgage financial planning articles of 2015:

  1. December 28 — Reverse Mortgage Heirs Are ‘Dead Wrong’ About Their Inheritance

Adult children often get skittish when their parents are taking out a reverse mortgage, mainly concerned that doing so will fritter away their inheritance.

Through the judicious and responsible use of a reverse mortgage, if used with the proper estate management in place following the borrower’s death, a borrower can actually provide heirs with a substantial bequest in the form of a securities portfolio, the money from which they may be eligible to receive tax-free, according to a presentation by one practicing tax attorney and reverse mortgage researcher at an industry event this fall.

  1. April 8 — Survey of Financial Planners Reveals Need For Reverse Mortgage Dialogue

A survey by The America Institute of Certified Public Accountants this year indicated that more than half of CPA financial planners said running out of money is a top retirement concern for their clients.

But while the survey took note of annuities and Social Security as stable sources of retirement income, the absence of reverse mortgages underscores a need for increased dialogue between the reverse mortgage and financial planning industries.

  1. August 3 — 3 Tips to Forging Reverse Mortgage Relationships with Financial Planners

While there may not be a “silver bullet” when it comes to reverse mortgage loan originators forging partnerships with financial planners, some were seeing major success through persistent, strategic efforts.

To learn some key tips for LOs to create relationships with planners, RMD chatted with Shelley Giordano, chair of the Funding Longevity Task Force, an organization that helps educate financial planners through various partnerships. Read the article to see what she had to say.

  1. October 29 — Reverse Mortgages are ‘Triple Win’ for Retirees, Advisors and Mutual Funds

Home Equity Conversion Mortgages (HECMs) can offer a myriad of benefits to the borrowers they server, but they can also be attractive to financial advisors and even mutual funds, according to one reverse mortgage researcher.

A small draw from a reverse mortgage credit line at the right time can increase the long-term growth of a person’s securities portfolio, which may include a 401(k) or rollover IRA account. For these reasons, reverse mortgages can benefit mutual funds and financial planners by providing their clients with extra duration of these securities accounts, said Barry H. Sacks, a practicing tax attorney in San Francisco.

  1. November 12 — How Tenure Payments Trump the Reverse Mortgage LOC in Retirement Planning

Various studies have shown how a reverse mortgage line of credit, when used as part of a coordinated retirement planning strategy, can add value to a retiree’s investment portfolio.

But while the line of credit option has garnered considerable attention in financial planning discussions, in certain situations reverse mortgage tenure payments can significantly improve a portfolio’s success rate even further, according to a study published in November in The Journal of Retirement by Tom Davison, a reverse mortgage blogger and financial planning partner emeritus at Summit Financial Strategies, Inc. and Keith Turner, a reverse mortgage advisor with Retirement Funding Solutions.

  1. November 11 — 6 Strategies for Using Reverse Mortgages in Retirement Planning

Following research published earlier in the week, which detailed the various strategies for using reverse mortgages in retirement income planning, another paper explored six specific methods of incorporating home equity into a retirement plan and how each strategy impacts spending and wealth of the borrower.

The paper published by Wade Pfau, a professor of retirement income at The American College of Financial Services, analyzes different reverse mortgages possibilities in efforts to provide financial planners and their clients with a deeper context for considering how to incorporate home equity into a retirement income strategy. A breakdown of the six strategies can be found on pages 8-9 of the original paper.

  1. October 26 — Reverse Mortgages Offer ‘Disruptive’ Retirement Strategy

Reverse mortgages, while they have been around for decades even before the Department of Housing and Urban Development formally created the HECM program in the late 1980s, today they are becoming a “disruptive” way to leveraging home equity.

In the spirit of Silicon Valley, where the term “disruption” has become a buzzword among tech companies looking to radically change the conventional way of doing certain tasks, reverse mortgages are disputing the long-held emotional attachments tied to the home and how home equity can be used in building retirement wealth, according to a webinar from the Financial Planning Association, in which Barry Sacks presented.

  1. September 21 — Reverse Mortgage Line of Credit is ‘Best Bet’ for Retirement Planning

As the reverse mortgage industry continued to grapple with the “loan of last resort” reputation in 2015, one associate professor of finance in St. Louis suggested that the line of credit feature may be the reverse mortgage product’s best bet in becoming a serious retirement planning tool in the eyes of both retirees and the financial professionals working with them.

A standby line of credit can offer borrowers, particularly those who are planning or the long-run and not seeking a last resort solution, the peace of mind in knowing that they will have funds, which grow over time that can be accessed for any number of reasons.

But while greater education still needs to happen to raise awareness of using reverse mortgages in modern-day retirement planning, the line of credit could be the ticket to helping the HECM ditch its “loan of last resort” reputation once and for all.

  1. October 14 — Standby Reverse Mortgage Line of Credit: A Retirement ‘Must Have’

In a similar vein to the third-ranked financial planning story of 2015, the standby reverse mortgage line of credit strategy has been touted as a “must have” in the eyes of financial advisors and their clients—and that is primarily thanks to the HECM program changes over the last few years, which have changed the way reverse mortgages should be perceived in modern day retirement planning.

  1. November 9 — New Paper Spells Out Reverse Mortgage Strategies for Financial Planners

If you haven’t caught on by now, most of this top-10 list has focused on the need for the reverse mortgage industry to build a bridge with the financial planning community. And while much of this list has harped on the need to educate planners on the benefits of reverse mortgages, it’s only fitting that the most-read financial planning article on RMD in 2015 would be about a paper published in The Journal of Retirement.

The paper authored by Davison and Turner (see #6) provides a comprehensive catalog of the various strategies in which a reverse mortgage can be used effectively in retirement planning today.

Davison and Turner draw from a slew of previously published research from established reverse mortgage researchers such as John Salter, Harold Evensky and Shaun Pfeiffer, who have studied the “standby” reverse mortgage line of credit strategy; as well as other notable researchers, including Wade Pfau and Barry Sacks, whose respective research has focused on the synergies produced by a reverse mortgage credit line when used as part of a comprehensive retirement planning strategy.

“Overall, the major positive surprise is the value reverse mortgages can add to the lives of retirees, both those who already look forward to a satisfying retirement and those who are not as well prepared financially but will make it through,” wrote Davison and Turner. “This bodes well for a country with a rapidly expanding and aging retiree population.”


Is this your house — mortgage or no ?

If you own one of these houses, it is worth $450,000, has a $200,000 mortgage on it and $1395 monthly payments. Over the course of the 25 year term left on the mortgage, you will pay out $418,500 in monthly payments. Is that OK with you?

If you are 62, you can get a HECM and eliminate the mortgage payments, putting the $418k you will pay out over the course of the mortgage in your pocket or spending it as you see fit. If you don’t have a mortgage, you could put more than a quarter million dollars cash in your pocket, do with it what you want taxfree and have an even better time than you are having now. What do you say?

With a HECM, your house is still yours, and nobody (besides you) has their name on your title. There is a mortgage  you don’t ever have to pay and in the end when you leave this earth, your home goes to your children just like you hoped. Any equity left in the home is theirs.

Why wouldn’t you get a HECM?  Yes, you could get another forward loan and there is a major difference — more and larger payments and in the end — no equity with which to get a HECM to eliminate your mortgage payments.

So you’ve been good and paid off your mortgage — even more so, the HECM contributes a lot of financial benefit for you in retirement mode, giving you valuable resources you didn’t know you had.

Do you know what to do to make this happen? I do. Call me anywhere in the United States, Warren Strycker, 928 345-1200 and let’s talk.

I enjoy making house payments; SIGN HERE

I am Hesitant because…

(please check all that apply)

I enjoy making house payments?

I have no need for extra cash?

I don’t like to travel?

I don’t want to help my family financially?

I get to take my house with me when I die?

I’ve seen it all, done it all?

I don’t really like having fun?

I have no hobbies?

I have no dreams?

I want to work until I die?

I enjoy barely paying my bills each month?

I don’t trust or care about anyone?

I don’t believe you — even though millions are doing the HECM safely?

I want to sacrifice my whole life — then let my kids blow the money when I’m gone?

I understand the mortgage interest deduction will be eliminated but I still want to make payments even though I don’t have to. (standard deduction $11,800)?

I love having the risk of Foreclosure hanging over my head or

Dead Equity just sitting there?

I have made payments for 20 years…

it won’t happen to me?



X ______________________________



Reverse Mortgage Heirs Are ‘Dead Wrong’ About Their Inheritance

Adult children often get skittish when their parents are taking out a reverse mortgage, mainly concerned that doing so will fritter away their inheritance. Those concerns, however, are largely unfounded, especially if the reverse mortgage is used strategically and the proper estate management is in place following the borrower’s death, says one tax lawyer and reverse mortgage researcher.

Through the judicious and responsible use of a reverse mortgage, a borrower can actually provide heirs with a substantial bequest in the form of a securities portfolio, the money from which they may be eligible to receive tax-free, according to a presentation at last month’s NRMLA conference in San Francisco by Barry H. Sacks, J.D., Ph.D, a practicing tax attorney.

A reverse mortgage accrues interest over a long period of time, but the interest is not deductible until it is actually paid. The tax law that dictates how much of the accrued interest is deductible, and under what conditions.

If the estate management is done well, Sacks said there is a deduction available to reverse mortgage heirs that would otherwise be lost under the conventional approach to estate planning, where the estate sells the home and distributes the proceeds among heirs and beneficiaries.

“This deduction would be lost in the conventional way that estate planning is done, but it can be recovered if the deduction can go to those children so they will get not only a great big 401(k) account left over from their parent, whose account has been enhanced by the judicious use of a reverse mortgage credit line, but they will also get that money tax-free—or at least a portion of it to the extent of the deduction,” he said.

This strategy can be appealing to the emerging group known as the “mass affluent.”

Mass affluent

The “mass affluent” is a term used to describe Baby Boomers who are nearing retirement. It’s a misleading term in that these Boomers are not massively affluent, rather there is a mass quantity of them and they are almost affluent.

Typically, members of this group have between $750,000 and $2 million of net worth at retirement; they primarily rely on investments in their 401(k) or rollover IRA; and their homes are mostly paid off.

Mass affluent retirees have three objectives, Sacks noted. First and foremost, they want cash flow sustainability, meaning they want to have enough funds to last them throughout retirement. Second, they also want to retain some financial cushion in the course of their retirement to be available in the event of an emergency. Third, they want to pass assets onto their heirs and beneficiaries, also known as a bequest motive.

In previous research, Sacks pointed out that mass affluent retirees can achieve all three of these goals without sacrificing one for another. And that’s where a reverse mortgage comes into play.

“The point is, you may erode a little bit of the home equity, but you’re adding a lot more to the overall value of the securities portfolio,” he said.

Various research has shown that using a reverse mortgage cansignificantly enhance the success rate of a retiree’s portfolio, particularly when obtaining a reverse mortgage line of credit earlier in retirement as opposed to using one as a loan of last resort.

But for a retiree who wants to downsize into a smaller home, using a Home Equity Conversion Mortgage (HECM) for Purchase can help them better achieve their three retirement objectives while preserving their securities portfolio and providing a favorable deduction to heirs following the death of the reverse mortgage borrower.

HECM for Purchase vs. IRA

Consider a retiree who has an IRA of $1 million, a home value of $1.1 million with a mortgage of $500,000—thus, providing equity of $600,000. This person wants to sell their home and downsize to a house that will cost $850,000. Additionally, the retiree will need about $45,000 per year (inflation-adjusted), plus Social Security for living expenses.

All of this criteria was posited by Sacks during his presentation to show an illustrative example of a strategy that enables retirees to advance their three retirement objectives (cash flow sustainability, preserve funds for emergencies and bequest motive).

To buy his new $850,000 home, the retiree can proceed in either one of two ways.

For the first method to obtain the $250,000—in addition to the $600,000 realized from the sale of the old house—the retiree could draw on his IRA. Doing so reduces the $1 million in the IRA to $650,000 (i.e. of which $250,000 is used toward the purchase of the new home and the other $100,000 is for income tax on the total $350,000 withdrawn).

The second method: obtain a HECM for Purchase for $250,000, thus leaving the IRA untouched at $1 million.

While both methods are viable solutions to help the retiree purchase the new home, each has a very different impact on cash flow and the probability of it running out over the course of retirement.

After running Monte Carlo simulations for both scenarios, Sacks finds the probability of cash flow surviving 30 years in retirement is only 30% if the retiree does the IRA transaction. That means there is a 70% likelihood of running out of money during a 30 year retirement.

By taking the $350,00 from the IRA, the $650,000 remaining is far too little to enable it to sustain a $45,000 per year inflation-adjusted distribution for many years, Sacks noted.

Whereas if the retiree took the HECM for Purchase, he would get better than an 80% probability of cash flow survival out to 30 years, and about a 90% probability at 25 years, according to the Monte Carlo simulations.

“That’s much better,” said Sacks.

Both scenarios directly advance the first retirement objective of cash flow sustainability, but also meet the other two objectives as well. So the next step in realizing the deduction accessible to heirs is calculating how much interest has accrued.

Interest accrual

Interest is easy to estimate, Sacks noted, since the loan principal is all taken at the outset of the transaction and there isn’t the problem when different amounts of principal are taken at different times. The interest rate, however, varies.

Even when assuming the interest rate is somewhere between 6% and 8%, the total interest that will have accrued over time will amount to numbers in the several hundred thousand dollar range.

Taking the middle ground, at a 7% rare, the simple accrued interest on the $250,000 debt from the aforementioned example will reach $262,500 at 15 years; $350,000 at 20 years; and $437,500 at 25 years.

“That’s a lot of interest and that could be deductible,” Sacks said.

Determining how much the IRA account is likely to be worth in 15 years and beyond is not as simple as calculating accrued interest, because a portfolio of securities—particularly one that is being drawn upon—can have any value in a whole range of potential values, Sacks noted.

After running several simulations, more than 70% of the potential outcomes are values of $1 million or greater with the reverse mortgage transaction at least 15 years later. That means there is greater than a 70% likelihood that there will be more than $1 million in the IRA. Meanwhile, if the retiree used the IRA transaction method, at 15 years there is only a 12% probability that they will have that much money.

What these simulations indicate, Sacks noted, is that there is a very high likelihood that, if the interest amounts shown are deductible, then there is plenty of IRA value which the deductions could be taken upon distribution from the IRA.

Deductions and estate management

The Internal Revenue Code (IRC) allows deductible interest secured by a residence if it falls under the category of Acquisition Indebtedness.

Acquisition indebtedness is defined as indebtedness that is incurred for the acquisition, construction or improvement of a qualified residence of the taxpayer and is secured by that residence. This also includes any refinancing of such indebtedness, but only up to the limit of the outstanding principal at the time of refinancing. The IRC allows interest to be deductible if the Acquisition Indebtedness is on a debt less than $1 million.

“You saw [earlier] that there were several hundred thousands of dollars in the interest,” Sacks said. “That would enable the heir who gets the house to sell the house, and that’s how that interest deduction would become available—it’s available to the person who pays it off.”

The central point in this grand recipe Sacks laid forth is that the conventional approach to estate management—where the estate sells the house, pays off the reverse mortgage and divvies up the proceeds among heirs—wastes the possible interest deduction.

“Instead of the estate selling the house and paying off the reverse mortgage, the proper estate planning to achieve this result is to have the heir and beneficiary of the 401(k) or the IRA get the house directly, then sell it, because that’s the person who gets the deduction under the regulation,” Sacks said.

In other words, whoever happens to do the selling gets the deduction. This strategy may need to be written into the client’s will or trust; and an arrangement must be made between the borrower, borrower’s heirs and the reverse mortgage lender or servicer on how the house is going to be disposed of.

The HECM for Purchase example explained earlier is the ideal situation for the Acquisition Indebtedness treatment, according to Sacks, who noted that the clear purpose of the reverse mortgage is the acquisition of a personal residence. And under such treatment, the entire amount of the accrued interest is deductible when paid.

Though complicated in nature, this strategy may ultimately diminish one of the most common qualms of heirs believing that their parent’s reverse mortgage fritters away their inheritance.

“In fact, the adult children are dead wrong because by taking a reverse mortgage and using it strategically, the parents are actually enhancing their heirs’ inheritance,” Sacks said. “They’re boosting—and by a lot—the overall value of their securities portfolio.”

This, Sacks added, creates synergy and a “positive sum game,” where a relatively small reduction in the home equity results in a much larger increase in the value of the securities portfolio.

“Moreover, by thoughtfully planning or administering the estate, these heirs are going to get some, or all, of that securities portfolio free of income tax,” Sacks said. “It’s a pretty good result, especially if you’re a tax lawyer.”

And, there are significant benefits if you are a Safe Money advocate. Warren Strycker, 928 345-1200 and/or

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Should you do a HECM Reverse Mortgage?

by Warren Strycker, financial professional.

Editor’s Note: For more than ten years, I have pitched the message of hope in the reverse mortgage as a missionary loan originator, mostly to people who were not in a position to do anything else. They did not prepare for retirement (for whatever reason, good and bad)  and the only assets left were in their home equity. I helped a lot of good folks get a new start when there was no other way to go financially.

The process was often tough on them as it was tough on me to accomplish it. Those who found joy in badmouthing what I did was mostly not acquainted with the facts and didn’t want education for competitive reasons they defended sometimes viciously. I never participated in the bad faith use of the proceeds that the enemies of the reverse mortgage touted as true, and mostly I don’t believe many went to the casinos with their home equity proceeds.

My take on the reverse mortgage is pretty simple. Over the years, you paid mortgage payments so that one day you could use the equity you built up by taking a big part of it out in a refinance. You own the equity and you have the right to use it. Equity in your house it pretty much “dead” in that it serves no real purpose other than personal pride.

Any payments you make with a reverse mortgage not required and mostly people don’t make them, enjoying the increased cash flow in the household budget as a bonus.

As years progress, the reverse mortgage has become the butt of a lot of people’s emotional views preventing those who qualify for financial relief from enjoying the benefits of another chance at thriving in retirement. As a result, people getting a reverse mortgage would rather keep it quiet because they believed to get an RM was a symbol of their financial failure.

Any issues over cheating your children out of the value of your home has been mostly ignored. Your children have homes of their own and probably don’t want yours anyway. Usually, there will be equity left to give them a token gift referred to as their inheritance — free money they didn’t earn and probably won’t use up responsibly. From my point of view, they can do without the Lamborghini they would buy with your money. What they think about you personally probably won’t depend on the size of their inheritance.

People entering those portals now are entering with a new set of regulations in what is called “financial assessment”. Not all will enter now but most enter and are benefited by pouring new concrete over an old financial floor. The evolving process does more to solidity the security of the plan than it did before and for many in the future, financial relief will be found in the establishment of a HECM mortgage.

Now I promote a more positive focused view of the financial side of retirement. The reverse mortgage can be a helpful tool in restructuring retirement finances and it does not have to be a bailout to make sense . Today’s focus is hoping you see the wisdom of OZ in preparing more adequately for retirement income. (Most of you already have in you the wisdom to promote your own financial goals and benefits. It’s OK to believe what you want about a reverse mortgage. (I did)).

Some are now promoting the idea that home equity can be wisely treated along with other assets to balance out the need for a thriving retirement. Another generation will record the results of that plan for retirement wisdom. If I am still alive when that happens, I will probably be a part of it. In the meantime, I assume the position of financial planner to those who don’t know what that is and I have only the credential of experience to promote it now.

I hold up for your scrutiny the ones that did work —  as I transition a bit to tout the ones that work for you.