Monthly Archives: October 2015

Extend your Snowbirding — GETAHECM.

So you own a vacation home in the sunbelt (or somewhere else where it’s warm in the winter) and it’s difficult to keep both houses financed and you wonder how long you can keep up with the costs. Not to worry. Consider HECM at your primary residence and RELAX with no payments — in fact, you can take your proceeds in a line of credit that actually earns more interest than the contract accumulates without payments of any kind in your lifetime. “Do” the numbers and then call so we can talk about this.

Hmmmmmmmm?

Consider a HECM mortgage on your primary home “back home in Indiana” or elsewhere in the United States. The HECM loan is like a HELOC home equity except that you don’t need to make payments and the cash you receive can be used as a line of credit to support your dual lifestyle or any number of other budget/retirement plans.

Don’t give up on the sun. Extend your time of winter fun using a HECM without payments.

Consider: https://gofinancial.net/2015/10/forbes-reverse-mortgages-can-be-retirement-saving-grace-immediate-change-request/ and/or https://gofinancial.net/2015/09/building-home-equity-is-the-sweet-spot-for-retirement/

See “information” on Home page navigation tab for current appointment. Call for details.

 

Financial Planner recommends HECM “synergy” with use of coordinated credit line.

October 26th, 2015

Reverse mortgages have been around for decades, even before the Department of Housing and Urban Development created the Home Equity Conversion Mortgage (HECM) program in the late 1980s. But while these financial products aren’t necessarily new, today they are becoming a “disruptive” way to leveraging home equity, says one reverse mortgage researcher.

In the spirit of Silicon Valley, where the term “disruption” has become a buzzword among tech companies looking to radically change the conventional way things are done, reverse mortgages are disrupting long-held emotional attachments tied to the home and how it can be used in building retirement wealth, according to a recent webinar from the Financial Planning Association (FPA), featuring Barry H. Sacks, a practicing tax attorney in San Francisco who has researched the effects of reverse mortgages in retirement planning.

In February 2012, the Journal of Financial Planning published a report Sacks co-authored that analyzed the use of home equity via a reverse mortgage. The report mathematically showed how a reverse mortgage line of credit feature can be used to supplement retirement income.

Expounding on the report’s findings during last Thursday’s FPA webinar, Sacks discussed how HECMs can “reverse” the conventional wisdom that has been anchored by perceptions that one’s home is sacrosanct, and that once the mortgage has been paid off, it should never be encumbered to any debt.

“In fact, it’s a wrong-headed idea,” Sacks said. “The notion that you should wait late in retirement before you start thinking about a reverse mortgage is contrary to the way sequence of returns risk can be overcome.”

Using a reverse mortgage line of credit as part of a coordinated retirement strategy can help retirees—specifically, the “mass affluent” who have invested assets in the range of about $500,000 to $1.2 million, and home equity in the same range—who are drawing on securities portfolios like 401(k) accounts or rollover IRAs, Sacks said.

“A small draw from a reverse mortgage credit line at the right time increases the long-term growth of the securities portfolio, such as a 401(k) or rollover IRA account,” he said.

This can be a critical strategy for retirees, considering the most frequent cause of retirement account exhaustion is the sequence of returns risk.

“The conventional wisdom for dealing with risk of exhaustion is a passive strategy,” Sacks said. “Conventional wisdom says: ok, let’s not worry about that until we run out of money. This is a wait-and-see approach.”

When faced with portfolio depletion, using a reverse mortgage as a last resort can prematurely exhaust one’s portfolio much sooner than if a person took a line of credit earlier during retirement.

Per a comparison example provided during the webinar, two people named John and Jim each start off in Year-1 with a retirement portfolio of $500,000 at age 65. Each experience the same investment performance over the course of a 30-year retirement period.

John, however, embraces the conventional wisdom of taking out a reverse mortgage later in life and only does so once his portfolio has been exhausted in Year-24.

“New wisdom” Jim, on the other hand, gets a reverse mortgage with a line of credit feature in Year-2 of his retirement when he’s 66 years old. Jim then draws from his standby line of credit in years following negative returns to his portfolio in years 2, 3, 6 and 23.

At the end of a 30-year retirement, Jim had drawn $295,000 from his reverse mortgage credit line, owed $692,000 on the reverse mortgage loan, but left an investment portfolio of $1,086,000—more than doubling his portfolio value since he retired.

John, who ran out of money on the 24th year, had drawn a total of $447,955 over the course of the seven years he had his reverse mortgage line of credit, but without any money left in his retirement portfolio.

“That is a remarkable example of the synergy that comes from the coordinated use of a reverse mortgage credit line,” Sacks said. “This is crucial because there is such a risk of people running out of money in later years.”

Written by Jason Oliva

Standby Reverse Mortgage Line of Credit: A Retirement ‘Must Have’

 

Research has shown that when using a reverse mortgage in the retirement planning process, rather than using a HECM as a loan of last resort,  the HECM significantly increases the likelihood of a retirement portfolio’s success.When it comes to using a reverse mortgage in retirement planning, there are several strategies that make the standby line of credit feature a “must have” in the eyes of financial advisors and their clients.

That’s primarily due to recent Home Equity Conversion Mortgage (HECM) program changes over the last couple of years, which have changed the way reverse mortgages should be perceived in modern day retirement planning, says Colleen Rideout, home equity retirement specialist at Retirement Funding Solutions.

Launched in January by former Security One Lending head Torrey Larsen, RFS is a company that has roots in collaborating with financial advisors by showing, through academic research, how a reverse mortgage can help retirees fund their longevity. Larsen was instrumental in establishing the Funding Longevity Task Force in 2013 with reverse mortgage industry veteran Shelley Giordano, now the principal of consulting firm Longevity View Associates.

The Task Force is comprised of distinguished reverse mortgage researchers like John Salter, associate professor of financial planning at Texas Tech University; former Mature Market Institute Director Barry Sacks; Tom Davison, CFP; and Wade Pfau, professor of retirement income at the American College—among others.

Since its inception, the group has produced several studies from its members on the practical use of a HECM, and how it fits, as part of a comprehensive retirement plan. It’s this research that has helped “open up a new strategy” in educating non-reverse industry professionals on the merits of HECMs, says Rideout, who regularly teaches continuing education classes on reverse mortgages in her home state of Colorado as well as nationally.

Earlier this month, Rideout presented at the National Association of Insurance and Financial Advisors (NAIFA) 2015 Annual Conference in New Orleans. Her presentation spotlighted the “must have” reverse mortgage line of credit feature to a crowd of financial planners.

“The line of credit strategies are very basic,” Rideout says. “Once you learn—as an advisor or an insurance agent—how the line of credit works, then you can build other strategies on top of that.”

Rideout’s presentation also examined several different strategies a borrower can use the “standby” line of credit feature on their reverse mortgage to complement other their retirement assets.

Research has shown that when using a reverse mortgage in the retirement planning process, rather than using a HECM as a loan of last resort,  the HECM significantly increases the likelihood of a retirement portfolio’s success.

For the HECM nationally, contact Warren Strycker, loan officer NMLS 247179, See contact information in Navigation Bar under “Information”.

Forbes: HECM mortgage Can Be Retirement ‘Saving Grace’; Immediate change needed ahead.

American face a slew of financial challenges on the road to retirement. But as retirees plan to rely on Social Security and personal savings to fund their non-working years, a recent Forbes column says one particularly underused asset can be a “saving grace” for many people: home equity.

While Social Security is by far the largest retirement income asset of the average American, other major sources of wealth must also be considered, and that includes using home equity via a reverse mortgage, suggests Forbes contributor Jamie Hopkins, assistant professor of Taxation at the American College.

“The lack of focus on home equity in retirement income planning is nothing short of a complete failure to property plan and utilize all available retirement assets,” Hopkins writes. “This needs to change immediately because strategic uses of home equity, especially reverse mortgages, could save many people from financial failure in retirement and help stem the overall retirement income crisis facing Americans.”

Home equity can be effectively used as part of a retirement income plan to “dramatically improve one’s financial security,” Hopkins notes, and there are a number of ways to tap into this asset, including via selling one’s home, taking out a home equity line of credit or securing a reverse mortgage.

“While there are a variety of ways to utilize home equity as part of a retirement income plan, reverse mortgages deserve special attention and consideration,” Hopkins writes.

Unfortunately, misperceptions of reverse mortgages long-held by consumers and the general public have hindered the product’s popularity and utilization growth. But given the retirement picture facing Americans today, it is time for these perceptions to change.

“Individuals and industry leaders need to better understand how reverse mortgages cane effectively used,” Hopkins writes. “A more widespread and better understanding of reverse mortgages strategies needs to occur in order to better serve America’s senior population and retirees.”

Read the Forbes column.

Written by Jason Oliva