Category Archives: HECM Refinance

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.

See contact information in navigation bar for details.

“Warming up to HECM mortgages”, Taylor

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

95See contact information in navigation bar for details.



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.

Line of Credit Growth (1)

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.

Dayton3A 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.

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.

HECM spectrum

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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.


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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.

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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.

HECM spectrum

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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.

Find out if you qualify:

Call a 12 year veteran professional, Warren Strycker, 928 345-1200. He can give you a quote.


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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Financial Planner recommends HECM “synergy” with use of coordinated credit line.10/27/2015Similar post

Counseling Research Sheds New Light on Reverse Mortgage Borrowers11/23/2015Similar post

Home equity is sweet spot for peaceful retirement using all the financial tools at your disposal09/13/2015Similar post


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.

Getting Hired After 50

What older adults need to know when they’re back in the job market.

Whether you’re looking for full-time work or a part-time position, conducting a successful job search after 50 can be challenging. It often takes baby boomers longer to land a new position, says Robin Ryan, a career counselor and author of Over 40 & You’re Hired! While the average time for unemployed people under 35 to get a new job is just under four months, for older adults it typically takes nine months to a year to land a new position. And securing that new job may even mean changing occupations all together—a recent AARP survey found that 53 percent of reemployed workers 45 to 70 did so. But you can improve your chances of landing a new position quickly by following these simple tips.

Keep Your Resume Relevant

Highlight your experience from the last five to 10 years, emphasizing your most recent accomplishments. Also create a PDF of your résumé so you can easily upload it to online job sites or email it to the contact specified in the job posting.

Modernize Your Search

Pepper your résumé and cover letter with keywords and phrases used in the job posting. Most large companies use applicant tracking systems (also called robots), which filter résumés by scanning for contextual keywords and key phrases, then mathematically score them for relevance. Only the highest scoring ones get through for human review.

Get on LinkedIn

“Create a profile that advertises your strengths and your accomplishments,” says Ryan. Don’t simply copy and paste your résumé though. LinkedIn gives you an opportunity to show a bit of personality and give context to your achievements. Also, be sure to include a professional-looking headshot. No image at all may be off-putting to potential employers.

Look the Part

Landed an interview? Congratulations! Before your in-person meeting, Ryan advises making sure you look contemporary to today’s work world. “That may mean updating your hairstyle, or investing in a new interview outfit.”

What if social security disappeared tomorrow?

What if American citizens’ pessimistic concerns about Social Security and its viability for the future turned out to be accurate?

What if tomorrow Congress got together and came to a fateful compromise? Rather than trying to increase taxes or allow private investment accounts with the currently collected FICA taxes, they dissolved the program.

It is a drastic scenario but one believed possible by a high percentage of future recipients, and a majority of millennials. As recently as last year, 81 percent of this demographic stated they were concerned Social Security would not be there in the future, according to a study by Transamerica’s Center for Retirement Studies.

Perhaps ironically that same study concluded that generation was taking steps to save far more proactively than prior generations. They are going to need to, for sure.

Retirement planning – with no assumed income from any source or accumulated savings – is tough for the average household, even those closer to retirement. Consider a household without work, rental income or pensions but $250,000 saved. The family would have just $10,000 a year of income assuming the 4 percent rule for how much they would withdraw in the first year of retirement.

And considering the average household doesn’t have near that figure saved, there would be millions of families with no real hope of stepping away from work.

On the other hand, under this hypothetical scenario practically every worker in America would see a substantial increase in cash flow overnight. If there is no future benefit to receive, there would be no FICA tax to pay on either the employee or employer side. This represents 6.2 percent of income up to $117,000 or a maximum of $7,254 per year, per person and also up to that amount of savings for the employer.

Not everyone earns $117,000, but what would people do with an instant several hundred dollars a month after tax? Some would spend it, leaving them nothing for their old age. But others would pay down debt and save the rest to recreate the safety net Social Security provides.

And what would employers do? Would they forward on that money to employees or keep it as profit causing the stock market to explode, or reinvest it for growth, possibly creating more jobs?

No one knows what the future holds, or what possible adjustments to the system future leaders will make. A more gradual shift to a later retirement date seems likely, just as was done in 1983. When that amendment was passed, it didn’t affect a single person’s benefit for 17 years, and increased the retirement age over a 22- year period.

Simply repeating this step would lead to Social Security’s viability for decades to come.

Keep in mind people’s natural inclination to “not believe it until I see it” as well. In a survey done in 1979, only 32 percent of workers believed Social Security would be able to fund its future benefits, according to the Social Security Bulletin.

That’s 36 years ago and counting. Those same survey takers are, thankfully, today’s recipients.

Brian Kuhn is a certified financial planner at PSG Clarity, a division of Planning Solutions Group, who lives in Odenton with his wife and two daughters. You can reach him at 301-543-6035 or He offers securities through Triad Advisors, Member FINRA/SIPC. Advisory Services offered through Planning Solutions Group, LLC. Planning Solutions Group, LLC is not affiliated with Triad Advisors. PSG Clarity is a division of Planning Solutions Group, LLC.


Counseling Research Sheds New Light on Reverse Mortgage Borrowers

November 22nd, 2015  | by Jason OlivaPublished in CounselingHECMNewsReverse Mortgage

People get reverse mortgages for a variety of different reasons. Also varied are the motives behind why some borrowers go through Home Equity Conversion Mortgage (HECM) counseling and then ultimately decide against getting a reverse mortgage.

New research funded by the MacArthur Foundation and the Department of Housing and Urban Development aims to provide some insight into what influences prospective borrowers to follow through with a reverse mortgage, terminate their HECM, or not get one entirely.

The research is based on empirical modeling on reverse mortgages and survey data from HECM borrowers during a period of three to nine years after having received mandatory counseling, said researcher Stephanie Moulton, associate professor at the John Glenn College of Public Affairs at Ohio State University, during a presentation at the National Reverse Mortgage Lenders Association (NRMLA) annual conference last week.

With the help of ClearPoint Credit Counseling, researchers recorded information for 1,778 people counseled by ClearPoint between 2012-2014 who fit into three categories: people who didn’t obtain a HECM; those who obtained and kept their HECM; and people who obtained and then terminated their HECM. The average age of respondents was 70 years old.

For borrowers who obtained a HECM, being able to afford everyday expenses was their primary reason for getting a reverse mortgage (42%), whereas paying off a mortgage was main influence for others (38%).

Additionally, another 15% of people expressed they wanted to use their reverse mortgages as retirement tools, specifically so they may “postpone other retirement income,” Moulton said. For about 9-10% of people, “locking in home equity as a hedge against house price risk” was another cause.

Researchers then looked at people who didn’t get a reverse mortgage—those who did HECM counseling and did not “pull-through.”

Of this population, a sizable share attributed their reasons to a perceived ineligibility, thinking that they were personally ineligible (17%) for a HECM, or their property didn’t meet standard requirements (22%).

“Only about 28% are saying ‘costs are too high,’ which I know has been one of the big things that we all believe is what deters people [from getting a reverse mortgage],” Moulton said.

About one-third of respondents cited “the amount of money they can get is too low” as their main reason for not obtaining a HECM, whereas interestingly enough, selling the home and moving was the driver for only 6% of people for why they didn’t get a reverse mortgage. Only 2% of respondents said their reason for not getting a HECM was because “a financial advisor advised against it.”

The vision of the FHA’s Home Equity Conversion Mortgage program is to enable senior homeowner to age in place, essentially giving them a better quality of life and overall well-being as a result of being able to continue living in the home. But is this concept actually happening for borrowers who obtained HECMs, and how does their satisfaction compare to the lives of borrowers who decided not to get a reverse mortgage in the months following counseling?

Even among those two populations, those who got the reverse mortgage rate certain aspects of their current situation significantly higher than those who didn’t get a HECM, Moulton said.

“Those who got the reverse mortgage rate the condition of their home statistically higher than those who did not get a HECM,” she said. “They also rate their satisfaction with their city or town higher, along with daily leisure, family life and their present financial situation.”

But that is not to say the “terminated” group—those who got a HECM then terminated it—was an unhappy bunch.

“The ‘terminated’ group are really not unhappy or disgruntled, which was a surprise because we thought these are going to be our grumpiest folks,” Moulton said. “We thought they would be the ones to say [getting a reverse mortgage] was a mistake. We did not find that.”

The results of the survey served as a sneak peak to the actual study, which Moulton said would be formally released early next year.

Written by Jason Oliva

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.


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: and/or

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”.

Questions about a HECM?

Below are some common questions about HECM loans:

What is a Home Equity Conversion Mortgage loan?

A HECM loan allows homeowners aged 62 and older, to convert a portion of their home’s equity into tax-free funds and eliminates the need to make any monthly mortgage payments. This allows many homeowners to obtain the cash they need to improve monthly cash flow, pay off debt, fund home repairs or renovations or build a safety net for unexpected expenses.

How do I qualify for a Home Equity Conversion Mortgage loan?

One Borrower on the Home’s Title Must be 62 years of age

The home must be your primary residence

The home must have sufficient equity and you must be able to pay off your existing mortgage (if any) using the HECM proceeds.

Most single-family homes, two-to-four unit owner-occupied dwellings, townhomes, or approved condominium or manufactured homes

How much money could I receive?

In general, the older you are, the more equity you have in your home and the lower your mortgage loan balance; the more money you can expect from a HECM loan.

How do I receive my proceeds?

Depending on how your structure your loan, there are multiple options to choose from when deciding how you would like to receive your loan funds. You can receive a lump sum payment, monthly payments or obtain a line of credit.

Do I have to pay income taxes on the proceeds?

Money received from a HECM is tax free as it is not considered income. However, you should consult your financial advisor for any effect on taxes.

Still have questions? 

Consult your appropriate government agencies for any effect on taxes or government benefits.

You must still live in the home as your primary residence, continue to pay required property taxes, homeowners insurance and maintain the home according to FHA Requirements.

The funds available to you may be restricted for the first 12 months after loan closing, due to HECM requirements.

Borrowers may access the greater of 60 percent of the principal limit amount or all mandatory obligations, as defined by the HECM requirements, plus an additional 10% during the first 12 months after loan closing. The combined total of mandatory obligations plus 10% cannot exceed the principal limit amount established at loan closing.

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.



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

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Warren Strycker 928 345-1200

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(This HECM information website,, launched July, 2015)