Reverse mortgages have long been viewed in a negative light. Many people perceive them as only for the most desperate of Americans who did not save enough for retirement. But more and more research is coming out suggesting that homeowners of all walks of life seriously consider the merits of a reverse mortgage.
One of the most recent studies on this topic is from Wade Pfau and is titled Incorporating Home Equity into a Retirement Income Strategy. Pfau states, “Strategic use of a reverse mortgage can improve retirement outcomes. The benefits are nonlinear in nature, as they relate to the synergies created by reducing sequence risk for portfolio withdrawals and to the nonrecourse aspects of reverse mortgages that can potentially allow a client to spend more than the value of their home.”
According to Pfau, home equity and Social Security benefits represent the two biggest assets for American households. He states, “Even for wealthier clients, home equity is still a significant asset and should not automatically be lumped into a limiting category of last resort options once all else have failed.” He continues, “It is a great shame for the financial planning profession that the conventional wisdom about reverse mortgages continues to remain so negative and to be based on so many misunderstandings about their potential uses.”
Pfau outlines six different methods for using a reverse mortgage wisely in his recently published paper that can be viewed here. It is well worth the read if you are considering getting a reverse mortgage.
To find out if a reverse mortgage is a good idea for you and your loved ones, it can be helpful to reach out to a Reverse Mortgage Specialist like those at FirstBank. The Reverse Mortgage Team at FirstBank will help you understand all the details about reverse mortgages and get an idea from you about what your goals are for your retirement. If a reverse mortgage is a good option for you, the specialists will walk you through every step of the process. Call FirstBank today to find out about how you can use a reverse mortgage to help protect your retirement income.