2169 East Rutland Lane, Martinsville, IN 46151
Corporate NMLS #1025894

In a recent article, Dan Moisand, CFP® notes that predictions about “safe withdrawal rates” in retirement planning are flawed, because they are typically based on the assumption that spending habits will remain level over decades…

Looking back, of all the decisions you needed to make when planning your retirement a couple of years ago, the most challenging for you as a couple was figuring out how much money you’d be spending each year. You no doubt started the process by projecting you’d need 70% or perhaps even 80% of what you were used to bringing home while still employed full time. Then, like most of your friends, you set up a 4% withdrawal plan out of your investment assets, since you’d always been told that was the “safe” way to go.

In the beginning, your plan seemed to be working just fine; in fact, so far you haven’t needed to tap your resources for more than the planned monthly distribution. Your spending patterns haven’t dramatically changed. What’s more, due to the pandemic, you’ve cut back on some of the travel you’d planned. You’re in the habit of rebalancing the asset mix in your portfolio a couple of times each year. Despite all these measures, you can foresee a problem. Inthe event some big expense presented itself, your entire plan could be thrown “off balance”. (Dan Moisand agrees, saying “What can stress a client’s finances is a shock event.”)

There is an alternative. Used as a line of credit from which you can draw as needed for any “shock events”, a federally insured reverse mortgage might provide just the retirement income “cushioning” needed. Any “draws” you take from that line of credit will be tax free. Meanwhile, as long as your regular plan of investment withdrawals is working, your reverse mortgage money will remain in “the account”, growing tax free at the same rate as the current interest plus ½% mortgage insurance premium.

Almost every retirement withdrawal system involves a steady, predicted spending pattern. Problem is, reality is seldom stays in lockstep with predictions. With a reverse mortgage, rather than predict, you can create a reliable backup PLAN.

https://mutualreverse.com/david-garrison

^{Not intended as tax advice. Consult a tax specialist.}

2169 East Rutland Lane, Martinsville, IN 46151
Corporate NMLS #1025894

You’ve both always carried on a very active lifestyle, and the first couple of years since your retirement have featured a high level of sports-related leisure activities. To a significant extent, the pandemic “crimped your style” during the past year, but you have high hopes that 2021 will allow you to get back on track. Meanwhile, the pandemic has changed your financial outlook somewhat, in that two of your children have needed help, one due to a job loss, the other due to unexpected medical costs. In order to provide that much-needed parental assistance, you had to liquidate some of your own portfolio assets, which unfortunately increased the income you expect to report on your 2020 tax return.

While you have a reassuringly low level of debt and are covered by Long-Term Care insurance, last year’s events have caused you some concern about maintaining adequate “cushioning” against unexpected future needs. Of course, you would like to avoid triggering excess taxes through unplanned withdrawals from your respective retirement portfolios.

There’s a possible better way. Rather than tapping your portfolios, consider using one of your largest assets as a buffer against unexpected future contingencies. Once having established a Home Equity Conversion Mortgage (HECM) line of credit, you’ll be in a position to help your children deal with setbacks as you judge fit, doing that without altering your investment strategy – and without triggering any negative tax effects for yourselves.

A reverse mortgage might well be your path for rebounding from past, pandemic-induced costs, and for feeling prepared for whatever the future has to bring.

https://mutualreverse.com/david-garrison

2169 East Rutland Lane, Martinsville, IN 46151
Corporate NMLS #1025894

So far, so good, you’d been thinking. In fact, looking back over the five or so years since you retired from the corporate world and became a part time entrepreneur, you’ve kept your financial head well above water. Although 2020 included some scary moments in terms of your investment portfolio, year-end results turned out far better than expected. What’s moiré, in consideration of the pandemic, you’d cut back on travel expenses and were able to add to your portfolio assets rather than drawing them down.

Meanwhile, serious health setbacks suffered by several of your close friends and business allies got you thinking about your own vulnerability when it comes to future healthcare costs. You’ve read about the advantages of “aging in place”, but realize that should illness strike, the cost of even part-time home healthcare services would put enormous strain on your resources, probably forcing the erosion and eventual liquidation of all your investment assets.(According to caring.com, the average monthly cost of in-home healthcare in Indiana as of 2020 is $4334, you’ve learned). Up until now, you have not purchased Long-Term Care insurance, and you realize that is an inevitable next step; you want to make sure the policy would cover the costs of care at home

In “re-ordering” your budget to accommodate your new awareness of financial vulnerability due to deteriorating health, consider using the equity in your home as a backup funding source. Once your reverse mortgage is established, you can set up a regular “draw” to cover Long-Term Care insurance premiums. Alternately, the HECM can be structured as a line of credit, earning interest until such time as you can no longer generate earnings from your business to cover the premiums.

You’re wise to turn your concern over your fiends’ health setbacks into action, rather than allowing worry to consume your energy. A government-insured reverse mortgage might be your way of taking care of Long-Term Care.

https://mutualreverse.com/david-garrison

2169 East Rutland Lane, Martinsville, IN 46151
Corporate NMLS #1025894

As a financial advisor, you’re keenly aware of the need to avoid offering tax advice or legal counsel. Upon uncovering gaps in your client’s protection, (unless you’re licensed to sell property/casualty, life, or even long term care insurance), your function lies in pointing out the need, recommending they seek the advice of a specialist.

The very same compliance principles apply when it comes to talking with your clients about the value of unlocking their housing wealth through a Home Equity Conversion Mortgage (HECM) or reverse mortgage. No, you’re not the one to discuss specific features and benefits of the product, any more than you would discuss the specifics of different insurance policies or trust provisions. What is very much within your purview is first understanding – and then communicating with appropriate clients – the place housing wealth might have in their overall financial plan, then recommending they seek the advice of a reverse mortgage specialist.

You’re wise to be cautious about recommending products or even tactics outside of your expertise, and you’re hesitant to suggest a solution you’re heard was “expensive”. The real questions you and your client must ask, concerning any financial planning recommendation, include: What is the problem being solved? What are the alternatives? What are the risks of doing nothing? (Expensive? Compared to what?)

Stay compliant – always. But the topic of government-insured reverse mortgages belongs on your need-to-know list – and possibly on your client’s as well.

https://mutualreverse.com/david-garrison

2169 East Rutland Lane, Martinsville, IN 46151
Corporate NMLS #1025894

You’ve been doing quite well in semi-retirement, both health-wise and financially. However, you’ve just realized that this is the year in which you’re going to be forced to take the first Required Minimum Distribution out of your IRA account (which represents the bulk of your financial assets). Future tax rates are likely to be higher than today’s, you believe, and you’d like to eliminate the need to take those RMDs going forward.

One tactic you’ve been reading about is converting to a Roth, which would cancel the need for those annual withdrawals and allow the money to continue growing tax-free. Your estate plan would be improved as well, you believe, with your heirs having no tax bill on the inherited funds. The only issue is the substantial tax bill a conversion would trigger this year. While your gig income plus pension benefits and Social Security are more than enough to cover lifestyle expenses and keep some cash reserves, you are in no position to fund a one-time, six-figure tax liability.

Freeing up the resources you’ve accumulated in the form of home equity might provide a solution. Once the Home Equity Conversion Mortgage (HECM) has been established, you can tap the line of credit to the extent needed to pay the tax triggered by the Roth conversion, allowing the unused portion of the reverse mortgage revolving line of credit to continue to grow.

Like love and marriage, reverse mortgages and Roth conversions can, in the words of that old song: “Go together like a horse and carriage!”

Not intended as tax advice. Please consult a tax specialist.

https://mutualreverse.com/david-garrison