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#171: Using a reverse mortgage to “regularize” retirement income


As a financial advisor, you’ve found, the trickiest aspect of advising clients who come to you at the brink of retirement, is helping them select an appropriate and “safe” system of withdrawals from their investment accounts to support their lifestyle needs. As Morningstar observed in its White Paper on “The State of Retirement Income 2023, many couples seek a “paycheck equivalent” in retirement, aiming to withdraw the same amount every month, (adjusted for inflation) for the duration of their lives.

Often, as an advisor, you spend time explaining to clients that for most retirees, spending patterns hardly turn out to be that regular. In reality, retirees tend to spend most during the beginning years of retirement, with spending leveling off in the middle to later years of retirement, when health concerns often escalate. The right level of withdrawal is going to need ongoing review and discussion. Obviously, a lot depends on variations in the investment markets, and you and your clients need to allow for the “sequence of returns” that has the power to sink or support even the most careful of withdrawal plans.

For clients who not only own their home, but who contemplate continuing to reside in that home for the rest of their lives, part of  your income planning discussion with them might include reverse mortgage funding. “Freeing up” the equity in their home allows their housing wealth to serve as a retirement income “buffer” injects greater elasticity into the income withdrawal calculation.

Set up as a line of credit (with the unused portion being credited with growth at the same rate as the interest being charged on the borrowed funds, the reverse mortgage can add a “client comfort factor that gets clients closer to an “aah-just-right” feeling about their brink-of-retirement income planning. 

Readers, if you’d like to see what you might qualify for with a reverse mortgage in Indiana, or to download your Reverse Mortgage Guide Click Here (and scroll down).

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Borrower must occupy home as primary residence and remain current on property taxes, homeowner’s insurance, the costs of home maintenance, and any HOA fees. David Garrison, NMLS ID 1595194. Mutual of Omaha Mortgage, Inc. dba Mutual of Omaha Reverse Mortgage, NMLS ID 1025894. 3131 Camino Del Rio N 1100, San Diego, CA 92108. Indiana-DFI Mortgage Lending License 43321. Michigan 1st Mortgage Broker/Lender/Servicer Registrant FR0022702. These materials are not from HUD or FHA and the document was not approved by HUD, FHA or any Government Agency. Subject to credit approval. For licensing information, go to: Equal Housing Lender