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#7 Reverse Mortgage Enables Foray into Impact Investing


Now that you and your spouse have each survived both your first four years of retirement and COVID-19, you’re more than ever determined to make a difference in the way you conduct your lives, including the way you invest your money. Your portfolio choices in your retirement accounts have been quite traditional, and you’re still not ready to step very far out of that mold. On the other hand, the two of you have been reading up on “impact investing” in terms of making choices that positively affect the world, particularly when it comes to the environment. You have been learning about developments in sustainable agriculture and renewable energy, and these are the areas that interest you most. At the same time, you know you need to be prudent, since you are dependent not only on pension income, but also on your investments for cash flow. Basically, you’re seeking to make an impact without negatively affecting your own ability to preserve assets and generate quarterly income.

You have considered refinancing the home in which you hope to spend your remaining years. The purpose would be to make a one-time meaningful gift in the form of a donor advised fund. You like the idea of making a decisive move today (and taking an immediate tax deduction) without needing to make all the decisions now about which specific charities will benefit. The home values in your neighborhood have increased dramatically, and you’d have the chance to access meaningful dollars and still fit the payments into your budget. Still, you’re hesitant to take on an increased monthly obligation.

It’s possible that accessing housing wealth in a different manner might provide the perfect solution. With a reverse mortgage, you would be accessing dollars to fund your donor-advised fund without taking on an obligation to make payments every month or quarter. As you’ve stated, the growth in your home value could allow you to access meaningful funding for your donor-advised fund. Of course, you would continue to pay the property taxes, insurance, and maintenance costs on the home, but any remaining mortgage obligation you have could be paid off, possibly still leaving funds that could be used in emergencies.

As an alternative approach, you might discuss with your tax advisor setting up the reverse mortgage so as to generate retirement income, using some of your investment assets to fund the charitable initiative.

Some careful thought and planning will be needed, but using housing wealth to fund impact investing can help build your own financial plan while you set about doing your small part to help build a better world!