Morgan Stanley says “Every American’s Home Is Their Retirement Asset”

By Daniel Hunt, Lisa Shalett, Zi Ye, and Stephanie Wang on March 31, 2020

The answer to the question, “How prepared are you for retirement,” depends a lot on whether you look holistically at the balance sheet, including home equity, or just at the portfolio and income sources like Social Security. When home equity is ignored, that can cause households to make suboptimal decisions, such as forgoing longplanned spending it could afford or taking more investment risk than it’s comfortable with. When a questionable decision like that encounters the kind of market downturn we are currently experiencing, it can do serious damage to household finances and well-being.

Find the report here:

How to create a retirement ‘paycheck’

Posted January 3, 2020

Your expenses don’t end when your paychecks do, but creating a reliable income stream in retirement can be tricky. The right choices can result in sustainable income for the rest of your life. The wrong choices could leave you uncomfortably short of cash.

In fact, retirement includes so many important, potentially irreversible decisions that most people could benefit from a few sessions with a fee-only, fiduciary financial planner. (Fiduciary means the advisor is committed to putting your interests ahead of their own.) These ideally would start about 10 years before retirement. Understanding some key concepts could make those discussions easier — or keep you from making serious mistakes if you take a do-it-yourself approach.

Find the full article here.

Reverse Mortgages Can Help House-Rich Seniors Free Up Cash for Retirement. Here’s How They Work.

By Neal Templin on Dec. 14, 2019

Looking to free up $4 million to fund your retirement or pay off your mortgage?

Logo for Barron's

If you’re a senior with serious digs in places like California or the New York City area or other markets where many homeowners are house-rich and cash-poor, you might be able to secure such funds with only your home. The market for jumbo reverse mortgages has come back to life.

Reverse mortgages, in which retirees tap the equity in their homes through mortgages that don’t have to be paid as long as they live there, were long regarded as a last resort. Then financial experts began publishing research several years ago showing that the strategic use of reverse mortgages could help retirement portfolios better survive down markets or delay the claiming of Social Security benefits.

You may find the full article here.

Exploring the Retirement Consumption Puzzle

by David Blanchett, CFP®, CFA

Wanting to learn more about consumer spending in retirement? This article discusses the following topics:

  • Empirical research on retiree spending has noted a “retirement consumption puzzle,” where retiree expenditures tend to decrease both upon and during retirement. This decrease in spending is inconsistent with general economic theories on consumption, which suggest individuals seek to maintain constant consumption over their lifetimes.
  • Government data on consumption was analyzed in this study to understand how retiree consumption actually changes over time.
  • The results of the analysis suggest that although the retiree consumption basket is likely to increase at a rate that is faster than general inflation, actual retiree spending tends to decline in retirement in real terms. This decrease in real consumption averages approximately 1 percent per year during retirement. 
  • A “retirement spending smile” effect is noted. This finding has important implications when estimating retirement withdrawal rates and determining optimal spending strategies.

Propriety Reverse Mortgage Products Could Eclipse FHA’s HECM Program in 2019

Written by Jamie Hopkins on July 2, 2019

The reverse mortgage market world heads in reverse away from the government created Home Equity Conversion Mortgage (HECM) and towards new propriety products. This is an encouraging sign because any healthy market needs competition, innovation, and variety. However, recently HECM program has been the driving force behind the reverse mortgage world, leaving many without an ideal solution to utilizing home equity as part of a sustainable retirement plan.

The article can be found here.

Busting Three Half-Truths About Reverse Mortgages

By Jamie Hopkins on June 24, 2019

Hear from Jamie Hopkins in this Forbes article regarding the public’s opinion on reverse mortgages: “A few years back, I conducted and published research in the Journal of Financial Planning that showed Americans don’t understand reverse mortgages. In fact, respondents scored below 50 percent on a 10-question true-false quiz.

One possible explanation for the poor performance is a lot of misinformation floating about. A recent USA Today article titled “Considering reverse mortgages? Better to reverse course on this risky course” confirms my belief. The article contains many half-truths and misunderstandings and projects a negative connotation of reverse mortgages onto the reader.””