Category Archives: News

Risks and Planning: What Did COVID-19 Teach Us?

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By Anna Rappaport, F.S.A., M.A.A.A.

COVID-19 created major new health risks for Americans at all ages and, at the same time, had a major impact on the economy and daily life, exacerbating a wide variety of retirement risks. The retirement system faced major challenges before the pandemic, but the pandemic and its consequences may change the way people look at retirement issues. This article reviews how COVID-19 changed the economic environment, the work environment and the situation for retirees. It provides insights into employer responses to date and a discussion about what they might do in the future. Organizations that make major changes in employment strategies will also need to revisit their retirement benefits strategies. This article further provides a discussion of retirement risks based on recent Society of Actuaries (SOA) research and includes COVID-19 impacts on the risks. It brings together consideration of retirement risks, the environment before COVID-19, changes in that environment and possible future directions for retirement benefits. In 2020, SOA released a new version of its “Post-Retirement Risk Chart” and several reports on retirement risk and COVID-19. These reports were also used to inform this article.​​

https://www.iscebs.org/Resources/BQ/Pages/BQ-executive-summaries-2021.aspx

The Academy of Home Equity In Financial Planning Releases Home Equity Model Language and Guidance for Financial Services Firms

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By Jamie Hopkins and Dr. Craig Lemoine on February 10, 2021

The Academy for Home Equity in Financial Planning at the University of Illinois at Urbana-Champaign believes that certain retirees can have a more secure retirement when home equity is used prudently. The Academy has just released compliance guidance around home equity and financial planning designed to help financial service companies update their language, policies, and procedures, many of which no longer follow best practices in the industry.

https://www.prnewswire.com/news-releases/the-academy-of-home-equity-in-financial-planning-releases-home-equity-model-language-and-guidance-for-financial-services-firms-301226106.html

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

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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:

Every-Americans-Home-Is-Their-Retirement-Asset1Download

How to create a retirement ‘paycheck’

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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.

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By Neal Templin on Dec. 14, 2019

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

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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

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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

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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.