Looking to free up $4 million to fund your retirement or pay off your mortgage?
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.
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.
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
As we enter retirements, the change in lifestyle is an inevitable challenge for almost every retirees. How can you preserve your lifestyle without steady income streams? How to utilize your existed assets to support your retirement? To answer these questions and offer more advice, Shelley Giordano launched “What’s The Deal With Reverse Mortgages” second edition on Kindle. Learn more about the retirement assets folks don’t know they have.
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.
Webinar with NAIFA and Curtis Cloke on July 18, 2019.
Join Curtis Cloke, Academy of Home Equity member and award-winning international speaker, educator and author for this exciting event focusing on methods to secure income in retirement! This webinar is put on by NAIFA – Iowa.
By Jamie Hopkins, Esq., LLM, MBA, CFP®, RICP® on June 20, 2019
When it comes to retirement planning, discussions about downsizing, refinancing, making renovations to the home to support aging and reverse mortgages are ignored in most financials plans. This void is shocking since home equity is typically the largest asset that most Americans have as they near and enter retirement.
This gap in planning is why a new development at the University of Illinois Champaign-Urbana is so important. A group of researchers, thought leaders, planners, and industry experts, formerly of the Funding Longevity Task Force, have just joined Dr. Craig Lemoine at the University of Illinois Financial Planning Program. In the past, the group consisted of independent researchers, including myself, which is important to note as I discuss the new organization. The team formerly tested retirement income strategies and the role of home equity in financial plans. While much of the group’s research then focused on reverse mortgages, the academy is committed to investigate a broader study of home equity and retirement security.
Jamie Hopkins, Esq., LLM, MBA, CFP®, RICP®, is the Director of Retirement Research at Carson Wealth and a former professor of Taxation at The American College, where he helped co-create the Retirement Income Certified Professional® (RICP®) education program. Jamie strives to increase the retirement income security of Americans by delivering practical and trusted retirement research and education. His most recent book, “Rewirement: Rewiring The Way You Think About Retirement,” details the behavioral finance issues that hold people back from a more financially secure retirement. He has been selected by InvestmentNews as one of the top 40 financial service professionals under the age of 40 and was also selected by The American Bar Association as one of the top 40 Young Attorneys in the country. In 2017, Trusts & Estates Journal awarded Professor Hopkins the Distinguished Author Award for his article on the Department of Labor Fiduciary Rule. He holds his LLM in Taxation from Temple University School of Law and his J.D. from Villanova University School of Law.
The Journal of Retirement Fall 2015, 3 (2) 61-79; DOI: https://doi.org/10.3905/jor.2015.3.2.061
There is little doubt that many older Americans are not well prepared financially. The reverse mortgage is a financial instrument that can brighten their financial prospects and reduce the chances of an old age in financial straits. This article explains how reverse mortgages work. Recent research shows that strategically combining reverse mortgages and investment portfolios can significantly boost sustainable retirement income. Moreover, in the last three years the regulatory framework has been revised to develop further the market for these instruments. Reverse mortgages are increasingly recognized as a valuable financial planning tool. They are now seen as well suited for retirees—not only underfunded homeowners who turn to a reverse mortgage as a last resort, but also those who enter retirement well-funded.
Two major retirement challenges could be addressed through a simple innovation. First, long-term investors are struggling to meet their (lowered) target rates of return. Attempts to raise returns by investing in riskier assets only raises the risk of future underperformance. Second, individuals have insufficient retirement savings and are facing the prospect of a meager retirement paycheck. A new real estate sub-asset class, iHomes (Income from Homes), created by innovative funds and real estate managers, could address these twin challenges with attractive results for all parties. The solution rests in allowing retirees to tap into home equity to generate income, and for innovative investors to get rewarded for supplying capital for these transactions.
To dig into the article regarding home equity and reverse mortgage, click here.