In the past, reverse mortgages were generally treated as a last resort option after other resources were depleted, or as a way to obtain quick access to a large lump-sum of assets. This is no longer the appropriate way to think about reverse mortgages in a retirement income plan.

The reverse mortgage option should be viewed as a method for responsible retirees to create liquidity for an otherwise illiquid asset, which in turn can create new options that potentially support a more efficient retirement income strategy (more spending and/or a greater legacy) by helping to manage sequence of returns risk.

After providing an overview of retirement income planning, which sets the context for understanding the potential role of reverse mortgages, this presentation explains the basics for how reverse mortgages work.

Then, I'll provide an overview of potential uses for a reverse mortgage in a retirement income plan, with simulations that compare the effectiveness of reverse mortgages against other potential strategies. 

Learning Objectives

1.      Understand retirement income planning as a process which uses available assets to best meet retirement financial goals while managing the expanded set of retirement risks that confront those goals.

2.      Understand how a variable-rate HECM reverse mortgage works, including the mechanism that supports a growing line of credit for the retiree

3.      Address how reverse mortgages can contribute to a risk management strategy for retirement

4.      Understand the mechanisms whereby reverse mortgages can contribute to a retirement plan, emphasizing applications that include refinancing a traditional mortgage, using a HECM for Purchase, supporting the delay of Social Security claiming, and coordinating with an investment portfolio to support distributions to meet a retirement spending goal 

This presentation is fully revised and updated for the modification of reverse mortgage rules affecting applications after October 2, 2017.