You know you have hit the big time when you get on Letterman. And to have none other than Mick Jagger make mention of the humble reverse mortgage resource is Epic! But I am still saddened by one fact.
Most advisors still have not understood the profound impact that housing wealth can have on retirement income and outcomes.
There are at least (5) ways to the funds from a Reverse Mortgage can be dispersed, and in the Letterman segment only one of them is mentioned. But it is a very important one. Guaranteed Predictable Income (GPI) For As Long As You Live In Your Home
In retirement income planning, there are (3) Basic strategies for distribution:
- Systematic Withdrawals: The client sets a certain % of their savings to draw from each year. And then adjusts that figure up or down depending on portfolio performance. 4% has long been held as a safe starting place.
- The Bucket Strategy: The clients sets up savings inside different “buckets” as it were to draw on during different stages of their retirement. The Go-Go years (early), the Slow-Go years (mid-range) and the No-Go years (later). Leaving the more aggressive investments in the later bucket to grow more and to smooth out volatility.
- The Flooring Strategy: The advisors sets a minimum guaranteed income that will cover the clients most basic living expenses. Housing, Food etc. This gives the client a sure level of comfort that ensures that no matter what, I still have a “floor” on which to stand and build.
The Jagger top 10 statement that says:
” Song Royalties are Great, But Even They Cannot Match the Guaranteed Cash Flow from a Reverse Mortgage”
That statement is a an example of a Flooring Strategy in Retirement Income Planning! Mick got it right.
So the real question is: What Impact on Retirement Outcomes Can a Reverse Mortgage Tenure Payment Really Have?
Simple Case Study:
Below is a couple that has not done too bad for themselves. (take a look)
Challenge #1:
But given their current spending and modeled over 10,000 different scenarios, the probability that their saving will last as long as them is not very good (58% probability of success)
Now Introduce Housing Wealth:
However, if they were to take a $1200 Reverse Mortgage Tenure Payment (guaranteed monthly income for as long as one of them lives in the house) would that make a difference?
The “What You Talkin’ Bout Willis” Factor: Remember that line from different strokes? Did you see the difference in outcomes. These are no my calculations. The good folks from Money Guide Pro Retirement planning software ran the numbers. From 58% to 96% chance of success. Over and over again they ran the figures and what did they find out.
Housing Wealth properly used can have a profound impact on retirement outcomes.
Three things to Know:
- 87% of Baby Boomers will Own a home entering into Retirement
- The Majority of current retirees already own a home
- The Advisor who knows how to use housing wealth will differentiate themselves and have more satisfied clients and referrals than ever before
Now you know. Be sure to contact us to schedule a webinar or training for your team.
Don Graves, RICP®, CLTC®, Certified Senior Advisor, CSA®
Latest posts by Don Graves, RICP®, CLTC®, Certified Senior Advisor, CSA® (see all)
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- Squeezing the Juice Out of Retirement: Understanding the Four Psychological Phases of Retirement - February 27, 2024
- Navigating the Three Economic Phases of Retirement: A Holistic Approach Using Reverse Mortgages - February 20, 2024
Categories: Advisors, Common Usages, Financial, Topics
Tags: Reverse Mortgages, Running out of Money