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{Case Study} How One Couple Purchased Their Retirement Dream Home and Added $50,000+ to Savings

Meet Tom and Jane

Married Couple (71/71) | Current Home Value $500,000 | Outstanding Mortgage Balance $175,000 ($1279/month)

IRA’s/Savings $540,000 | Social Security $3,200/month | Pension $705/month

Retirement Concerns

Tom and Jane’s advisor discerned their primary concerns based on a strategic core framework I crafted–the 5 L’s.
Longevity (Lo) | Lifestyle (Lf) | Liquidity (Lq) | Legacy (Lg) | Long Term Care (Lt)

(These retirement concerns are simple to understand and extremely powerful when combined with laser-focused questions. Download you copy here.)

Lifestyle
Tom and Jane’s current home is too large for them and doesn’t suit the retirement lifestyle they desire. They’d like to buy a smaller home in a retirement community.

Liquidity
They’d also like to have additional cash flow each month to be able to enjoy the early years of retirement.

Long-Term Care
They do not have long-term care insurance as they are uninsurable, so they’d also like to have access to funds should they need them to cover an extended care episode.

How Did Their Advisor Introduce Housing Wealth into the Conversation?

“If you could increase your cash flow, reduce your expenses, and add new money back into your retirement savings, but it involved moving to your next, last, and best home; would you want to know about it?”

“Yes,” they said as they began to consider what they just heard.

“More cash flow means more golf and travel without worry,” thought Tom.

“This means more money added to savings, so we can enjoy retirement and not worry about long-term care costs,” thought Jane.

“A newer house with less maintenance, lower taxes, and better amenities sounds great,” said both of them.

What Are Their Choices?

Tom and Jane sell their current home and pay off the existing mortgage ($175,000). They now have $300,000 in proceeds from the sale. They choose a $430,000 home in a nice retirement community. They have a few financing options:

  1. Pull from Savings to Pay Cash
    This option reduces their retirement assets by nearly 25% and locks the proceeds in the new property. What happens if another housing correction happens and the home loses value? What happens if they cannot get the money out of the property when they need it?
  2. Traditional Mortgage
    They can make a smaller downpayment in cash and finance the remaining balance by taking out a traditional loan. If they do this, they’ll be paying $700/month for 30 years–something they’d rather not do.
  3. Reverse Mortgage
    The HECM for Purchase program makes $186,239 available, so they must contribute a $243,761 down payment. They will have no mandatory mortgage payments and will be able to add $56,239 to savings.

Retirement Outcomes

Not only were Tom and Jane were extremely happy to have a new home, they were relieved to improve their overall liquidity and retirement savings, while reducing the drain on their portfolio by eliminating monthly mortgage payment requirements.

Don Graves, RICP®, CLTC®, Certified Senior Advisor, CSA®
Don Graves, RICP® is a Retirement Income Certified Professional and one of the Nation’s Leading Educators on the Emerging Role of Reverse Mortgages in Retirement Income Planning. He is president and founder of the HECM Institute for Housing Wealth Studies and an adjunct professor of Retirement Income at The American College of Financial Services. He has helped tens of thousands of Advisors as well as more than 3,000 personal clients since the year 2000
Don Graves, RICP®, CLTC®, Certified Senior Advisor, CSA®
Don Graves, RICP®, CLTC®, Certified Senior Advisor, CSA®

Categories: Advisors, Common Usages, Financial Planning, HECM Basics, Real Estate, Strategic Usage

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Comments: 2 Responses

  1. RODAH ANONO says:

    Great information.Thank you for sharing.
    Is it possible to have this emailed to me?

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