A recent Consumer Protection Finance Bureau white paper entitled, “The Costs and Risks of Using a Reverse Mortgage to Delay Collecting Social Security,” takes a broad swipe at using Reverse Mortgages to support deferral of Social Security benefits and seriously discourages it.
To be certain, there are those who appreciate and embrace the report’s findings and others (see below) who say the paper is “so limited in scope and riddled with inaccurate statements that it likely does more harm than good,” as well as, “the report rightly points outs the potential risks of reverse mortgages, but it demonstrates little understanding of the nuances of Social Security claiming strategies and overstates the typical cost of a reverse mortgage in today’s marketplace.”
Two Reasons I Enjoyed The Report
Though I appreciated and agreed with the rebuttals from Professor Jamie Hopkins at Forbes and Mary Beth Franklin at InvestmentNews (below), my initial reaction upon hearing the report was one of pure delight! Why? Wasn’t the report negative? It was certainly limited in its scope and accuracy, but that’s not the real reason I was excited. Watch this week’s Ask Don Graves two-minute video to see.
This week the Consumer Finance Protection Bureau released a study about using Reverse Mortgages to Delay Social Security Claiming, and I couldn’t be more excited.
Deferring taking Social Security until age 70 not only shortens the retirement period, but increases the payout, and has been proven to be a good strategy for most married boomers.
Unfortunately, current trends tell us that less than 5% are actually planning to defer till aged 70. This is concerning because today’s Boomer will live longer than their parents, have saved less than needed, and will experience a cash flow crunch because of the debt they’ll carry into retirement. Therefore, bringing awareness to the social security deferral strategy is critical.
The Second Reason I’m excited is that using the Reverse Mortgages to delay social security claiming was examined as an actual strategy! But how many advisors really knew that it could be structured that way? Almost none!
Though the accuracy and conclusions of the report have been challenged, the fact that Reverse Mortgages are coming up in Retirement Income Conversations signals a shift in the way the program is being perceived, and for that, I am excited.
After nearly two decades of sharing the strategical use of Reverse Mortgages to delay claiming Social Security with more than 3,000 personal clients and over 15,000 advisors, I finally get to see this strategy receive the attention from the press it deserves. Awesome! Most don’t know that there are around 17 other intentional and coordinated uses of the HECM that have been proven to help retirement outcomes. These strategies can help your clients Increase Cash Flow, Mitigate Risks, Preserve Assets, Improve Liquidity, and Add New Dollars back into Savings.
The question is not whether the HECM is the the conclusion of the matter (after all, the HECM is not for every retiree). However, the point is that it has been included in the Retirement Income Planning Conversation.