The financial and retirement planning concerns of women are very different from those of men. A cursory internet search will reveal that:
- Women are less likely to have planned or saved enough for retirement (primarily because they spent few years in the work force, made less when they did and often left early to take care of a family member).
- For women age 65+, the poverty rate is nearly double that of men in the same age group.
- 27% of gray divorced women are poor compared to just 11% of gray divorced men.
- Women are far more likely to report that their financial concerns are causing them stress.
- Only one-third of women believe they are on track for retirement planning and saving.
On top of that, recent studies say that
90% of women will be the sole financial decision maker
at some point in their life!
In a previous article, I outlined the six sources of retirement income that women need to understand and optimize and the 5 Reasons Women need to save more for Retirement then men.
In today’s article, I want to list 7 reverse mortgage strategies that have special application for women. These are taken from my book: Housing Wealth – An Advisors Guide
7 Simple Strategies
- Paying Off a Mortgage: Nothing is more concerning to retirees than carrying debt into their retirement years. The sad fact is that consumer and housing debt will eat up a very large portion of the modern retiree’s monthly income and peace of mind. This concern is magnified for the married woman due to the near-certain income reduction that she will experience at the death of her spouse. Having the HECM Replacement or Exchange conversation is a way to alleviate some of her future concerns.
- Creating an Income Replacement Strategy. Similarly, because the income for most women will be adjusted at the death of their spouse (e.g. life insurance, pension selections), an established HECM can often supplement needed income. To optimize the amount of income the HECM could replace, a wise strategy may be to establish it as a line of credit early in retirement and let it grow as a type of income replacement insurance. It can be accessed and replaced as needed, or converted to monthly income, if the loan is still in force. Having this conversation early can ease the mind of wives as well as single women who desire a buffer asset to hedge against market volatility.
Additionally, many pension systems are hurting and in danger of collapse. At the very least, they are being restructured, so that employees must now pay for medical expenses. A recent Forbes article said nearly one million U.S. workers and retirees are currently covered by pension plans on the verge of collapse. Establishing a standby HECM line of credit could serve as a much-needed lifeline.
- Creating a Long-Term Care Plan: Nearly 70 percent of Americans will need some sort of long-term care during their lifetimes, with the average length of care being nearly three years. Thirty percent of the primary caregivers are over the age of sixty-five. Oftentimes, both the literal and figurative heavy lifting of care-giving falls on the wife, and it is typically she who will suffer the indignity of having someone else care for her. This is a gloomy, often overlooked reality that weighs heavily on females. Using housing wealth to help create a long-term care plan is very wise.
- Life Insurance: A very simple way to help the longer-living spouse is to establish or maintain life insurance that can fulfill a variety of functions upon the death of the first spouse, as well as legacy benefits at the passing of the second. For pennies on the dollar, retirees can establish a policy or set up a reserve fund to ensure there is enough to finance the rest of retirement.
- Right Size with HECM for Purchase: Even though the house may become too large and expenses burdensome, the value of homeownership is still important to many retirees. This is often exacerbated in mid to late retirement when funds are tight, or perhaps a sickness or death drains income and savings. Using the HECM for Purchase allows retirees to purchase their next home for around 50 to 60 percent down, have no monthly mortgage payments and often add new dollars back into savings. For wives/widows and caregivers, this could be a real blessing.
- Social Security and Retirement Income Optimization: One of the most significant ways to optimize retirement outcomes is to have a very simple conversation regarding Social Security. The system is constructed in a way that offers flexibility. You can begin taking retirement benefits anywhere between age sixty and seventy, and you get 100 percent of your benefits at your full retirement age. If you take it early, you get less, and if you wait, you get more. You can defer by establishing a HECM line of credit at the onset of retirement and then drawing from it to supplement all or a portion of what Social Security provides. The non-taxable dollars from the HECM can be used to help your clients wait longer before drawing from an annuity or IRA–allowing them to grow. When done correctly, this can significantly increase the probability of retirement success.
- Gray Divorce, Silver Solutions:In an article entitled “Gray Divorce Boosts Poverty Level for Women,” financial author Mary Beth Franklin shares about the growing phenomenon of gray divorce and how women are particularly impacted by it. Here are a few excerpts:
* Even though the overall U.S. divorce rate has remained stable since 1990, gray divorce has doubled during that period.
* Gray divorce appears to diminish wealth more than earlier divorce, and women are impacted in a greater measure than men are.
* Gender matters and economic disparity between men and women widens with age. A whopping 27 percent of gray divorced women are low-income, compared to just 11 percent of gray divorced men.
Divorce is always painful, but if there is a home involved, there may be some solutions that create a real win/win, especially for women. Below are two helpful articles outlining some of the strategies:
The Funding Longevity Task force of the American College created an educational summary of some reverse mortgage solutions. You can download the PDF HERE