A retiree’s biggest concern is outliving their money. Taking withdrawals from a nest egg when the market is down big, like right now, drastically shortens the life of a portfolio leaving senior citizens in peril on running out of money earlier in retirement than expected.
But for some senior citizens, what choice do they have? Not everyone has the ability to have one year of living expenses in cash at the ready or if they did life happens and the cash went elsewhere.
Having access to funds NOT in the market is key, especially in times of crisis. One option that needs to be considered is a HECM standby reverse mortgage line of credit. It’s a bucket of accessible funds that is not attached to the market. The key is to set it up early, when it’s not needed, and have it ready to go so you don’t miss a beat.
There is a study that was published in the Journal of Financial Planning that compared a $400,000 nest egg designed to last for 30 years, that didn’t have a HECM reverse mortgage line of credit set up, that ran out of money in 25 years vs. the same nest egg, that did have a HECM reverse mortgage line of credit ready to go, and over the same span of time instead of running out of money, had over $1,000,000 left. From zero to $1 million, that’s an enormous turnaround. When using the HECM reverse mortgage line of credit in conjunction with systemic portfolio withdrawals, can drastically lengthen the life of your nest egg. This study was presented to FINRA, a Financial Advisors governing body, with positive results.
A HECM standby reverse mortgage line of credit is not the same as a bank HELOC. It has more protections and flexibility. Click here to read about the differences between the two.
Here’s an 8-minute video summary of the study presented to FINRA on how HECM reverse mortgage standby line of credit can work in conjunction with a retiree’s portfolio during the systemic withdrawal stage. Just click on the link for the private YouTube video https://www.youtube.com/watch?v=zBoEl_MLmTY&feature=youtu.be
It’s important to note that in order to qualify for a reverse mortgage, the youngest borrower’s age, the amount of equity in the home, prevailing interest rates and credit are reviewed.
I do all kinds of reverse mortgages and I do them well, feel free to contact me or leave a question or comment below.
All the best,
KW