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Where Smart Money Meets _ The Reverse Mortgage Magic

October 4, 2021

Here are someone else’s thoughts just for you!

The rest of this post directly addresses you and your clients. You are welcome to post it on your own website or blog, or use the material in emails and presentations, to help open the reverse mortgage conversation.

Fact:

As 11,000 baby boomers a day turn 65 (a phenomenon that began in 2011 and continues through 2029), retirement savings — or the lack thereof — continues to be grist for financial columnists nationwide. The financial needs of 80 million Boomers cannot be ignored. And while writers tout the importance of scrupulous saving — today the median net worth of a householder aged 65-69 to be just under $200,000 — what these actuarial tables fail to consider is the noteworthy John Lennon lyric: “Life is what happens to you while you’re busy making other plans.”

Someone still shy of retirement age may have had every intention of going grandly into a well-cushioned old age, saving and investing diligently — and been wiped out by a health crisis (COVID) not covered by insurance, an economic downturn, or an act of nature (e.g., fire, flood, tornado).

You probably know at least one person who fits this profile, if not half a dozen. They’ve saved sincerely, and life intervened. Over 40% of Boomers get by with only Social Security income. With Social Security becoming benefit turning negative by 2022, and more seniors being urged to wait until age 70 to apply for it, the need for the HECM reverse mortgage option is growing.

Yet many older Americans are still reluctant to tap their home equity. Lack of knowledge and understanding typically underpins such reluctance. Granted, the HECM is a sophisticated and complex retirement income planning tool. But many older adults may need to take a step back, to assess what aging in place actually means, whether they are best suited to doing so, and how to begin readying their lives and home for the next life stage.

Aging in Place with Dignity and Aplomb

For people who are healthy and want to remain in their own homes as they grow older, a reverse mortgage can help make this a reality. The first step is determining whether aging in place is in your best interest.

Here are 7 guidelines a homeowner can use to decide whether they want to age in place, and if so, whether to explore a reverse mortgage. Aging in place can serve you well if:

  1. You have sufficient equity in your home to qualify for a reverse mortgage, also known as a HECM (Home Equity Conversion Mortgage).
  2. Your health is generally good, and you’re mobile.
  3. You have a network of local family, friends, you can rely on.
  4. You drive — or public transportation is readily accessible.
  5. You live in a safe neighborhood.
  6. Your home can be modified to address changing needs.
  7. You’re outgoing, well connected, and able to reach out for social support.

A Home That Will Meet Your Current and Future Lifestyle Needs

Home modification is important, even — especially — if you’re healthy and active now. Our bodies and needs change over time. Someone who is spry in their 60s, 70s, and even 80s may be glad their house “ages with them” as they grow older.

A few simple home modifications can make a big difference. These features, elements of what’s known as “universal design,” can affordably retrofit your home for greater safety and peace of mind:

  • Grab bars, especially in the shower and bathtub.
  • Handrails. People can slip at any age and take a tumble; as we age, this can result in a broken hip or worse.
  • They can also be installed temporarily if someone needs to use a wheelchair for a short time, such as when recovering from surgery.
  • Door wideningto accommodate wheelchairs, walkers, and four-pronged canes.
  • Low thresholdsto avoid tripping, and to make it easier to navigate with assistive devices (walkers, canes, etc.).
  • Kitchen and bathroom modificationsto make cabinets easier to reach, floors less slippery.

Do You Believe in Magic?

Fans of the Harry Potter books may not realize that Hogwarts’ headmaster, Albus Dumbledore, also knew something about smart retirement planning. (That’s what happens when you live to be 150.)

For those of us with somewhat shorter potential lifespans, Dumbledore says, “It is our financial choices and options that show what we truly are, far more than our abilities.” 

So, save what you can, be smart about managing your finances, and keep your magic wand handy. With the careful use of the equity in your home and a positive aging in place profile, the HECM option can transform money concerns into real retirement magic.

 

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Mike Bowers
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