The Center for Retirement Research at Boston College has been garnering considerable press in the past few weeks for a recent report on how retirees can supplement their assets with home equity, primarily via touting the benefits of using a reverse mortgage or downsizing to a smaller residence.
But while reverse mortgages have become vulnerable to a variety of public misconceptions, an article from Morningstar helps make the case for these loans in a Q&A with Alicia Munnell, director of the Center for Retirement Research.
“[Reverse mortgages] are not a last-ditch-effort product,” Munnell said in the article. “But for those for whom it’s right or who can afford it, it will be a very valuable product over time because people are going to need to add their home equity to other sources of retirement income to get by.”
Munnell, who also has a book coming out titled “Falling Short: The Coming Retirement Crisis and What To Do About It,” even likened reverse mortgages to annuities in the role they play in terms of asset allocation.
“So, if you take [a reverse mortgage] in terms of a steam of income over the rest of your life, it is very much like an annuity in terms of how the payments seem to you,” Munnell said. “They continue for as long as you live, and then the money is paid back out of the sale of your house. So, it’s a stable, predictable source of income that would allow you to take risks with the other part of your portfolio.”
Read more at Morningstar.
Written by Jason Oliva
