Crossroads of Reverse Mortgages and Retirement Create New Complexities

As retirees age, there comes a point when financial advising, tax planning and saving for retirement all come to a head, requiring in some situations a team approach when something as complex as reverse mortgages get thrown into the mix, according to a recent article from Investment News.

Reverse mortgages, while they have been gaining more attention from financial planners lately for their ability to help increase the spending horizon of a person’s retirement portfolio, may also be able to help high-income retirees reduce their exposure to new Medicare surcharges, according to a recent IN article written by Katy Votava, Ph.D., RN and president of, a consulting service that works with financial advisers and consumers on health care coverage.

While reverse mortgages are just one of several methods that can provide tax-free liquidity and cash flow to retirees, not everyone has warmed up to the idea of tapping into their home equity, especially among advisers.

“One of the most persistent misunderstandings surrounding reverse mortgages is fear,” writes Votava in an IN article this week. “As one adviser put it, how do we ‘deal with the feat that the reverse mortgage companies are going to take advantage of the homeowner?'”

Since 2013, reverse mortgages have undergone several key product changes that have increased borrower protections while also strengthening the sustainability of the Federal Housing Administration’s Home Equity Conversion Mortgage (HECM) program.

“While this is all well and good, it still begs the question of what is the advisers’ role when considering including a reverse mortgage, or any other strategy to reduce high-income retirees’ exposure to Medicare surcharges,” Votava writes.

Because certain high-income clients might have widely complex circumstances, perhaps even beyond the assistance of a HECM counselor, Votava suggests that a team-based approach with multiple disciplines may be able to help retirees find the right decumulation strategy.

“It is clear that there is a critical nexus between financial advising, tax planning and health care planning that is more and more important in today’s world,” Votava writes. “This is similarly true with other methods of diminishing income-related Medicare surcharges, such as ROTH conversions as well as certain kinds of life insurance and annuities. Each person’s financial, tax and health care forecast can vary widely well into retirement. There is no simple rule of thumb to rely on.”

Read the Investment News article.

Written by Jason Oliva

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