Financial Planners Often Overlook Reverse Mortgage Tax Advantages

image A recent article from Financial Planning discusses how retirees with 401(k)’s are faced with the question of how to structure their assets to avoid running out of money.  This becomes even more important with the turmoil in the financial markets and a reverse mortgage can be a great resource to help accomplish this.   

Some are calling this the next wave of retirement planning and it’s a great opportunity for advisors since these type of problems are too complex for most clients to solve on their own.  "The science of financial planning is shifting in this direction," says Brian Nygaard, managing director of Pershing in San Francisco. "I don’t think we are very far along yet as an industry, particularly in providing technical support, though individual advisors are working very hard to maximize results."

As planners get more focused on drawing down, optimizing the sequence of withdrawals could become more standardized.  Traditionally, tax hasn’t been factored into spend down computer modeling so there are only a few tools at planners disposal.  Most of these tools ignore certain asset classes all together such as real estate.  This is not just a modeling problem. Reverse mortgages, which have many tax advantages, tend to be overlooked as a tax-efficient source of retirement funds  

Typically, financial planners have a negative outlook on using reverse mortgages and strictly see them as a last resort kind of product.  As the reverse mortgage industry continues to educate more financial planners about the product I’m hoping we will see their outlook change.  

Tackling the spend down (Financial Planning)

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