ThinkAdvisor: Reverse mortgages can serve as ‘lifetime income’ option

While reverse mortgages are not strictly income, such a product is a potential option to avoid running out of money in retirement according to a column at ThinkAdvisor

Since the level of retirement income planning by many seniors in the United States can vary significantly, many people who are either in or approaching retirement likely have concerns about whether or not they will outlive their financial resources. This is where options related to “lifetime income” can come into focus, and one financial writer says that reverse mortgages can serve as one potential option.

While reverse mortgage professionals across the country understand that the word “income” can be misapplied to a reverse mortgage loan’s proceeds since such funds do not qualify as “income” for tax purposes, ThinkAdvisor financial writer Roger Wohlner details how reverse mortgages can serve the purpose of maintaining cash flow in retirement alongside several other options.

“A reverse mortgage can be a component of a client’s overall retirement income strategy in some cases,” the column at ThinkAdvisor reads.

The look at the product began by highlighting what Wohlner characterizes as potential downsides of the reverse mortgage, which will likely sound very familiar for embedded industry professionals.

“These can include the costs and fees associated with the loan,” the column reads. “This might not be the best option for the client if they will be moving soon or if they want to leave their residence to their heirs as part of their estate. It is important that you ensure that your clients do not fall victim to a reverse mortgage scam.”

The column does include a look at potential benefits and situations where the product may be a good fit for a senior.

“A reverse mortgage can be a means for older adults who have a large amount of their net worth tied up in their home’s equity to generate extra cash for retirement,” the column reads. “A reverse mortgage can be a good solution for clients with a lot of equity in their home and wish to continue living there. A reverse mortgage can be a good way to generate the extra cash they may need to support their retirement income needs. A reverse mortgage also works in situations where there are no heirs or where the homeowner is not concerned about leaving the home to their heirs.”

Other potential “lifetime income” options explored in the piece include lifetime income annuities, emergency savings accounts, personal pension plans available from specific institutions, liability-driven investing, inflation-protected annuities, qualified longevity annuity contracts (QLACs), or continuing to work longer than a senior may have initially planned.

Read the column at ThinkAdvisor.

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