A common misconception regarding reverse mortgages has revolved around the idea that only seniors with minimal retirement options pursued them. However, as financial planners and wealthy individuals are now embracing reverse mortgages as a reliable component of retirement planning, the former perception of the concept is starting to change.
Currently, there are 75 million Baby Boomers in the United States, with 10,000 of them per day turning 65 over the next 15 years.1 Of those, about 10 to 15 million individuals fall into a category that is considered “mass affluent”.1 It should be noted that “mass affluent” is a somewhat misleading label because this group is not massively affluent. Instead, there is a mass amount of Boomers who are almost affluent. These individuals typically have between $750,000 and $2 million of net worth when they retire, which puts them in a position to be well off, but not to the extent where estate taxes are a concern. 1 Instead, this demographic tends to live comfortably while relying on their 401(k) or roller IRA funds for income with a home that is mostly paid off.1
Financial experts are starting to recognize that such individuals have the potential to experience the most benefit from a reverse mortgage.1 401(k) accounts and IRAs can have a high level of volatility, so it may be a big financial mistake to draw money from them when they are down in value. A reverse mortgage credit line may help with finances when a 401(k) or IRA is down, so that such securities do not need to be drawn upon immediately. 1 Utilizing a reverse mortgage until portfolio securities recover may dramatically decrease the probability of their early exhaustion.
Since financial planning has become a much bigger role in the conversation of retirement planning, the financial planning community has recognized that reverse mortgages tend to have lower costs attached as compared to other financial products and provide a longer-term value. Wealthier people have begun to embrace the concept because they enjoy being able to tap into the equity that they have built in their homes.1 Taking advantage of such equity is a great way to avoid liquidating stocks and investments in a market that is down, and may also help borrowers avoid drawing on assets that are performing well in a healthy market.
Wealthier seniors are starting to note that the reverse mortgage can be an effective way to utilize the equity in their homes to help fund their retirement and supplement their income. The reverse mortgage is a product that is being recognized amongst seniors and financial planners alike for the advantages it can bring to a retirement portfolio.
Source
1http://www.huffingtonpost.com/buck-wargo/mass-affluent-now-tapping_b_7717092.html