Issue 20.17
It’s an amazing thing that we are living so much longer today. “The age of 70 is the new 60!” It’s a phrase that is used often, but very true. Just 10 years ago the life expectancy at age 60 was to live to 82. Today, at the age of 60 the probability that you or your spouse at 60 is simply that one of you will live until the age of 90!
In ten years, the life expectancy has increased nearly a year over year or ten years of life expectancy over the last ten years. Hard to say with health and heart research let alone the mind and Alzheimer’s research how life expectancy will take us over the next decade.
Fascinating where we are headed. Fascinating, scary, exciting, but are we prepared financially for that life expectancy?
It really does not seem how much money we have today, if you speak to a financial advisor, it seems we still need more. No matter how much we save, do we ever have enough to protect against what life throws at us in the future? Maybe, but no one really knows. The cost of medical, assisted care, and life tragedies.
The Nobel Prize Winning Economist, Professor of Economics MIT states, “The Reverse Mortgage will be the most powerful – yet largely untapped tool for retirees to improve their standard of living.” As, we head into a longer life span for many reasons today, the reverse line of credit will come into play in more households than not over the next decade assuming we don’t have a world event etc.….
Today, we have savings and retirement that may last us until the age of 80 for example. That is if both spouses continue to live and receive social security etc. However, if we lose a spouse, then we lose some income. We lose the lower of the two socials between husband and wife and we must do more with just the one income and savings.
Now, how long is savings going to last us if interest rates go up and the cost of living, with taxes and other continues to rise. Today, the statistics are simply that one spouse will live until the age of 90 today. The same statistics are that the couple will also run out of savings and retirement at the age of 82. What happens at that point. Does the state step in and pick up the bill for all and everyone?
I don’t think that math will work. It is the same math with Social Security and the tables. It just does not Pencil guys.
By strategically incorporating the use of home equity with a hecm monthly tenure payout as part of this retirement plan, the clients may in fact prolong the life of their portfolio increasing their financial peace of minds.
At cherry creek mortgage, there are several strategies to work with a reverse line of credit with equity growth, unlike what you see on television in advertisements. If at age 62 we open a reverse line of credit and let it grow it grows tax free at a secured rate that is near three times what a bank pays today, yet has the same government security. I will argue that there is not an investment in the country that is government secured and grows taxes free interest and pays nearly 5% but a reverse line of credit with equity growth. The protected growth arises simply because the line has the collateral of the home that allows the growth and interest to accrue at a higher rate than any savings or secured investment that is also government insured.
In the reverse line of credit, you can use the funds at any time or you can let them grow and compound and thus creating that additional savings and retirement if we need it. But, if we are lucky and we live a strong life and our investments and savings continue to prosper, we may not need our line of credit, so it has not cost you anything. The line is there if we need it in our retirement, and if we don’t, we have not cost our heirs anything but simply added a tremendous retirement tool to my spouse and I’s options and security if we are lucky enough to live a long and healthy life.
We don’t need to put any stress on kids, additional help, as the line of credit is our safety cushion. It is our long-term health care plan, and it is our disability insurance coverage.
This way, we can tap into it, if we need it and if we don’t it has not cost us anything.
The story is always the same. A young couple retires at age 66 hoping that their retirement portfolio will last throughout their lifetime. They need to generate 4,000 a month in total income from all sources. Monthly social security payments are 2180 and their retirement portfolio beginning balance is 400,000. Inflation is projected at 3% with portfolio returns at 6% if we are lucky.
Without utilizing a reverse mortgage this couple’s saving should only provide the required income until the age of 89. The strategic use of a reverse mortgage will extend their portfolio’s longevity and may provide for remaining funds to pass on to their heirs at age 100.
If you have any questions, please let me know. Contact your investment advisor and or registered mortgage planner if you have questions today. The reverse line of credit is simply a tremendous strategy to incorporate into a retirement plan, but will not cost your heirs anything if life turns out the way it is supposed to but is also there to add another 250,000 to your retirement savings if you or your spouse need it without giving up a home or having to sell a home. Brandon can be reached at 435-674-9200.
Until next time. Brandon.