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Financial Advisors

The Challenges Faced by Financial Advisors for Seniors

Most people aren’t prepared for retirement—or even close.  Financial advisors for seniors are currently confronted with unprecedented political and economic uncertainty. In combination with the issues that surround an aging population, increasing life expectancy, and the rising cost of living, you have the perfect storm for millions of retirees at risk of outliving their retirement funds. 

This Forbes Article highlights the challenge: ‘The Greatest Retirement Crisis In American History’ We are on the precipice of the greatest retirement crisis in the history of the world. In the decades to come, we will witness millions of elderly Americans, the Baby Boomers and others, slipping into poverty. Too frail to work, too poor to retire will become the “new normal” for many elderly Americans.  Read More

Reverse Mortgages Provide An Answer:  Homeowners age 62 and older who have either paid off their primary home in full or have a considerable amount of home equity can use a reverse mortgage to tap their housing wealth while still living in the home; the loan can be repaid when they move, sell or die. The Federal Housing Administration’s Home Equity Conversion Mortgage program is a commonly used one.

Some homeowners may be forced to reshape their opinions on reverse mortgages. As people live longer due to medical advances, more of them may need to get at their home equity to pay for their medical costs. Also relevant is that many Americans near retirement age have a considerable amount of wealth in housing equity; 25% of all wealth was held in the form of home equity in 2011, according to the U.S. Census Bureau.

Home Equity Conversion Mortgage for Home Purchase
Did you know senior borrowers age 62 and older can use a Home Equity Conversion Mortgage (HECM) to purchase a home?

 Many senior borrowers have heard about the benefits of paying off an existing mortgage utilizing a reverse mortgage. However, many are still unaware that they can also purchase a new home by combining a reverse mortgage with a down payment.

This enables senior borrowers to purchase a new home without having to worry about making monthly mortgage payments (borrowers must remain current on property taxes, homeowner’s insurance and HOA dues).

Purchasing a home with a reverse mortgage is very similar to purchasing a home with a conventional mortgage. Call today to learn more about how reverse mortgages can help you increase your sales and help your customers increase their purchase power!

Home Equity Conversion Mortgage (HECM) for Home Purchase
Journal of Financial Planning Recognizes Reverse Mortgage Benefits ‘Reverse Mortgages Time Has Come’   Excerpted from Reverse Mortgages: Their Time Has Come by Scott Burns.

Reverse mortgages were long thought of as a last-ditch effort allowing retirees to stay in their homes, but that all might be changing, writes investment advisor Scott Burns, Chief Investment Strategist and Founder of AssetBuilder, in an recent article.

“They were badges for people soon to be broke…” Burns writes. “I should confess that I shared that view. Based on reader mail, reverse mortgages were great examples of too-little-too-late. The vast majority of the people, who wrote in asking about reverse mortgages really needed to rethink where they lived, not draw down what was usually their last asset.”
He has since changed his mind, he writes.

Rather than the “Rodney Dangerfield of financial planning tools,” today Scott Burns sees value in a recent study conducted by Barry Sacks and Stephen Sacks, a Tax Attorney and Economist who recently penned an article in the Journal of Financial Planning to demonstrate an untapped market for reverse mortgages they found.

New Choice May Preserve Portfolios, Lower Cash Reserve Needs

Excerpted from the April 18, 2012 Financial Advisor Magazine article written by Karen DeMasters.
“A new type of reverse mortgage may be one key to enabling retirees to preserve portfolios and keep less cash in reserve, says Harold Evensky, a Financial Planner and nationally recognized expert on retirement issues.

The new federally insured Home Equity Conversion Mortgage, or HECM Saver, allows holders to establish a credit line but not draw on it unless the funds are needed. Payments on interest can be made when the holder chooses to do so or they can be deferred until the home is sold.

Unlike traditional reverse mortgages that provide a lump sum payment, the HECM can provide cash when needed, such as when the markets are down. This prevents the stockholder from having to sell stocks at a loss to get cash. The HECM can then be paid back when the markets are back up, Evensky says, which preserves the portfolio.

The new reverse mortgage is one factor changing the face of retirement planning, says Evensky of Evensky & Katz, a Wealth Management firm in Coral Gables, Fla. Evensky recently presented his view of changes in retirement planning at a webinar, The Future Ain’t What It Used to Be: The Ultimate Guide to Retirement Planning for Baby Boomers.

"Each day 10,000 baby boomers turn 65 and that will continue for the next 19 years, which makes the subject of retirement planning crucial", says Evensky, "and that planning needs to reflect some changes.”

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