Researchers Recommend Reverse Mortgages for Retirement Planning

The Center for Retirement Research at Boston College published a new study entitled, How Important is Asset Allocation to Financial Security in Retirement?, which concludes that financial planners have mistakenly focused on asset allocation, rather than the broader range of retirement options, such as reverse mortgages.

It concludes, “financial advisers will be of greater help to their clients if they focus on a broad array of tools—including working longer, controlling spending and taking out a reverse mortgage.” 

This is the third study published by prominent researchers within the past six months demonstrating the value of reverse mortgages in retirement planning.

Financial planner Harold Evensky and his colleague John Salter (Texas Tech) published their study, Integrating Reverse Mortgages with Other Products to Create a Balanced Retirement Plan, which says, “protecting home equity may be a luxury future retirees can ill afford” and advocates the use of a cash flow reserve account for ongoing expenses that is replenished by a reverse mortgage taken as a line of credit.

A few weeks ago, the Journal for Financial Planning published Barry Sacks’ and Stephen Sacks’ study entitled Reversing the Conventional Wisdom: Using Home Equity to Supplement Retirement Income, focuses on cash flow survival and says, “we have found substantially greater cash flow survival probabilities when the reverse mortgage credit line is used in either of two active strategies rather than in the conventional, passive strategy as a last resort.”