Until recently, reverse mortgages were considered the “Wild West” of retirement planning, writes a Wall Street Journal article published this week. But today, many more planners are using them to create a stream of income or a cushion against market declines.
WSJ speaks with two financial planners including Harold Evensky, co-author of a study at Texas Tech that has brought reverse mortgages into recent headlines. The article writes:
“Using your nest to help with your nest egg is becoming a more common way to round out a financial plan during retirement.
Even after the bursting of the housing bubble, the biggest financial asset many retirees have is their home. But because that money is tied up in the equity of the house, it’s an investment that has been difficult to count on as a source of income.
Reverse mortgages have long been an option. However, until recently, they were the Wild West of retirement planning. High upfront costs, poor disclosure and dodgy sales pitches made them an option that many advisers avoided.
Now, with the introduction of reverse mortgages backed by the Federal Housing Administration in late 2010, more financial planners are adding them to their tool kit.
Primarily, they’re using them as a way to provide a steady stream of tax-free income that can last the rest of a retiree’s life. They can also be used as a way to provide a cushion against a big, but temporary, drop in the markets….”
Read the full article at WSJ.com.