reverse mortgage plan your future
TRANSCRIPT
Learn how utiLizing home equity can better your cLient’s financiaL position by:
• Eliminatingmonthlymortgagepayments
• Improvingaccesstotax-freecash
• Providingapotentiallylow-cost,non-cancelable,growinglineofcredit
• Protectingportfolioperformanceinadownmarket
• Offeringcreditrequirementsspecifictotheseniordemographic
:
Thomas Mastromatto #145824 phone 888-769-7023
DiscoVer the new
ReverseMortgage
Weappreciateandapplaud
thewayinwhichyouhave
putyourclientinsucha
financiallysecureposition.
You’veworkedhardwith
yourclientstoensureeach
onehasaviableandsecure
retirementportfolio,and
formany,thetimehasto
cometobegindisbursement
plansinaresponsibleand
sustainableway.Atthe
sametime,marketchanges,
economiccyclesandmany
otherexternalinfluences
havenegativelyimpacted
portfoliostocreatesome
futureuncertainty.Areverse
mortgagecouldbethe
perfectfinancialtoolto
provideadditionalsecurity
andimproveportfolio
longevity.Thenewreverse
mortgagehasavariety
ofoptions,lowercosts,
andadditionalconsumer
protectionsinplaceto
provideborrowerswith
moreconfidenceintheir
retirementplans.Today’s
reversemortgagecanbe
usedtopaybillsorother
financialburdens,provide
cashflowsimilartoannuities,
oraddadditionalsecurityasa
rainydayaccount–thenew
reversemortgageisnowa
versatile,safeandeffective
retirementplanningtool.
we invite you to find out more.
Thomas Mastromatto #145824 phone 888-769-7023
What is a reverse mortgage?
Areversemortgageisawayforborrowersage
62oroldertounlocktheequityintheirhomeby
turningitintotax-freecashwithouttheborrower
needingtomakemonthlymortgagepayments.
How would a reverse mortgage help your
client with their retirement portfolio?
Areversemortgageprovidesapotentially
inexpensive,easy-to-qualify,tax-free,non-
cancellable,liquidcashreserveforvarioususes.
3 Replace cash reserves
3 Delay Social Security and pension payouts
3 Tax-free loan proceeds may reduce tax liability
3 Postpone drawing down retirement assets, therefore giving assets more time to grow
3 Cover large unexpected expenses, such as medical bills or home modification
3 Eliminate existing mortgage for clients who still have a traditional mortgage balance
3 Finance a new residence through the HECM for Purchase product
Also, a reverse mortgage does not affect traditional governmental retirement benefits, such as Social Security and Medicare.
How can it be used for retirement security?
How much does a reverse mortgage cost?
Manyofthesamecostsassociatedwitharegularmortgageapplytoreversemortgages.Clientswillbe
chargedanoriginationfee,amortgageinsurancepremium(MIP),anappraisalfeeandstandardclosing
costs.Inmostcases,thesefeesandcostsarecappedandmaybefinancedusingtheproceedsofthe
reversemortgage.
What are the qualifications?
3 Theyoungestborrowerontitlemustbe62yearsofageorolder.
3 Thehomemustbetheborrower’sprimaryresidence.
3 Thehomeequitymustexceed40%inmostcases,dependingupontheborrower’sage.
What are some challenges associated with this loan?
Areversemortgageisahomeloan,soadvisorsmayneedtoconfrontdebt-adverseclientsabout
creatingdebtagainstadebt-freeasset.
Advisorsmayalsohavetoworkwithfamilymemberswhodon’twanttheirinheritancediminished.
Thomas Mastromatto #145824 phone 888-769-7023
Six Major Portfolio Survival Risks:
1. Less structured AssistAnce Diminishedrolesofbenefitplansfromboththegovernmentandtheworkplace.
2. MArket VoLAtiLityThemarkethasexperiencedgreatlyvaryingannualreturnsoverthelast30years.
3. infLAtionBasedonhistoricalaverageinflationrates,ifyourclientrequires$50,000tomaintaintheirpresentlifestyle,theywillneedover$131,000in25yearsjusttokeeppace.
4. LongeVityOnememberofa65-year-oldcoupletodayhasa50%chanceoflivingtoage92anda25%chanceoflivingtoage97.
5. tAxesThetopmarginaltaxbracketformanyretireesin2011was35%,sominimizingtaxburdencanhelpstretchsavings.
6. HeALtH cAreApproximately70%ofAmericansage65orolderwillneedsometypeoflong-termcare,andthecostsarerisingfasterthaninflation.
Demographic Statistics:
AMeriprise surVey47%ofrespondentsplantousehomeequitytohelpfundtheirretirement.
Boston coLLege center for retireMent reseArcH74%ofretireeswillfallshortoftheirincomeneedsat62yearsold.
pew reseArcH centerBetween2002and2011,thepercentageofadultsthatsaidtheywillnothaveenoughmoneytolivecomfortablyinretirementrosefrom32%to53%.
Amongadults55to64yearsold,thepercentagewhosaidtheywerenottooconfidentornotatallconfidentthattheywillhaveenoughtoliveoninretirementrosefrom26%in2009to39%in2012.
The Big PictureHomeequityisanothertooltohelpclientsreachtheirgoalsduringretirementplanning.
reverse mortgages aren’t just for people struggling to keep their homes. reverse mortgages can also work for financially comfortable retirees looking for additional retirement security in order to avoid selling other portfolio assets at the wrong time or under duress.
47%
74%
Thomas Mastromatto #145824 phone 888-769-7023
meet hankHankisarecentretireewhoislookingforward
toenjoyingthefruitsofhislabor.Hankworked
closelywithhisadvisortogrowhisnestegg,
buthisportfoliotooka$117,000hitduring
theGreatRecession,whichaccordingto
*Ameriprise,isonparwiththeaverageamount
otherBabyBoomer’slost.
Thankstohisadvisor,he’sbackontrack,but
heunderstandsthatthelosswillimpacthis
qualityoflifeduringretirement.Knowingthis,
Hankwantstohaveanintelligentplaninplace
tomakesurehismoneylastsatleast30years,
especiallyifthemarketturnsvolatileagain.
Appliedstrategically,areversemortgagecan
significantlyincreasetheprobabilitythatHank’s
portfoliowilllast.
Here’s howUsing**MonteCarlosimulations,Hank’scurrent
$600,000portfoliowitha5%withdrawalrate
over30yearsonlyhasa67.5% chance of
survival.
Makingupa$100K+lossisnotaneasyfeat.
Byutilizingareversemortgage,Hankisable
toaffordablyaccesshisequitytoreplacehis
portfoliolosswithouthavingtomeetstringent
qualificationcriteria.
Bycomparison,ifHankweretoleveragehis
homewithareversemortgageandonlyreplace
the$117,000lossfromtheGreatRecession,
hismorerobust$717,000portfoliowitha5%
withdrawalrateover30yearshas an 85%
chance of survival. That’s a 17.5% increase
in the chances of portfolio survivability
when just considering replacing losses.
This is just one of many ways a reverse mortgage can help your client’s portfolio provide a sustainable and secure retirement.
Find ouT more by conTacTing us Today.
*Source: Retirement Derailers survey released by Ameriprise Financial in February 2013. Koski research interviewed 1,000 working Americans ages 50–70 with at least $100,000 in investable assets.
** Monte Carlo simulation method produces a range of estimated portfolio outcomes an investor may experience over a designated period. Monte Carlo is not offered as a tool for forecasting market performance or determining a sustainable withdrawal rate during retirement. It does not reflect historical returns of any portfolio mix or asset class, and should not serve as a guide or substitute for ongoing management of wealth during retirement.
Age 62
stAtusRetired
HoMe VALue$350K (no mortgage)
current portfoLio$600K
desired witHdrAwAL rAte5%
needs portfoLio to LAst 30+ years
distriBution goALMaintain short-term liquidity and mitigate need to access long-term investment portfolio during bear markets
portfoLio surViVABiLity67.5%
Thomas Mastromatto #145824 phone 888-769-7023
Barbaraisarecentretireewho
istryingtodecidetheproper
timetotakeherSocialSecurity
benefits.Basedonhergoals,
herprojectedlivingexpenses
are$60,000peryear.Ifshe
pullsthatmuchfromhercurrent
investmentportfolioyearafter
year,she’lldepleteherfunds
wellshortofhergoaltomakeit
last30years—andshedoesn’t
haveapensiontohelpmakeup
thedifference.Barbarabelieves
thatdrawinguponSocial
Securityisheronlyoption.
Aftermeetingwithheradvisor,
shelearnsthatinordertomake
themostofSocialSecurity
benefits,sheshouldwaituntil
age70inordertocollectthe
highestamount.Byutilizinga
reversemortgagetosupplement
herretirementincomeduring
theeight-yeardeferralperiod,
Barbaracanensurethatshe
receivesmaximumbenefits
withouthavingtodrainher
investmentportfoliotoreachher
goals.
Age 62
stAtusRetired
portfoLio$500K
HoMe VALue$500K (no mortgage)
pension None
meet barbara
scenario 1 and 2 client Portfolio input Parameters:
•Theinitialvalueoftheretiree’saccount
o60/40 securities portfolio
•Equities60%
•FixedIncome40%
Calculationsofinvestmentgain/lossandofretirementincomewithdrawalareperformedeachyearina30-yearperiod.
identical variables in all simulations:
•Initialwithdrawalrate
•Investmentperformance(averageinvestmentreturnbasedondatafrom1973-2009)
•Rateofinflation
•Amountdrawnbytheretiree
differing variables in all simulations:
•Sequenceofinvestmentreturns(randomlyselected)
•Strategiesusedtodeterminewhetherretirementincomeiswithdrawnfromtheaccountand/orthereversemortgagecreditline
Inthecourseofthecalculations,thecashfloweithersurvived30yearsoritdidnot(thetwomostsignificantdeterminantsofcashflowsurvivalaretheinitialwithdrawalrateandwhetherthehigherinvestmentearningyearsoccurearlyorlateinthe30-yearsequence).
Thomas Mastromatto #145824 phone 888-769-7023
ways to use a reverse mortgageTheJournal of Financial Planninghasoutlinedvariousstrategiestoeffectivelyuseareverse
mortgagetohelpretirementfundssurvive:
passiVe strategy
1.Reverse-Mortgage-LastStrategy|Areversemortgageisestablishedwhentheclientisinfinancialtrouble.This
usuallymeansthattheportfoliofundshavebeendepleted,high-valueassetshavebeensoldtomakeendsmeet,
andleveragingthehomeequityisthelastremainingoption.
actiVe strategies
2.Reverse-Mortgage-FirstStrategy|Areversemortgageisestablishedattheoutsetofretirementanddrawn
uponeveryyeartoprovideretirementincomeuntilexhausted,allowingtheclient’sportfoliomoretimetogrow.
Subsequentwithdrawsarethenmadefromtheportfolio.
3.CoordinatedStrategy|Areversemortgageisestablishedattheoutsetofretirementbutonlydrawnupon
iftheportfoliounderperforms.Theneedtousethereversemortgagefundsisdeterminedyearlybasedupon
investmentperformance,whichsparestheportfolioanydrainwhenitisdown,givingitabetterchancetorecover.
Usingtheseactivestrategies,thecashreservesaremadeavailableupfrontandincorporatedintoaplan,giving
theportfoliothemaximumamountoftimetogrowandthebestpossiblechanceofsurvival.Theborrower(s)can
stillliveintheirhomewithoutmakingmonthlymortgagepayments,feelconfidentaboutbeingfinanciallyprepared
foremergencies,andmaintaintheirdesiredqualityoflife.simple and effective.
“Reversemortgagesdohaveaplaceinmainstreamretirementdistributionplanning,andhaveasignificantimpactontheprobabilitythatsomeclientswillbeabletomeettheirpredeterminedretirementgoals.”--The Journal of Financial Planning,“StandbyReverseMortgages:ARiskManagementToolforRetirementDistributions”byJohnSalter,Ph.D.,CFP,AIFA;ShaunPfeiffer;andHaroldEvensky,CFP,AIF
call us today to learn how a reverse mortgage can provide real retirement security for your clients.
Thomas Mastromatto #145824 phone 888-769-7023
FindouthowareversemortgagecanprovideyourclientwithamoresecureretirementTODAY.
call us For more inFormaTion.©2013AmericanAdvisorsGroup
Thomas Mastromatto #145824 phone 888-769-7023