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The Best Retirement Vaccine?

March 23, 2021

The retirement preparedness pandemic & reverse mortgages

For millions, vaccines have increased life expectancy and prevented needless suffering and death. While typically underappreciated in developed nations, today multitudes across the globe are eagerly flocking to get vaccinated to prevent infection or the severe symptoms of COVID-19.

Wouldn’t it be nice if there was a retirement vaccine to hedge against the risk of outliving one’s money or to prevent the ravages of unexpected health and financial emergencies? Fortunately, there is one for eligible older adults who own a home. A reverse mortgage.

Acute retirement crisis

Vaccines are of no benefit for those who are already acutely ill. The same can be said for senior homeowners who are already in an acute financial crisis that would only be postponed with a reverse mortgage. For instance, a homeowner who could not make timely property tax payments despite having no liens on the home has only postponed the inevitable; a property tax lien or possible foreclosure.

The financial preparedness pandemic

Today millions face the specter of retirement insecurity. Even those with the financial strength of retirement savings can see their funds evaporate in a matter of months due to unforeseen financial shocks. This is where a reverse mortgage can bring an ounce of prevention to prevent a pound of avoidable financial pain and mental anguish.

However, like most, vaccines don’t seem so important until there’s an imminent threat. Unlike the polio epidemic’s frightening physical manifestations in the early 1950s, the effects of the retirement preparedness pandemic go unnoticed until the patient is gravely ill.

This is why reverse mortgages should no longer be viewed as a ‘loan of last resort’. Unfortunately, such a notion has lead to countless homeowners going down a path of financial ruin that may have been easily avoided had action been taken earlier. That is truly tragic.

An ounce of prevention

Over eight-in-ten HECM professionals who responded to our ‘State of Your Business Survey’ said their borrowers get a reverse mortgage to eliminate an existing mortgage. But what about those with little or no outstanding mortgage loan balance? Could they benefit? Absolutely. The challenge is how to reach homeowners who appear seemingly secure of their retirement preparedness. This requires removing our fixation on mere mortgage elimination to the unforeseen threats to their retirement security. What if they don’t have the means to pay for long-term care costs should they or their spouse fall ill? What if the stock market melts down and 30-60% of their life savings is lost? What then? You see, a little ‘whataboutism’ isn’t always bad, in fact, it’s crucial.

Even better, a reverse mortgage borrower may choose to boost their ‘retirement antibodies’ by making voluntary payments, thus preserving some of their equity while building their future borrowing power (principal limit or line of credit) as a hedge against financial shock. How often is this scenario presented to those with little immediate need for cash flow?

While reverse mortgages are certainly not a miraculous financial vaccine, they certainly can serve as a robust and flexible preventative measure to mitigate retirement’s most notable risks.

 
Jay Kaplan profile picture
Jay Kaplan
This is the place to share. Share news, updates and opinions. The reverse is the most misunderstood item in the lending and financial home ownership arena; we need more exchange of ideas. This area is for questions and, I hope; answers. Please keep the dialogue going in the name of education, and that goes both ways. Please see that I have added two categories from The Educated Retirement show for Nostalgia and Wisdom
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This is the place to share. Share news, updates and opinions. The reverse is the most misunderstood item in the lending and financial home ownership arena; we need more exchange of ideas. This area ...
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