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Piedmont, CA

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Piedmont, CA

by: ALISON VAN DYKE

FIRST AND MAIN FINANCIAL

(510) 601-1935

Oakland, CA | Best Financial Advisors Oakland CA; Plan with a Reverse Mortgages

Enhancing Retirement Income with a Reverse Mortgage:

Reverse mortgages are an important tool in the retirement income toolkit.

An existing client of ours recently decided it was time to retire.  He is 68 years old and he and his wife were concerned about unforeseen expenses during retirement and nervous about market volatility with markets currently close to all-time highs.  Another area of concern was the potential impact of significant long-term care expenses later in life.  They were looking for guidance in anticipating retirement expenses and wanted to have a better understanding how certain large, unexpected expenses could impact their overall financial plan.

During the data gathering phase of the financial planning process we thoroughly reviewed their annual living expenses and together decided that expenses should be increased to reflect what was actually being spent on a monthly basis.  After increasing their expenses and projecting their annual cash flows, the probability of success of not running out of money during their lifetime dropped from 96% to 75%.  This outcome reconfirmed concerns associated with their financial future.

After a lengthy discussion and review of the entire plan, we decided to look at options to be considered that would revert their probability of success back up to the 95% level.  We highlighted an overall expense number that would help their situation and discussed if a level of part-time work should be considered to offset additional expenses.  Based on the amount of equity in their home and limited retirement savings, we also considered a reverse mortgage.

Most of the reverse mortgages that are exist today are Home Equity Conversion Mortgages (HECM), which are regulated and insured by the federal government.  They have evolved over the years and when used responsibly, can create liquidity for an otherwise illiquid asset.  If used properly, they can support a more efficient retirement income strategy, resulting in more spending and/or a higher net worth at end-of-life.  After consulting multiple sources to gather accurate estimates of the value of the home, existing mortgage details, HECM costs, interest rate and principal limits, we were able to model a reverse mortgage and demonstrate how their annual lifetime cash flows would be affected as well as the overall impact to their net worth.

The result was a probability of success bumped back up to the 98% level when incorporating a reverse mortgage into their plan.  Their total portfolio assets (not including their home) were also increased from approximately $1 million to $1.8 million at end-of-life.  And, although no additional mortgage payments were made, their overall net worth remained unchanged at $3.6 million.

When sitting down with our clients, we were able to demonstrate how a reverse mortgage can be used effectively to enhance a retirement income strategy and create additional flexibility in a cost-effective manner.

If you have ever been curious if a reverse mortgage may make sense for your situation, we invite you meet with the First and Main Financial advisors for a free consultation.  We would be more than happy to sit down with you, assess your financial situation and review our services that will help you navigate your financial future.

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“Best Financial Advisor in Piedmont, CA”

Top Rated Local Financial Advisor / Planner

East Bay Area: Piedmont, Oakland, Berkeley, Alameda, Orinda, CA

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Recent

“Best Financial Advisor in Piedmont, CA”

Top Rated Local Financial Advisor / Planner

East Bay Area: Piedmont, Oakland, Berkeley, Alameda, Orinda, CA

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BIO: At First & Main Financial, Alison Van Dyke helps clients with their financial lives. She has worked in Corporate Finance for Bank of America and Chase Manhattan Bank. Alison is pursuing the CFP® certification; she received her MBA at Georgetown and her B.A. in Political Science from UCLA.

235 Wildwood Avenue,
Piedmont, CA 94610, USA

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Piedmont, CA 94610, USA

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BIO: At First & Main Financial, Alison Van Dyke helps clients with their financial lives. She has worked in Corporate Finance for Bank of America and Chase Manhattan Bank. Alison is pursuing the CFP® certification; she received her MBA at Georgetown and her B.A. in Political Science from UCLA.