This series that is intended to provide you a well-rounded, objective overview of reverse mortgages, an element of your financial plan that if implemented properly with thoughtful, proactive planning, has the potential to dramaticalIy improve the odds of your achieving a successful retirement.

First, let’s take a moment to understand why this is so important. Americans’ longevity continues to increase over time, with advancements in medical care being a significant driver – the average life expectancy of a 60 year old is multiple decades into the future, and given the pace of medical care innovation, it is likely that life expectancy will continue to significantly increase in the near future.

At the same time, as we have seen especially in recent years, the cost of living in the United States continues to significantly increase, with some of those drivers being especially felt by retirees and soon-to-be retirees, including the cost of health care and other necessities.

With increasing longevity and rising costs, a sound, proactive approach to retirement planning is key. Yet, over the last several decades, we have seen the private sector move away from defined benefit programs (pensions) that historically provided an important, predictable supplement to income in retirement, replacing those programs with defined contribution programs like 401Ks and IRAs, where individuals are responsible for funding and managing those investments for their retirements. Unfortunately, these changes have left many Americans with significantly underfunded retirement savings, with the Federal Reserve estimating the median retirement savings of a 65-74 year old in 2022 to be only $200,000, with half of that age cohort having less retirement savings than that. With decades to live, and many retirement experts recommending a 4% annual withdrawal strategy over time that equates to $8,000 a year at this median, that is simply not a sustainable retirement for many retirees, even when supplemented by social security income.

At the same time, over 3/4 of retirees or soon-to-be retirees age 62 or older own their own homes, and have accumulated substantial home equity in recent years, with the Urban Institute estimating the median home equity, adjusted for inflation, rose from $173,000 in 2019 to $222,000 in 2022 for 62 year olds. Put simply, for a large majority of older Americans, the equity they have accumulated in their home – the value of their home minus any mortgage balance – is the significant majority of their overall net worth.

With this backdrop in mind, this series is intended to provide you with a thoughtful, objective overview of how reverse mortgages work, focusing on the details of the Home Equity Conversion Mortgage, or HECM for short, a federally insured loan product. Our goal is also to provide you a balanced overview of who should consider these types of products, and who should not, and how they can be integrated proactively into your overall financial plan for retirement, drawing on third party research results where helpful.

We also encourage you to reach out to us with any questions you have, including any potential scenarios you would like to discuss individually. We also appreciate any feedback, comments or questions you have, and we will do our best to answer those questions, and provide additional content and topics based on those comments. If you find this content helpful, please also subscribe, so you will be notified when we post new content.

In the next installment of this series, we will focus on the basics of the reverse mortgage.