Reverse Mortgages: How to use Reverse Mortgages to Secure Your Retirement

by Wade Pfau

*This is the Updated 2024 Book Edition from January 2024* Reverse mortgages are an important retirement planning tool. This book provides an up-to-date understanding about reverse mortgages and how to use them as part of a complete and responsible retirement plan.

I am a professor of retirement income. I may be the only author of a reverse mortgage book who does not work within the reverse mortgage industry. My focus is on finding ways to build strong retirement plans, and this is the perspective I bring to reverse mortgages.

I know that reverse mortgages can look expensive in isolation. But reverse mortgages should not be viewed that way. We need to focus on their overall contribution and interactions with other retirement assets as well.

Retirement is different from what people are accustomed to when working. Risks change. Retirees must sustain spending while not knowing how long their funds need to last, while managing the risks of a market downturn that can permanently derail a retirement portfolio, and while also being ready to manage unexpected spending surprises.

Reverse mortgages can help to manage these retirement risks by providing an additional resource to support spending and to coordinate with other investments assets.

My overarching interest is in building efficient retirement income plans to support the most spending potential for assets, both during life and as a legacy for the next generation. I demonstrate with case studies how reverse mortgages can contribute to better retirement outcomes in numerous

- Coordinate between spending from the investment portfolio and from the reverse mortgage to better protect investments from market volatility

- Avoid the additional burden of fixed mortgage payments in retirement by refinancing a traditional mortgage with a reverse mortgage

- Pay for home renovations to help you comfortably age in place with the home you love

- Build a bridge to support getting the most lifetime value from Social Security benefits

- Use the reverse mortgage as a tax-free spending resource to better manage your taxable income

- Use the growing line of credit as a protective hedge for your home value or as a source of reserves to cover unexpected spending needs

This book provides the basics for how reverse mortgages work, why they work better when interest rates are low (unlike every other retirement tool), what their growing line of credit means, and how they help to manage investment volatility.

Reverse mortgages---when used correctly---can provide an added layer of security for retirees by creating flexibility for their assets. Opening a reverse mortgage earlier in retirement and using it in a thoughtful manner is generally more effective that treating it only as a last resort option.

Those who understand whether and how to fit a reverse mortgage into their retirement plan will have an important edge in achieving a financially secure retirement. This book shows you how.

Genres: Finance, Nonfiction

143 pages, Kindle Edition

Published February 25, 2022

About the author

WADE D. PFAU
PhD, CFA®

Professor of Retirement Income

RICP® Program Director

Co-Director of the New York Life Center for Retirement Income

Areas of Expertise:
Annuities, Financial Planning, Investments, Life Insurance Planning, Life Insurance Practices, Portfolio Management, Retirement Planning

BA, University of Iowa
BS, University of Iowa
MA, Princeton University
PhD, Princeton University

Reviews

[Sukesh Shekar · Rating 5 out of 5]

the most insightful source on using housing wealth as part of your retirement

35 million households are 62 or older. Less than 1% use this gem called a HECM. It can increase retirement length, lifestyle, liquidity, and legacy by introducing a new asset class into your portfolio.

My favorite tips were using it to reduce (income) taxes, delay social security and reduce cash reserves with a coordinated portfolio strategy.

I you won’t accept a portfolio that 100% stocks, why do you accept a portfolio that 0% home equity?

[Diana · Rating 5 out of 5]

An objective professional look at reverse mortgages under current law. Bust several myths about why have been denounced in the past. Practical guidance backed up by Dr. Pfau’s research and others.highly recommend reading this book before or early in retirement or as part of understanding retirement income sources. Well-researched and written.

[Linda Leitz · Rating 4 out of 5]

Pfau is an expert on retirement funding. He debunks the opinion of reverse mortgages as a consumer ripoff and gives solid research on how they are structured, as well as effective use of reverse mortgages in retirement funding. The academic research details do not make for light reading. But the conclusions are important for financial professionals who want to give objective advice.

[Terry Earley · Rating 2 out of 5]

Short, informative read. Plenty of deep detail, written mainly for financial professionals.

[Dave · Rating 4 out of 5]

Good intro to how reverse mortgages work, beyond the mostly negative hype from an author that appears to have no vested interest in promoting or villifying them.

[Laura Power · Rating 4 out of 5]

Wade Pfau provided an in-depth and alternative look at reverse mortgages that explains how the use of them may work in some financial income plans. I especially liked the first chapters on financial income planning and will probably incorporate it in our own plan. I would recommend this book to someone looking to either provide a legacy or provide extra income that is trapped in your home.

[M31 · Rating 3 out of 5]

Aunque este orientado al mercado USA, gran introducción a cómo utilizar de manera responsable esta herramienta financiera y, al igual que en How much can I..., Muy bien documentado matemáticamente y ampliamente explicados los mecanismos burocráticos y sus riesgos asociados.

[Linden · Rating 4 out of 5]

Excellent overview of the role of home equity in a retirement plan.

[Allison · Rating 4 out of 5]

If you are considering a reverse mortgage or have the misfortune of retiring right before a down market, this book is definitely worth your time.

[Jason Branning · Rating 5 out of 5]

Excellent summary of reverse
mortgages and practical uses for them. Dr. Pfau's assertions are thoroughly researched and offer helpful context for retirees thinking about a reverse mortgage.