Finance of America Reverse: Sophisticated 21st Century Planning

– Today’s savvy investors are
looking for innovative ways of adding value to America’s
sophisticated retirement plans. For growing numbers of
advisors and their clients, this now means choosing a reverse mortgage as part of the proactive
retirement strategy. In this news item, we’re going to learn more
about the renaissance of reverse mortgages. (upbeat music) – [Reporter] The golden years are getting a bit more complicated
for 21st century retirees. Kristen Sieffert is president
of Finance of America Reverse. – For people retiring today, it’s such a different
landscape than it used to be. With the majority of people
no longer having pensions. Some of the first generations of people that had to do 401ks on their own without very much direction, just got off to a slower start than many people in the past. Coupled with the fact
that people are living so much longer these days. – [Reporter] As Americans
face longer retirements, there is renewed urgency
to ensure they can fund the lifestyle they want,
preserve assets under management, and pay for long term care, while still having sufficient savings to cover rising healthcare costs. A reverse mortgage is
one tool that can help. – A reverse mortgage is for
people that are 62 and older. There are some products on the market that allow you to get
it at age 60 and above. And basically it allows
you to take the equity that you’ve built up in your home and turn it into cash flow
as a standby line of credit. And I’d also mention that
with a reverse mortgage there are no payments required. If a borrower chooses to make payments in order to protect
their equity, they can, but there’s no payments required as long as they’re living in the home and keeping up with the
obligations tied to the loan. – [Reporter] In the
U.S., senior home equity is valued at a staggering $6.8 trillion. Steve Resch, Retirement
Strategies’ vice president for Finance of America Reverse,
explains how the market for reverse mortgages
includes affluent home owners. – The overall retirement
market is about 20 million when we look at mass affluent consumers. And those are your
consumers that have between a half a million and $1.5-2
million of invested assets. – Our homes are often our
largest purchase early in life. In retirement, these homes become one of our greatest assets. So as Americans prepare for retirements that can last 30 years or more, increasingly reverse mortgages
are playing a critical role in creating financial security
during our golden years. – Many firms won’t even talk to clients that have less than
half a million dollars. But with a coordinated strategy, that portfolio could potentially handle all the draws needed to
get through retirement, but then at the same time
double, or even triple over time, now we’ve created a client
that is highly profitable to wealth management firms. – [Reporter] Phil Walker,
Finance of America Reverse’s vice president of strategic partnerships considers how seniors at all income levels can put their homes equity to work. He calls it the coordinated strategy. – You literally just look
at the portfolio performance at the end of each year. If the portfolio performance is up, you take the next annual
draw from the portfolio. But in those years when
the portfolio performance is down, instead, you take the draw from the reverse mortgage line of credit. This gives the portfolio
some breathing room to rebound faster, right. It allows it to take advantage
of the up market times. – [Reporter] Dr. Barry Sacks,
an independent consultant in retirement income
planning explains further. – By coordinating the
draw from the credit line against the performance of the portfolio, you end up with a much better situation than if the retiree were to
simply draw from the portfolio until it’s exhausted, and then as a last resort,
draw on the home equity. – So how can financial advisors incorporate reverse mortgages
into financial planning in such a way that it benefits
not only their clients, but also helps them grow
their own businesses? – The fact that you’re greatly
increasing the longevity of a portfolio obviously
benefits the client, but it benefits the firm also. If that portfolio can potentially double or triple over time, now you have a client that’s
gonna be with you forever. – Reverse mortgages have shifted away from a product of last resort to a cornerstone of savvy
retirees’ wealth strategies. With the help of a well-informed
financial professional, Americans can tap into
rising home equities and get to work on that retirement they’ve always dreamed of. From San Diego, California,
I’m Brad Pomerance.

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