The reality of our world today and traditional financial thinking just doesn’t work anymore.
I read a pamphlet by Leonard A. Renier a Financial Planner, The Family Legacy, and he asks the question “what in the last several years has the financial services industry done to improve the lives of the average American”? He is talking about saving for retirement.
This really got me thinking. They offer a service where you pay them for their advice and you take all the risk on the product/program they sell to you. This could be mutual funds, stocks, bonds, 401K’s, and insurance. All in the name of making money for retirement. Yes, making money not just saving.
How do they expect us to save 20% of our paycheck for the next 30 years in order to retire comfortably? There are no more 30 year jobs with lifetime pensions. Salaries have not kept up with the cost of goods, shelter or raising a family in most of the world. The landscape changed about 10+ years ago and those getting ready to retire or recently retired don’t have enough money either.
The writing has been on the wall for a long time; however we just don’t want to take action. Why? Hope, fear, misinformation, outside opinions all contribute to our fear, and fear breeds inaction. Many in the financial services industry are now paying attention to reality. They are now looking at home equity to bridge the gap.
Nobel Prize-winning economist Robert Merton said in a recent article “the idea of leaving the house as a bequest is flawed”. He continues “we need to start thinking about the house differently, viewing it as an asset rather than treating is as part of our legacy”.
We must live in the economy that surrounds us. If you are getting ready to retire are you able to have the same standard of living in retirement as you did when working? Do you have to work a bit longer? Do you want to work that long? Will you be able to work that long? For those that have retired is it the retirement you worked so hard to obtain?
I’m an advocate of Reverse Mortgage. Not because I sell mortgages, but because I want to have the same standard of living as I do now when I retire, and frankly that just isn’t going to happen unless I tap in to the largest single investment I have ever purchased. My house. I was taught to buy a house pay it off and never touch the equity. Why? We were not meant to retire with a mortgage payment because in retirement our expenses need to be lower and housing is the highest expense we have. I can still retire, comfortably and for my life, in my home with no mortgage payment
Again quoting, Robert Merton “The house is like an annuity. It provides the housing you need for as many years as you need it”.
I believe, if planned properly, a Reverse Mortgage can be the 4th bucket of money in retirement planning.