The evidence piles up: there are compelling reasons for making home equity part of your client’s retirement income strategy.
In an article in the Financial Planning Journal, Wade Pfau, PhD, CFA analyzes the current literature in six studies on whether and how home equity should be incorporated in a retirement income plan, particularly where sequence of returns risk is a concern.
Through simulations, the article considers the use of a reverse mortgage in five different scenarios, using as a control case a sixth scenario in which a reverse mortgage is not used.
The takeaway: there is great value for most clients in opening a reverse mortgage line of credit at the earliest possible age. And most frequently, the reverse mortgage reduces the inherent risk in the income strategy.
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