A researcher and financial analyst explains the role of the reverse mortgage in retirement planning.
In this debut finance book, Pfau draws on accumulated research and a deep understanding of the intricacies of reverse mortgages to advocate for their role in a balanced fiscal strategy for retirement. The book covers the basics of retirement finance, explaining the common investment vehicles employed to provide funds for an individual no longer drawing a salary, and then focuses on the mechanics of using a reverse mortgage as one component of the income stream. Pfau explains the regulations governing reverse mortgages, from penalties designed to prevent a homeowner from making unwise decisions when converting the dwelling’s value to cash to the protections in place that ensure a nonborrowing spouse can continue to live in the house as needed. The book takes a calm and moderate approach to fiscal planning for retirement, offering numerous examples of the actual returns a homeowner can achieve in comparison to other investment vehicles and avoiding an alarmist tone regarding the viability of job departure or the future of finance. The result is both informative and well-reasoned, providing substantial information about reverse mortgages while emphasizing the fact that they are one component of responsible financial planning and not a panacea in themselves: “coordinating withdrawals from a reverse mortgage reduces strain on portfolio withdrawals, which helps manage sequence of returns risk.” Pfau acknowledges that although a house represents a significant fiscal asset, it also plays an emotional role in its owners’ lives that must be addressed in planning for its eventual disposal. He clearly explains that the reverse mortgage, which allows homeowners to remain in a place they love while still benefitting from the equity stored in it, can be a practical solution that addresses both monetary and personal criteria. “Further Reading” sections at the end of each chapter provide additional information for readers in search of more details about both the research cited and the workings of the financial instrument.
A well-reasoned argument in favor of the reverse mortgage as a component of a retirement strategy.