New York Times: In Family Retirement Planning, Reverse Mortgages Could Present a Solution
With the impact of the COVID-19 coronavirus pandemic still a persistent presence in the everyday lives of Americans, more adult children and retired parents are spending time together, which makes for an optimal moment for retirees to talk about their finances with their children. A reverse mortgage can be one such solution for retirees to explore in consultation with their children.
This is according to an article at the New York Times written by finance author John F. Wasik.
The pandemic has brought a whole host of financial issues and potential problems to the forefront of many Americans’ minds, and one such problem could be related to estate issues, Wasik writes.
“For far too many families, financial planning is akin to scheduling dental surgery. The prospect of pain and discomfort prompts many to put it off — or not do it at all,” he writes. “During the pandemic, however, a mortal urgency has forced the issue. Will dependents and heirs be provided for? What about funding a dignified retirement? Fortunately, with many families still sheltering together, the different generations can sit down and address these subjects openly.”
Focusing on the story of married couple Rosemary and Jeffery Harris who made extensive financial plans after the 2008 financial crisis, they found some of those plans strained by the new financial impact of the pandemic and had to make additional adjustments.
“The couple lost a relative to COVID-19 and wanted to take the opportunity of having time with their daughters to nail down the details and keep them informed,” the article reads. “As many families have discovered, it can be uncomfortable to involve children in discussions of how to handle estates after parents die.”
The couple’s financial advisor, Aaron Smith of A.W. Smith Financial Group, says that parents can begin having that conversation with their children by prioritizing what needs to be discussed and taken care of first, Wasik writes. Common starting points can be oriented around what the retirees want to ensure out of their plan, between ideas like independence in retirement or inheritance for surviving heirs.
Brookings Institution researcher Martin Baily also tells Wasik that it can be important to take an inventory of family assets, focusing first on housing wealth and Social Security benefits. This is where a reverse mortgage could be an important pillar of the ultimate solution, Wasik writes.
“A reverse mortgage, for example, is worth considering to tap a home’s equity to provide a monthly payment based on the home’s value,” he says. “Although it’s a loan you don’t have to pay back, it’s complex and often expensive, and could compromise your estate plan.”
Many families may be most comfortable in broaching the topic of their asset inventory through the context of something like long-term care, according to Baily. This can help for scenario plans if the retirees become disabled, whether or not anyone in the family can provide in-home care, or if an institutional solution is required.
Article by Chris Clow on reversemortgagedaily.com