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Reminding Seniors of Their Options
“Destiny is not a matter of chance; but a matter of choice. It is not a thing to be waited for, it is a thing to be achieved.” That’s how former US Secretary of State William Jennings Bryan characterized life. His words are akin to the more concise dictum, “carpe diem!”
Yet many seniors are reluctant to seize the day, as they perceive reverse mortgage with the psychological equivalent of “deer in the headlights” panic. They imagine themselves painted into a metaphorical corner, paralyzed at the thought of losing either their beloved home or their life savings. As we discussed in the post on Scare Tactics, neither of these is a realistic outcome for the vast majority of seniors. So how do you put their minds at ease?
With information. The more informed seniors are about their financial options, the less paralysis they experience. It’s like opening a pressure valve, or a kettle releasing steam.
To begin, outline your client’s options. For example: should they take Social Security at age 62 or 65, or delay as long as possible to realize greater gains? According to the Financial Literacy Research Consortium at Boston College, delaying benefits until age 69 for a single male or age 70 for a woman or two-earner couple results in significant savings in their later years. The same boon may also apply to IRAs. Although seniors are required to begin receiving distributions by age 70½, this still affords them many years in which to postpone payouts and build their nest egg.
By the same token, a couple might want to consider whether to downsize to a smaller, less expensive home rather than apply for a reverse mortgage on their existing one. While their long-term homestead doubtless holds many memories — and most seniors prefer to age in place rather than relocate — a lower monthly mortgage will conserve resources. And research now indicates reverse mortgage may be the new “sweet spot” for borrowers: using accumulated home equity as an alternative to drawing down on investments.
Regardless of which path your prospects choose, the ultimate goal is for them to recognize that they have a choice: their later life destiny is in their own hands and is not a future to be feared, but seized with gusto. Then they’ll have the opportunity to enjoy truly “golden years”.
8 Comments
Ms. Rose,
The BCCRR is a study mill. Relying on its conflicting and lower quality research is playing with fire. To realize seniors have option is one thing but to believe that anyone reading such articles has sufficient information to sit down and describe those options with a senior is to do damage not help.
There are rather scholarly books on the subject of how to maximize Social Security. Real experts estimate that there are at least 4,000 different scenarios and the lion’s share apply to couples.
Most retirees have no idea when to claim and suspend or even the fact that exists let alone when to use or how it applies. They have no idea on how to claim now and claim more later. They lack the sophistication to know when to utilize the switch strategy. Some elections can be permanent and damaging. These are but the more common concepts Social Security experts utilize in their practices. When it comes to exploring Social Security options, seniors should seek the advice of an expert; it can mean tens of thousands of dollars and more to a retiree.
The Social Security Administration will answer questions about different techniques but they are prohibited from making recommendations and rightfully so. In many cases there are a myriad of issues to consider, including income tax.
Then the question becomes why delay taking an IRA? For most seniors, they saw their IRAs go down. Did they adjust their asset allocation after the decline or during it? If you believe that seniors are like deer caught in headlights with reverse mortgages, you should see many when it comes to adjusting their retirement asset portfolios and tax advantaged retirement plan asset base.
Few reverse mortgage originators have the tools needed to present the information required for seniors to make important financial decisions on subjects other than reverse mortgages. Let seniors seek the help of experts. We are not experts just because we read a “research” study produced by an organization like BCCRR.
There is much truth that various studies contradict one another depending on the group. That said delaying Social Security is not always a sound strategy but one that should be examined. Reverse professionals should not give tax or legal advice to potential borrowers as whether or not they should delay benefits. This is where working in tandem with their trusted adviser is key. Good points jim.
Shannon,
Although I am highly critical of the BCCRR report and the poor advice being given to seniors on using the delay strategy by obtaining a HECM with no consideration of risk or the impact of the strategy on their estate, sitting down with seniors and writing down their considerations, objectives, goals, and options can be a real benefit to our prospects whether they obtain a HECM or not.
What I strongly support is the methodology Ms. Amara presents. What I object to is not advising the senior to seek the advice of those who specialize in the areas under consideration. Just as we see seniors harmed by those who have read this or that false thing about reverse mortgages, so we can become that same type of “advisor” when it comes to overall retirement planning or selecting a specific course of action outside of the realm of reverse mortgages. Let us stick to what we are experts in and not try to be the expert in fields we know little about.
Ms. Amara brings up many good ideas with practical application. While it is never wrong to mention some of the financial strategies Ms. Amara mentions, it must be done with the caveat that one should seek a competent advisor in the those areas before incorporating the strategy into use of HECM proceeds. What we should be selling is reverse mortgages, not a strategic use of funds.
Jim, Thank you. I couldn’t agree more. There is need for much caution for loan officers to exercise in giving any retirement advice.
Mr. Veale,
I’d like you to be aware of two points about these posts. Since I am not a reverse mortgage expert, all potential subject matter is discussed ahead of time with the Reverse Fortunes staff, who often provide the sources I reference — and every blog post is read and approved by Shannon Hicks before it is uploaded.
We appreciate your thoroughness in reviewing them.
Sincerely,
Amara Rose
Ms. Rose,
Some issues are very sensitive in our industry. On the use of HECM proceeds to defer and increase Social Security benefits in later years, there is a huge divide. When one uses sensitive examples, there will always be a reaction.
I realize you believe there should be more understanding for the fact you are not taking a position on such issues when you use them as examples but that is an issue all writers face when writing for an industry they have little direct experience in.
I do apologize to you because I like the practical things you present like sit down with the senior and help them evaluate why it is they might need the HECM. I know you have no stake in the Social Security issue but for someone like me, not presenting it in an even handed manner will bring out the bull seeing a genuine red flag especially when it is defended by invoking the BCCRR, a research mill.
NO reverse mortgage loan originator should be advising on anything other than the prospect of using a HECM for home equity redemption, period. To take on the SS options, with the intent of advising a client, even of the options that they know about, without having the proper credentials is absolutely wrong.
Kevin,
I agree. What Amara is pointing out is that seniors have this as a consideration and ‘choice’ in retirement. That said loan officers should direct these conversations to the borrower’s trusted financial advisor. We should be asking at least if they are receiving Social Security (if eligible) or if they have chosen to delay benefits until a later time. As fiduciary standards become widespread we may find ourselves in the situation of having to document these questions were at least brought up, while not advising which route to take.