Kicking & Screaming

repeated assurances the client liquidated all his stock positions. Hanson said this led to a reduction of their retirement income and then taking out a reverse mortgage.

Was this a fear-based decision? Perhaps. What we don’t know is where their portfolio would have been had they stayed invested. Would they have fared better had they stayed invested during the market downturn? Maybe is all I can say since I am not a financial advisor nor am I privy to the particulars of their portfolio.

Today retirees and those nearing retirement face a two-headed monster: stubborn inflation and a chaotic and unstable stock market. Hard choices will have to be made; choices many older Americans have fought tooth and nail to avoid. So where does one turn when their hard-earned dollars are being scalped by the market and inflation is taking a bigger bite out of their wallet each month? Their assets. Does this mean there will be a surge of interest in reverse mortgages? No. But some will be dragged kicking and screaming to consider tapping into their home’s value or eliminating mandatory mortgage payments to weather the storm.

The Hill reports that nearly half of baby boomers have no retirement savings. “Fewer than half of working-age Americans have any retirement savings, according to Census data for 2020”, reports The Hill. Zero. Nada. Those who did save took a trashing in the market. Fidelity estimates that the average retirement account lost one-fifth of its value in 2022 tumbling from an average balance of $135,600 to $104,000. Diversifying investment classes may help but many who were diversified just saw their losses spread out among varying investments.

Craig Copeland, director of wealth benefits research at the Employee Benefit Research Institute said while reverse mortgages may have a mixed reputation there are good and reputable companies that can provide a decent amount of monthly income. I will point out that reverse mortgage proceeds are not income but can increase one’s cash flow.

Nevertheless, the ability to tap into one’s home value to help fund retirement will no longer be a luxury but a necessity for more retirees. The question we should ask is how do we best position ourselves to serve those seeking solutions outside of watching their portfolio’s value drop each month? What relationships do I need to build and maintain? What strategies will I use to establish myself as a potential solution to a vexing problem?

No one likes to be led to make a decision kicking and screaming but sometimes that’s simply what it takes. What are your thoughts?

Resources:

Fidelity® 2022 Retirement Analysis: In The Midst of Inflation and Uncertainty, Retirement Account Balances Are Rising

[The Hill] Nearly half of baby boomers have no retirement savings

[Investment News] Unflinching guidance is your ultimate fiduciary duty