Market volatility and reverse mortgage

Laurie MacNaughton © 2018

If you’re even a casual market observer, Monday’s financial news grabbed your attention as the Dow plunged 1175 points, the biggest point drop in history.

As a result of the market turbulence, the first call I took Tuesday went like this: “In light of the market crash, should I do a reverse mortgage?”

So…a couple things here.

First, and perhaps most importantly, a loan officer is not the same thing as a financial planner, wealth manager, nor accountant; most loan officers are neither estate attorneys nor CPAs. Even if your particular loan officer does carry one or more of these designations, he or she should not be dispensing advice across disciplines, as conflicts of interest might quickly become an issue.

Second, even though 1175 is an uncomfortably large number, percentage-wise it’s not anywhere near a big enough drop to qualify as a market “crash” by any reasonable definition.

Third – and I want to emphasize this – if a reverse mortgage was a good fit before a market plunge, it’s a good fit following a market plunge. If it was a poor fit before a drop, it may well continue to be a poor fit. And for those urgent reverse mortgage sales pitches? It’s always a good idea to listen to a “sky-is-falling” message with a healthy measure of skepticism.

But this topic does suggest a very real question, namely what are some factors that make a reverse mortgage a good fit?

Optimally, a reverse mortgage is one part of a long-range financial plan in retirement.

Here’s what I mean: as life expectancies continue to increase, retirement is going to take more than just Social Security. It’s going to take more than a well-funded 401-K. In fact, it’s going to take more than a pension, an annuity, an IRA, or a bank account – or a reverse mortgage. But when added together, these can combine to create a long-term means of maintaining dignity and independence in retirement.

So, don’t panic. And certainly don’t get caught up in catchy sales pitches. But do understand your options – and how a reverse mortgage can fit into your long-range financial plans.

If you would like more information on reverse mortgage, give me a call. I always love hearing from you.