4 minute read
When George Vrban recently took out a reverse mortgage himself, some eyebrows were raised. But his decision wasn’t born out of financial desperation — it was part of an overall strategic retirement plan.
George Vrban, a name synonymous with expertise and trust in the reverse mortgage industry, reached a personal and professional milestone by obtaining a reverse mortgage for himself.
Many will read the headline and feel sorry for George. After all, what tragic circumstances would drive the nation’s top reverse mortgage originator to leverage his hard-earned equity?
But George, who lives in St. Augustine, FL with his lovely wife, Michele, has long advocated for the use of reverse mortgages not just as a necessity but as a strategic financial planning tool. Having recently celebrated his 62nd birthday—the minimum age to qualify for a reverse mortgage, he had the opportunity to lead by example.
I’ve known George for 15 years and can assure you this action was not an act of desperation. It is one element of a long-term financial plan that includes tax strategies and Roth conversions.
You see, George is simply following in the footsteps of other notable reverse mortgage practitioners like nationally recognized speaker and reverse mortgage author, Harlan Accola. Harlan is National Reverse Mortgage Director at Movement Mortgage, and in 2022, he obtained his own reverse mortgage for many of the same reasons as George. They both know what many in the financial planning community are beginning to learn—obtaining a reverse mortgage at age 62 creates a more efficient retirement outcome.
“A reverse mortgage is often misunderstood as a last resort for financially destitute seniors. However, that perception is far from accurate,” said George Vrban. “My wife and I are fortunately in a comfortable financial position, yet we chose to take out a reverse mortgage because of the flexibility and security it offers. It’s a proactive measure, enabling smarter wealth management and prudent retirement planning.”
What is a Reverse Mortgage?
Reverse mortgages allow homeowners aged 62 and older to convert a portion of their home’s value into cash, monthly payments, or a line of credit. The homeowner remains in the home without a required monthly mortgage payment while maintaining responsibility for property taxes, insurance, and upkeep. The loan is typically repaid when the homeowner sells the home, moves out, or passes away.
What are some strategic advantages?
Today’s reverse mortgage borrowers leave unused proceeds in a secure line of credit (LOC) that grows at the same rate as borrowed funds. Therefore, borrowers who don’t need funds today will have increased capacity to pay for financial shocks later in retirement like home care. For this reason, it makes sense to obtain a reverse mortgage as early as possible.
While monthly payments are not required, reverse mortgage borrowers have the option to make voluntary payments to reduce their loan balance and increase their line of credit which may also provide a possible tax deduction. Therefore, some homeowners will make large windfall payments once every 3 or 4 years and then itemize on their tax returns in those years.
Getting a reverse mortgage early also provides a buffer against sequence of returns risk. Having access to home equity allows retirees to avoid selling investments during market downturns. This will help them to preserve their retirement portfolio during the crucial early retirement years when negative returns can have the most damaging impact.
George has been instrumental in guiding thousands of seniors through the process of securing their own reverse mortgages, enhancing their financial freedom and quality of life. Clearly his decision to obtain a reverse mortgage underscores his belief in the product’s advantages.
“It’s about walking the walk,” George explained. “How can I advocate for something if I don’t fully embrace it myself? I’ve always believed in the strategic use of reverse mortgages, and now I can share personal insights and firsthand experience with my clients.”
George Vrban is a Movement Mortgage Retirement Mortgage Professional (RMP) based in St. Augustine, Florida.
Dan Hultquist is a co-founder of REVERSE plus, and the author of “Understanding Reverse,” widely considered an essential resource for both consumers and mortgage professionals
This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.
To contact the editor responsible for this piece: zeb@hwmedia.com.
While there are many good things in this article, I question two of the tax ideas being promoted. Positively, I support the promotion of the interest deduction bunching strategy which is all but impossible without reverse mortgages. Yet borrowers need to be aware that they need to have verifiable documents supporting the amount of acquisition indebtedness their income tax deduction is based on which can change from year to year.
While I strongly support contributions to Roth IRAs and 401(k)s in working years except possibly after 50 (then most of the time traditional plans come into play) based on the taxpayers’ facts and circumstances, I do not support Roth conversions in most cases.
When I first started practicing income tax in 1972, the highest federal income tax rate was 70%. Over the years, we have watched that rate drop with rare exceptions. I have had few income tax clients who had higher marginal income tax rates in retirement than in many of their working years. This is based on the fact that most taxpayers have lower marginal income tax rates in retirement especially when compared to their marginal income tax rates in peak income years. To make Roth contributions effective, income tax planning help is generally required.
Then there is the increasing interest (and MIP) on the cash from a RM that pays the income tax bill related to a Roth conversion. None of that is deductible under current law. Some maybe deductible starting in 2026 and beyond but that has yet to be clarified through the legislative process.
While we talk a lot about using RM proceeds to mitigate the impact of the sequence of returns, when a substantial portion of the portfolio of a senior is held in a qualified pension plan, the strategy is far less effective unless a senior needs more than RMDs provide. It is still a valid strategy to the extent that a senior owns the portfolio directly.
While I appreciate Dan’s and George’s point of views on RMs, some of those in our industry deny and promote the idea that mortgagees should not file Forms 1099-A or 1099-C. These folks deny that unlike other nonrecourse mortgages, RMs can terminate in a manner that makes the debt cancelled subject to capital gains tax. It seems they care more about sales than the preparedness of potentially affected borrowers for what can end in a rather difficult income tax situation.