Using a reverse mortgage to support retirement savings has garnered attention from more financial planners today than in years past, but not all advisers think home equity should be used for longevity planning.
That’s the opinion Daniel Kern and Renee Kwok, chief investment strategist and president, respectively, at TFC Financial Management in Boston. Last week, Kern and Kwok wrote an article published in Financial Planning discussing why they don’t view home equity as a viable solution for their clients.
Acknowledging that downsizing is part of the retirement planning discussion, Kern and Kwok write that clients’ hope of relocating into a smaller residence is “to tap into home equity for retirement income while also accommodating for any future mobility limitation.”
“The real estate market in the Boston area has many clients realizing that downsizing is really upsizing in terms of cost,” they write. “Homes or facilities that have access to public transportation and ancillary services are often more expensive than the existing larger family home.”
Furthermore, Kern and Kwok write that unless clients are willing to move out of the region, it may be more difficult to unlock real estate equity values.
“As a result, we generally exclude home equity as a source of additional retirement income when planning for clients,” they write. “We primarily think of the home as a place to live in during retirement, rather than as a part of a client’s retirement nest egg.”
Read the Financial Planning article.
Written by Jason Oliva
