USA Today recently chatted with some financial planners for their takes on the Consumer Financial Protection Bureau’s recommendation against using the reverse mortgage to delay Social Security benefits — and some attempted to poke holes in the CFPB’s analysis.
The federal bureau last month released a report suggesting that the costs of a reverse mortgage could end up outweighing the potential benefits gleaned from the strategy, in which the borrower uses the loan proceeds to cover expenses while waiting to claim the highest Social Security benefits at age 70.
Multiple sources objected to this argument, with USA Today joining Jamie Hopkins and Jack Guttentag in laying out scenarios where the strategy could work.
“Experts took issue with the report’s methodology and assumptions, which might cause homeowners to unnecessarily dismiss reverse mortgages as a retirement-income tool worth considering,” financial columnist Robert Powell wrote.
Powell, who also serves as editor of Retirement Weekly, spoke with certified financial planner Marguerita Cheng, who said Home Equity Conversion Mortgages could be a good Social Security-delaying strategy for widows, widowers, or divorcees. Because they don’t benefit from their spouse’s income or Social Security benefits, Cheng said, a reverse mortgage could help bridge those gaps.
Both Cheng and John Salter, an associate professor at Texas Tech, told USA Today that there are risks associated with reverse mortgages. But both cautioned that a savvy borrower should consider multiple possibilities and not simply dismiss one out of hand.
“Future debt is a risk, but the risk has to be weighed with the reward of what is being created,” Salter told the paper. “There are no free lunches. But we should always have a comprehensive toolbox of strategies, and we must find the right tool for each person.”
For instance, Cheng suggested that homeowners should only consider taking out a reverse mortgage if they can see themselves comfortably aging in place at that specific property — and to perhaps avoid them if the home could be too costly or impractical to maintain over time.
Read the full piece at USA Today.
Written by Alex Spanko
