NYT: American College Center for Retirement Income in King of Prussia Explains Advantages of Reverse Mortgages

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Reverse Mortgages
Image via American College Center for Retirement Income.

While reverse mortgages were once considered a last resort for homeowners short on cash, today, they can be used by younger retirees to help pay bills and preserve savings and investments, writes Susan B. Garland for The New York Times.

Home Equity Conversion Mortgages can also help parents wanting to preserve home equity for their children potentially leave a larger legacy with a coordinated strategy, according to Dr. Wade Pfau, co-director of the American College Center for Retirement Income in King of Prussia.

Pfau, author of Reverse Mortgages: How to Use Reverse Mortgages to Secure Your Retirement, runs the calculator at RetirementResearcher.com where people can get an idea of how much a HECM will pay.

He looked at a hypothetical couple where both partners are 62 and have an initial home value of $435,000 and $870,000 in investments. He found that if the couple decided to take out a reverse mortgage after depleting their portfolio, they would have left their children close to $1.8 million in tax-free home equity. However, if they used a coordinated strategy, their heirs would receive $2.2 million in after-tax assets.

Read more about the explanation of reverse mortgages from the American College Center for Retirement Income in King of Prussia in The New York Times.

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