SUPERSIZE your retirement income

Have you ever heard the saying "different strokes for different folks?" Well, I always remind my clients that retirement planning is never a "one size fits all" and what works wonderfully for some folks is the absolute wrong concept for others.

Lets look at a hypothetical example using an imaginary couple named Mr. & Mrs. Jones that involves using reverse mortgage. Many people initally coil away from even the idea of a reverse mortgage, but I'm going to show you how, in this example, it creatively solves their financial issues. Please be sure to read all the way through this concept to understand how it was applied to the goals of the client.

Mr. Jones is age 70 & Mrs. Jones is age 68 years old. They are in very good health and have been retired for almost 15 years. When they retired, their pension was more than enough to cover all of their living expenses. During the last 15 years, they have seen their medical costs rise substantially, their property taxes increase, and the cost of living increase, which has eaten away at their modest retirement savings. So now they are really feeling an income pinch. Mr. Jones is considering going back to work, and they have been taking steps to aggressively cut their expenses. In fact, they are driving a car that is 20 years old, they have canceled their cable television and are considering not taking all of their prescriptions to try and save a few extra dollars.


Before Mr. & Mrs. Jones retired they had paid off their home. Their home is by far their largest asset, and if they had to sell it today, they could probably sell it for $275,000. They think selling their home would free up the capital they would need to live more comfortably. So they start looking to downsize. Unfortunately, what they find is that even the smaller decent homes in nice neighborhoods are going for around $275,000; so they will only break even. They do not want to move into an apartment, in fact, they don't want to move at all. They have lived in the same home for more than 30 years; they have a lot of wonderful memories, an incredible garden and great neighbors; and they are comfortable.


When I sit with Mr. & Mrs. Jones, I ask them if they have considered using a reverse mortgage. They said yes, but they didn't like it because they have 2 children, and it was important for them to leave something to the kids. I asked if the kids would want to live in the home. They said no, the kids will probably sell it and split the proceeds. So what I uncovered was leaving a financial legacy to the children was important to them. Leaving the home was not as important. So I asked them this question. How much would you like to leave to each of your children? After a little discussion, they came up with $100,000 for each child.

Here is where financial planning magic comes in. At our second appointment, I asked them if they would be interested in a solution that would increase their income by $723 per month and also guarantee that each of their children would receive $100,000 inheritance. There was no hesitation and an emphatic YES.

For this particular couple we were able to use a reverse mortgage to generate a guaranteed income stream of $953 per month for the rest of their lives as long as they live in thier home. From that $953; we used $229.74 to buy a second to-die-guaranteed-universal life insurance contract that would pay an income-tax-free death benefit of $200,000 upon the death of the second spouse. The guaranteed death benefit was to age 110, so it is highly unlikely they would outlive the insurance contract.

So by using a reverse mortgage Mr. & Mrs. Jones get to live in their home for the rest of their lives. They are guaranteed an income stream of $953 per month and of that use $229.74 per month to pay for a life insurance policy that pays a $200,000 death benefit. When titled correctly this is an $100,000 inheritance for each of their children. Mr & Mrs. Jones now have an extra $723 per month for income, and they have established a means of gifting to each of their children.

Now as with any planning, there are advantages and disadvantages, and it's important to consider all of the different "WHAT-IFS," costs and risks. While this type of planning is certainly not appropriate for everyone, it obviously accomplished the desired goals for Mr. & Mrs. Jones.

Jason Parker is the President of Parker Financial LLC, a fee based registered investment advisory firm specializing in wealth management for retirees. His office is located at 9057 Washington Ave NW #104 in old town Silverdale, WA 98383. He holds the series 65 securities license as well as being licensed to offer life and health insurance in Washington State. For more information please contact Jason at 360-337-2701 or online at http://www.parker-financial.net/. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. The opinions and information presented do not constitute a solicitation for the purchase or sale of any securities. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting mortgage or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information.