Reverse Mortgage

Office Hours
#1

My parents are nearing retirement and don’t have a lot in investments. I’ve gotten them on a budget this year and they are on track to clear all their consumer debt by the end of 2021. They are selling one of their homes and will have about $200k in proceeds.

I want them to put it all on their $300k Mortgage on their primary residence and then refi to a low monthly payment and interest rate for 30 years. My goal is to help them reduce their monthly obligations to live within their means at their lower fixed income upon entering retirement.

They consulted with a financial planner, who obviously holds more credentials than I, and they advised my parents to invest heavily and do a reverse mortgage on their primary home.

This freaks me out but I don’t know enough about reverse mortgages to be able to speak to the pros and cons in their situation. I just know that they could be fine if we continue down the path we started. Is it a bad idea to start investing in their 401k when they’d have to draw on it in less than 5 years?

How do I help them make the best decision for their retirement years?

#2

It’s recommended to invest in 401k if they never have done so. There’s never a bad time to start.

Also, it’s impossible to say whose advice makes more sense (yours or the financial advisor) because I don’t know your parents’ holistic financial situation/numbers. The financial planner, if a true fiduciary, then I would trust their advice. If the financial planner is not a fiduciary,
find one who is. However, having worked closely with different types of consultants, the motto is always “Trust, but verify.” Meaning, you guys can get a second or third opinion from other fiduciary financial planners, and see if their opinions align or if another opinion makes more sense to you. Or you can sit down with their current financial planner and ask them directly why they think a reverse mortgage is better than your own suggestion. Asking questions to close the gap of understanding to verify their and your knowledge is completely reasonable. Don’t be afraid to ask your financial planner questions if you have doubts - if they do their job right, they should have bullet proof answers. :wink:

#3

I’ll cover this in tonight’s office hours (4/21/2021) with the recording available afterwards on the course site!

If you’re not signed up for office hours, you can sign up here.

#4

Dang it, I missed this one because my parents were staying with me and I was walking them through mock budget scenarios after work for this very topic! I’ll check the video and plan to be online tonight! Thank you for addressing this :slight_smile: