Interest deductions may be limited with reverse mortgage because a reverse mortgage loan generally is subject to the limit on home equity debt.
New rules might protect borrowers against some potential perils of reverse mortgages. But when do the risks outweigh the rewards?
In a sign that the time had finally come for the idea of coordinated spending from a reverse mortgage, Harold Evensky, Shaun Pfeiffer, and John Salter of Texas Tech University published two articles—beginning with the August 2012 issue of the Journal of Financial Planning—investigating the role of a standby line of credit.
Maintaining higher fixed costs in retirement increases exposure to sequence risk by requiring a higher withdrawal rate from remaining assets. Drawing from a reverse mortgage has the potential to mitigate this aspect of sequence risk by reducing the need for portfolio withdrawals at inopportune times.
Advisers now are promoting reverse mortgages as a valuable tool for retirement planning, thanks to recent safeguards.