Reverse Mortgage Line of Credit Investment Retirement Strategy

Richard J. Kish

Journal of Real Estate Practice and Education, 2022, vol. 24, issue 1, 32-49

Abstract: Under the premise of a possibility of a shortfall in retirement income, the reverse mortgage line of credit (RM-LOC) could offer a possible solution. When shortfalls appear, a reverse mortgage can be used to supplement retirement income without imposing potential severe financial consequences in the future. Additionally, the line of credit option on a reverse mortgage can be utilized to time withdrawals from a portfolio consisting entirely of stocks or a mix of stocks and bonds. The RM-LOC investment strategy utilizes withdrawals from one’s portfolio after periods of upticks in the equity markets. But after down periods within the equity market, portfolio withdrawals would be forgone and the line of credit from the reverse mortgage is utilized. Within the RM-LOC strategy after the market reverses, the line of credit is repaid. The analysis shows that over several sample test periods dating from 1960, this strategy improves portfolio performance and the availability of discretionary cash flows for retirees.

Date: 2022
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DOI: 10.1080/15214842.2021.2008123

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