Reverse Mortgage Funding Social Security Delay August 2016

Scenario Highlights Single woman retired, turning 62, expects to live to age 95 Living expenses $87,000/year Social Security benefit at Full Retirement Age (FRA) of 66 is $2,500/month Pension from age 62 is $5,000/month $500,000 investments in IRA $240,000 Reverse Mortgage Line of Credit California resident; combined state and Federal tax bracket ~33%

Social Security starts at 62: IRA Funds Remaining Income Gap SS starts at 62 $500,000 IRA funds spending No Reverse Mortgage IRA Balance

SS delayed until 70 90% Success Rate Delayed Social Security: Reverse Mortgage Funds Income Gap SS delayed until 70 90% Success Rate The green part of the graph is $200,000 Reverse mortgage being spent down, and is gone during age 68. Green looks small, but is powerful – at the start it is 40% of the IRA The IRA grows nicely until age 68, when the client starts living on it At age 70, when SS starts, IRA withdrawals are reduced enough it can net grow again. True synergy: IRA alone doesn’t do it. Delayed SS alone doesn’t do it. Monte Carlo success rates quantify what the graphs show: Delayed SS without RM 8% success rate Early SS without RM 12% success rate Early SS with RM 70% success rate Delayed SS with RM 89% success rate ----------------------------------------------------------------------------- Single taxpayer $60,000 pension starting at age 62 $2,500 Social Security at Full Retirement Age 66 Expenses $96,000/year $500,000 IRA, invested in moderately conservative portfolio In years with RMDs, if not all spent, invested in taxable account with same moderately conservative portfolio $200,000 Reverse Mortgage Line of Credit, compounding at 4% a year (modeled as a Roth IRA) California resident 34.7% combined state and Federal marginal tax rate for early years when spending IRA

Synergy from Reverse Mortgage and Social Security Delay Line of Credit Success Rate On Graph? 62 $0 5% On graph 70 3% $240,000 79%   90%

Why did Reverse Mortgage filling the Income Gap Work So Well? More assets to spend: $240,000 home equity plus $500,000 IRA Allowed Social Security delay by Reverse Mortgage funding 6+ years of spending Investment portfolio untouched until age 68 6+ years of growth before withdrawals Reduces “sequence risk” - withdrawals when bad returns hit early Investment portfolio draws after age 70 reduced by largest possible SS A tax-free Reverse Mortgage dollar has spending power of $1.50 from IRA Client generally in a 33%+ tax bracket, combining state and Federal