1. Reverse Mortgage Funding Social Security Delay
August 2016

2. 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%

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

4. 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 % success rate
Delayed SS with RM % 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

5. 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%

6. 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