Increasing The Sustainable Withdrawal Rate Using The Standby

37 Pages·2014·2.02 MB·English

by  Pfeiffer, Shaun

Increasing the Sustainable Withdrawal Rate using
the Standby Reverse Mortgage

John Salter, PhD, CFP®, AIFA®
Associate Professor, Texas Tech University
Vice-President, Wealth Manager, Evensky & Katz Wealth Management
Shaun Pfeiffer, PhD
Associate Professor, Edinboro University of Pennsylvania
Harold Evensky, CFP®, AIF®
Research Professor, Texas Tech University
President, Evensky & Katz Wealth Management

1
Increase the probability of meeting

retirement goals.

Increase the sustainable withdrawal rate.

2
Can we borrow from a reverse mortgage line

of credit during times when the portfolio is
“ ”
off, in order to increase the probability of
meeting goals and the sustainable
withdrawal rate?
3
How much can be distributed from a portfolio

in the first year of retirement, and
subsequently increase the distributions by
inflation, and have a reasonable chance of
sustaining this spending throughout
retirement?
4
Problems with reverse dollar cost averaging,

the volatility drain on the portfolio when
having to sell assets at depreciated prices.

Annual returns, and sequence of returns can

have a profound impact on the longevity of a
’
retiree s portfolio.
5
Originally developed by Bill Bengen (1994).


Subsequent research, using historical returns,

estimated SWR to be near 6% using various
factors such as spending rules and partial
annuitization.

6
New research focusing on capital market

expectations rather than historical returns
significantly lower the SWR.

New SWR projected to be as low as 2.5%


7
8
What is your initial thought? Expensive? Last

resort only?

Was ours too…


What has changed? The product has become

cheaper with the HECM Saver.

Why use home equity? It is a resource that

normally remains untapped.
9
Must Be age 62 or over.


Pay taxes and insurance.


Maintain home.


Current mortgage must be paid off or rolled

into HECM.

Plans to be in home long term.

10