Reverse Mortgages in Retirement Income Planning

Much has been written about research evaluating reverse mortgages in the context of a retirement income strategy and sustainability thereof. Reverse mortgage strategies are likely to continue to gain steam in light of continually increasing life expectancy, arguably challenging expected investment returns, and because home equity represents a substantial asset for the vast majority of retirees.

In the video linked below professor John Salter outlines how retirees can put short-term cash to work in an HECM Saver reverse-mortgage product, though there are several risks to keep in mind.

The Cruel Psychology of the 1,000-Point Drop

If you don't already read Jason Zweig's regular column in the Wall Street Journal, you should. He is one of the few financial journalists worth reading. His recent article on the psychology of the recent market drop is rational and instructive. ==== Click here to read the article in it's entirety: http://blogs.wsj.com/moneybeat/2015/08/24/the-cruel-psychology-of-the-1000-point-drop/ See below for a snippet: Experiments have shown , for instance, that people believe cancer is riskier when they are told that it kills “1,286 out of 10,000 people” than when they hear that it kills “24.14 out of 100 people.” Hearing “1,286” immediately brings a large number of victims to mind, while “24.14” is simply a much smaller number. To notice that the first number is less than 13%, while the second is more than 24%, you have to focus on the denominators of the fractions and do some quick division. But your emotions will likely hijack your brain long before you get to that poi...

Did You Do as Well as Your Mutual Fund?

It's common practice to look at a fund's total return number for a snapshot of what performance to expect, but that won't give you the full picture. Morningstar studies have shown that investors' actual gains frequently pale in comparison to reported total return numbers. This phenomenon frequently plays out among funds that attract assets after streaks of hot performance, only to see some investors get skittish at the first signs of underperformance . After a moment's though, even a novice investor will realize that this behavior is just the opposite of the mantra -- buy low and sell high. This practice can be more broadly attributed to bad behavior and lack of a plan or philosophy when it comes to investing. Investors are human and humans are emotional. As much as the logician in me would like to believe my left brain is working to drive my decision making, logic comes in after emotions are experienced to provide context for how we are feeling and not the other ...

Last Week Was Not One To Miss

Last week the Dow rose 7.3% last week amid earnings reports from many companies, as reported in the Wall Street Journal ( http://online.wsj.com/article/SB124782681174757379.html ). For most companies, it's not like the reports were necessarily good. It was that the news was not as bad as expected . This rapid rise in the market occurred despite poor economic news, including rising unemployment now predicted to go north of 10%. To many investors, this seems counter-intuitive: poor economic news and declining earnings reports compared to the same time last year yet the market goes up markedly. How come? It's quite simple actually. The market looks forward and reacts to new and unknowable information . So even though the news was bad, much of it was not as bad as expected . Thus the new information positively changed market expectations and prices adjusted upward. Unless you can predict the future, as investors we must stay invested through good times and bad to ensure we experien...

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