Towards the end of bequest? The life cycle hypothesis sold to seniors

Gotman, Anne

doi:10.15448/1984-7289.2011.1.9196

Cited by 5 publications

(2 citation statements)

References 11 publications

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“…As the elderly extend their longevity, the reverse mortgage will raise the consumption even before retirement, yet the utility is enriched (Lei & Yang, 2019). The life cycle hypothesis concept inspires using the reverse mortgage (Gotman, 2020). The elderlies use their previous savings in the equity and convert them into cash as dissaving and consumption.…”

Section: Literature Reviewmentioning

confidence: 99%

Willingness to Accept Reverse Mortgage

Yee,

Chong,

Yusof

2023

The European Proceedings of Social and Behavioural Sciences

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At age 60, the working adult is turned into retired and stops generating active income. With the reduction in earnings, the aging population is facing the financial challenge to maintain their pre-retirement lifestyle. Hence, the elderly needed to find an alternative source to sustain their pre-retirement lifestyle and pay off their daily expenses. With the current retirement income, it is challenging for the elderly to sustain in their retirement, therefore, a new financial innovation shall be offered to solve the financial constraint of the elderly which elderly can convert the property into cash for self-sustaining without relying on other parties. As Malaysia has yet to launch new financial innovation products such as reverse mortgages, thus, it is crucial to understand the willingness to take up the reverse mortgage, so that the financial institutions have more confidence in the take-up rate of the reverse mortgage. The questionnaire is employed to examine the willingness to take up reverse mortgages and it found that most of the elderly are not ready to take up the reverse mortgage due to a lack of exposure and understanding of the product.

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Section: Literature Reviewmentioning

confidence: 99%

Willingness to Accept Reverse Mortgage

Yee,

Chong,

Yusof

2023

The European Proceedings of Social and Behavioural Sciences

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“…In Australia, close to 82 per cent of the older people (above 65 years) own a home. In the UK 70 per cent of the aged, own their home (Gotman, 2011). India ranks 7th in the list of countries, with a homeownership rate as high as 86.6 per cent.…”

Section: Home Rich-cash Poormentioning

confidence: 99%

Reverse Mortgage: A Financial Planning Tool for the Retirees— Case Study Approach in India

Ashok

Dhingra

2020

South Asian Journal of Business and Management Cases

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Reverse mortgage has always been viewed as a product meant exclusively for the elderly with financial hardship. However, there is a brighter side to it too. This article attempts to project reverse mortgage as a financial planning tool through a case study analysis. Using the coordinated strategy, this case explores how the line-of-credit option in reverse mortgage can meet the cash needs of a retiree during market downturns, allowing his portfolio to stay invested. The suggested strategy is a direct attack on investment risks, especially, sequence of return risk. Using this strategy, the depreciated assets are allowed to recover their original value and appreciate, ensuring better returns and longevity of investments. Dilemma: Is reverse mortgage a sustainable retirement plan? How can it be used as a financial planning tool to fund retirement? With the increasing proportion of elderly population in India (projected to be 19% by 2050), reverse mortgage has emerged as an efficient option to fund retirement days. Seeing its success in foreign countries, the dilemma, is: Is it an adequate solution to fund retirement in India? Theory: The premise of the present research is based on a coordinated strategy, used by Sacks and Lafaye (2016) where it is proposed that the client, using the line of credit option in reverse mortgage, would borrow only during market downturns, thereby leaving their market investments untouched and maximizing their gains. Basis of the Case: Phenomena-based case: financial planning for a retiree. Type of the Case: This is basically an applied decisional case, attempting to determine where reverse mortgage is an effective retirement plan or not. Protagonist Present: Mr Rajesh Sharma and Mr Anand Malhotra. Findings: After 20 years into retirement. Mr Rajesh Sharma who does not choose reverse mortgage ends up exhausting his complete investment portfolio value in the 19th year of his retirement life. Thus, he is in financial distress and has no resort to meet his financial needs except to fall back upon his children. On the contrary, Mr Anand Malhotra who opts for the line of credit option in reverse mortgage has positive net worth at the end of 20 years that can ensure a comfortable future for him. Discussions: The case recommends utilising reverse mortgage as financial planning tool for the elderly. Mr Rajesh Sharma is in financial distress and has no resort to meet his financial needs except to fall back upon his children. Mr Anand Malhotra by making the smart choice of reverse mortgage, ensured that his portfolio stayed invested longer, providing it sustenance and longevity. By opting for reverse mortgage, Mr Anand Malhotra not only shielded his investments from unnecessary withdrawals, but the option also gave him the confidence to tide over his financial exigencies The case concludes that reverse mortgage can provide greater probability of the investments/savings to survive the retirement period, coupled with a high probability of greater net worth at the end of the period. It can be safely concluded that reverse mortgage is definitely a golden walking stick for the elderly. If the government and the lending institutions take cognizance of this aspect of reverse mortgage and market it accordingly, it can turn out to be a vanguard product for the Indian elderly.

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Ageing, House Prices, and Economic Crises

Iparraguirre

2019

Economics and Ageing

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Towards the end of bequest? The life cycle hypothesis sold to seniors

Cited by 5 publications

References 11 publications

Willingness to Accept Reverse Mortgage

Willingness to Accept Reverse Mortgage

Reverse Mortgage: A Financial Planning Tool for the Retirees— Case Study Approach in India

Ageing, House Prices, and Economic Crises

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