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Quite possibly the most under utilized financial planning tool you've never heard of.

MORTAGES

The Strategic Reverse Mortgage- HECM Line of Credit

The Strategic Reverse Mortgage (Home Equity Conversion Mortgage-HECM), is a FHA insured, open ended,  non-callable, non-forfeitable, non-cancellable home equity line of credit that is offered to homeowners age 62 and older. The proceeds from the loan can be received income tax free, and don't count towards Social Security taxes or IRMAA calculations. The financial benefits for the smart millionaire retiree are substantial.

How can the Strategic Reverse Mortgage Help me?

STRATEGIC:   Adjective   " Carefully designed or planned to serve a particular purpose or advantage." 

 

  •  Use tax free loan proceeds to pay taxes on Roth IRA conversions

  • Pay the loan back with tax free savings from increased Social Security benefits/tax savings

  • Don't pay the loan off--your HECM line of credit can grow at a guaranteed annual rate of LIBOR + margin. Guaranteed growth rates can exceed 8%

  • Access funds tax free--use and reuse the line of credit without restrictions, qualifications, or income limits

  • If your line of credit value EXCEEDS the value of your home, you can "call your line of credit in" and the bank is obligated to pay you the difference.

 

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A Powerful Tax Planning Tool--with Guarantees

Case Study:

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65 YR old retiree wants to do a $3 million Roth IRA conversion and reduce tax liability

  • $3 million IRA

  • $1 million House (owned free and clear)

  • $2 million Non IRA monies

  • $80k/yr combines Social Security/Pension income

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Future lifetime RMDs scheduled to exceed $15 million. Tax liability on those RMDs exceed $4.7 million

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Strategy:

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1. Roth convert the entire $3 million IRA using the Supercharged Roth IRA conversion tools

     a. Tools 1-3 reduce Yr 1 tax liability to $500k on the $3 million conversion

     b. Use the Strategic Reverse Mortgage (HECM) to pay the $500k tax bill

     c. Reverse mortgage loan for $500k is received tax free and used to pay taxes

     d. Entire $3 million IRA is converted to the Roth and fully invested

     e. $2 million of Non IRA monies continue to be fully invested

     f.  Pay back the HECM line of credit with 1st year tax free earning from the Roth IRA, or

         over time with annual tax savings from increased Social Security benefits/ annual tax reduction

     g. Structure the HECM line of credit to grow at a guaranteed rate of LIBOR + Margin = 8% per year

     h. Once your HECM loan is paid back, keep it open, and the line of credit will continue to increase

         with compound interest for as long as you live in the home (depending on the rate)

     i. i.e. $500k line of credit growing at 8% per year = $13 million in 30 years

     j. You can "call your line of credit" in at any time, and the bank is obligated to pay the amount out

     k. If your line of credit EXCEEDS the value of your home, you can cash in your line of credit, give

         the money to your kids, move out of the home, and then your kids could buy the home from the 

         bank for whatever the current market value is, not the value owed on the line of credit

          i.e. $1 million Home value appreciating at 3% per yr = $5.2 million Future Value in 30 yrs

                 $500k HECM line of credit appreciation at 8% per yr for 30 yrs = $13 million

                  Net difference: $8 million for you or your heirs to keep.      

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