RFI User Guide - HECM Term Payments


RFI - HECM Term Payments


HECM Term payments have little applicability outside of RFI since it would be difficult to design a workable retirement plan that included a sudden stop of payments at the end of the term. With RFI, on the other hand, term payments can fit into a seamless schedule of payments without any breaks. This is because the combination of the HECM term payment with asset management and deferred annuity allows tradeoffs between the three that assure continuity.

To illustrate this we have defined 5 RFI scenarios as follows:



When the scenarios are calculated we get the chart displayed below. The 4 lower schedules reflect different annuity deferment periods and differences in rates of return. A 20-year HECM term payment is added to the highest of the 4 to get the fifth, illustrating the same continuity in spendable funds. Within RFI, HECM term payments are an easy way to increase monthly payments without loss of continuity.

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