Reverse Mortgages for the South Puget Sound

Retiring Americans at Risk

southsoundreversemortgages — Tue, 31 May 2011 18:54:15 +0000

I have recently read several articles from different sources all indicating the concern for financial survival of retiring seniors. A National Institute on Retirement Security article indicates that 83% of Americans are anxious about their retirement. The report indicates that for decades, Americans have had access three sources of income for their retirement security in the form of pension, social security and savings. With 78 million Baby Boomers turning 65 this year, they are experiencing a shaky road to retirement. When asked how they would define a secure retirement, many cited staying in their homes as part of a secure retirement.

A recent Wall Street Journal article indicates that most households with 401K’s nearing retirement fall short of having enough savings to maintain their current standard of living. In fact, of the 60 to 62 year olds, their 401K account was less than a quarter of what would be needed to maintain their standard of living. Even counting Social Security, pensions and other savings, participants appear to have insufficient savings to meet their retirement needs.

A recent AARP article indicates that one-fourth of Seniors have exhausted their personal savings. The report data shows that 83% of the respondents thought that the nations economic problems would make it harder for them to meet their financial needs in retirement. Over 66% have had to tap into retirement savings during the past three years, and 25% have exhausted their personal savings. Overall 52% were not confident that they would have enough money to live comfortably throughout their retirement. Seniors who wish to age in place, or simply cannot afford to move out may choose to take out a Reverse Mortgage in response to depleted savings.

Why consider a Reverse Mortgage?

southsoundreversemortgages — Wed, 23 Feb 2011 00:37:30 +0000

Seniors can use the proceeds of a Reverse Mortgage for as many reasons as you can imagine. Over the past few months I had clients who encountered medical expenses that were not covered by insurance and had also run up significant credit card debt. In addition they had a small mortgage balance on their home. With a Reverse Mortgage they were able to pay off debt including the mortgage and generate enough loan proceeds to cover the medical costs. I had another client who had significant prescription drug cost that ran into the thousands each month. With a Reverse Mortgage, the were able to establish a line of credit that could be used as needed to pay for the drug cost that were not covered by insurance. Another client lost some of her monthly income when her spouse died. She used the proceeds of a Reverse Mortgage to establish a monthly income for the rest of her life, and also set aside a line of credit to cover some home repairs and an emergency fund. I also had a client who used the proceeds of a Reverse Mortgage to buy a home for his daughter. His feeling was that she would eventually inherit the money anyway, so why not give it to her while he was still alive so that he could see her enjoy it.

It seems that many of the seniors that I speak with still have a mortgage on their homes and would like to pay it off with a Reverse Mortgage and eliminate their monthly payment. Many others have incurred installment debt to maintain their standard of living, but are finding it increasingly difficult to make these payments. The proceeds of a Reverse Mortgage can be used to pay off this debt and eliminate the monthly payments. As you can see the equity in your home can used through a Reverse Mortgage for almost any reason you can imagine.

How do you pay for Long-Term Care?

southsoundreversemortgages — Tue, 08 Feb 2011 18:25:46 +0000

A recent study reveals that many Americans acknowledge their potential need for long-term care, but they do not understand their options. Most of us who have had some experience with the long-term care of a loved one understand the financial strain that long-term care can cause their families. In the survey, approximately 36 per cent of the respondents with assets less than $100,000 fear that they will be a burden to their families. Only 39 per cent felt that they had planned for the costs of long-term care. Of the survey respondents, 65 per cent felt it was important to plan for long-term care, but less than half actually had a plan. The survey shows that the majority of consumers are not aware of their funding options to pay for long-term care. Many do not realize that Social Security does not cover those costs. Based upon the average savings balance, most families could not afford the cost of long-term care for one or two years at best. For those who had helped oversee long-term care, more than 25% said that their loved one had to sell their home to help pay for the costs. While some had heard of long-term care insurance, it was far down the list of likely sources of long-term care funding. For those who own their homes, or have a substantial equity perhaps the proceeds from a Reverse Mortgage could pay the premiums for long-term care insurance. As Americans live longer and healthcare costs continue to rise, the issue of long-term care takes on greater importance.

Are you financially fit for retirement?

southsoundreversemortgages — Wed, 12 Jan 2011 20:08:07 +0000

I was recently reading a Retirement fitness survey conducted by Wells Fargo and Company. The survey revealed that nearly three out of four working middle class Americans between 25 and 69 expect to work through their retirement years. It seems that the reason for this is a big deficit in retirement savings and lifestyle choices. The survey found that median retirement savings for those ages 50 to 59 was only $29,000. However, 56% of the respondents said that they were confident that they could support their lifestyle through retirement. For the respondents, $300,000 was the median amount predicted to be needed for a retirement nest egg. On average they expected to withdraw 10% of their nest egg annually when 4% is the industry recommendation.

It seems that to many Americans have their heads in the sand when it comes to savings deficits. Barring a miracle, winning the lottery, or a big inheritance, their going to be forced to cutback their lifestyles after retirement. Interestingly enough, only 54% of those 60 somethings felt that they would have to work during retirement.

All in all, it looks those approaching retirement have under saved, and do not have realistic expectations about the financial future during retirement. In the survey only 33% of respondents had a written plan for their retirement.

So you think that you will retire at 65?

southsoundreversemortgages — Fri, 17 Dec 2010 19:16:00 +0000

Last week, the results of a six month study, compiled by Nyhart on employee retirement preparedness revealed that the majority of American workers will not be able to afford retirement until 73 years of age. This study is identified as the “Fall 2010 401K Retirement Readiness Study”. The article claims that the study reviewed almost 10,000 employee retirement accounts from 110 private and public companies, assessing how the employees personal 401K contributions would affect their retirement age. The study goes on to say that employees over 55 will need to contribute more than 45% of their salary for the rest of their career in order to retire at 65. By continuing with their current levels of contributions to their 401K, most American workers between the ages of 60 and 64 will need to work until they are 75 in order to afford retirement. The study goes on to say that by increasing the contribution by just 2-4% of total income, you can shave years of the age that you can retire.

Ultimately, the study found that only 19% of American workers will be ready to retire at 65. Employees earning between $60,000-$70,000 have the lowest projected retirement age of about 70. Employees who earn less than $25,000 annually have a projected retirement age of around 78.

Financial Fitness for Seniors

southsoundreversemortgages — Tue, 07 Dec 2010 19:54:08 +0000

Historically, financial planners have helped prepare seniors financially for retirement with a 3 legged stool approach. The sources of income typically included for consideration after retirement was pension income or more recently a 401K or IRA, personal savings, and social security. Employees receiving pension income have become less common, and retirement savings has more commonly been through a 401K or IRA. Since these forms of retirement savings have been self-directed, the investment results have been varied. The past few years, we all know what has happened to the value of our investment accounts, they have declined. So what we have been salting away for retirement has not only failed to increase, but has actually declined. The same is true for our personal savings and investment. Those who have stayed invested have seen significant growth in their investments during the past 18 months or so, but the value is still not what it once was. This means that those of us at, or nearing retirement have less assets available for retirement.

For those of us drawing social security benefits or soon to draw them, should be assured of receiving our monthly check. However, increases in benefits, designed to keep pace with inflation may be less certain. Along with social security medicare costs are likely to increase due to higher co-pays, or reduced benefits.

With all of the above in mind, it may be time to add a fourth or fifth leg to our retirement stool. We may want to consider working part-time after retirement to reduce the amount that we draw from our retirement accounts and savings. It seems to me that we should think about this prior to retirement to decide how and where we work part-time. Do we want to same in the same line of work or is it possible that we might find other part-time work.

The fifth leg of the stool that we might consider to supplement our other retirement income is our home equity. It may be time to consider how we could use our home equity to improve our monthly income or financial well-being. This could mean selling our home, downsizing and putting the proceeds from the sale in the bank or other investments. It might mean using a line of credit from our home equity to supplement other income. It might also make sense to consider one of the reverse mortgage products available to assist us seniors in improving our financial well-being.

In any case it seems to me that the retirement stool may now have five legs instead of three to assist us seniors in establishing our financial fitness for retirement.

Baby Boomers now considered the “Sandwich Generation”

southsoundreversemortgages — Fri, 19 Nov 2010 00:55:14 +0000

Baby Boomers who are supporting aging parents as well as children, are being refered to as the “Sandwich Generation”. A recent survey indicates that this generation is feeling the stresses of funding their retirement while also that of parents. According to the survey, 78% fear that they will not be able to retire comfortably, and 52% indicate that they will need to work part-time during retirement. this generation is overwhelmingly feeling the effects of the most recent economic downturn. the survey also indicates that 60% would rely on 401K’s or IRA’s to sustain them through retirement, and 37% said that they would turn to a home equity line of credit. When you look at maintaining current lifestyle along with the costs of helping support parents, it can be a daunting task. The good news is that there are financial instruments available like reverse mortgages to help relieve the financial stress. While it is not new that retiring seniors are facing financial challenges, that added financial pressure of providing for parents and children is significantly effecting retirement plans. For those that own homes with substantial equity, a reverse mortgage may be a good option.

Reverse Mortgages and Long-Term Care

southsoundreversemortgages — Mon, 08 Nov 2010 23:56:23 +0000

The advantage of using a reverse mortgage, or at least some of the proceeds of a reverse mortgage to allow clients to purchase long-term care insurance can be a good option for some seniors. For years, the long-term care industry has heard from clients that one of the largest road blocks to long-term care planning is for clients to find the money to pay the premiums. With the proceeds of a reverse mortgage, that problem can be easily solved. Like almost every situation dealing with personal finance, planning is the key. Anyone at least 62 and doing long-term care planning should at least consider a reverse mortgage as a possible solution for paying the premiums needed to pay fora long -term care insurance policy. If for some reason you could not qualify for long-term care insurance, a reverse mortgage could be an option should long-term care services be needed. As always planning and considering the options available is important for long-term care as it is with most financial decisions.

Reverse Mortgage Interest increases based on shrunken 401K

southsoundreversemortgages — Thu, 28 Oct 2010 18:33:10 +0000

Recently I was reading an article from Bloomberg Newsweek. It seems that as recent as 10 years ago, reverse mortgages were primarily used by widow’s well into their 70′s with little retirement income. Now with the significant losses in retirement savings due to our recent financial crises, interest in reverse mortgages has increased by younger retiree’s. Due to the fact that Baby Boomer’s are now reaching retirement age, demand for reverse mortgages is expected to increase. Not only do borrowers need extra income, but many still have mortgages that they wish to pay-off with a reverse mortgage. The largest number of borrowers this year are 62 and 63 year olds most of whom want to pay off mortgages to prepare for their reduced income during retirement. Americans’ retirement accounts took a significant hit during the recent financial crises. According to the Employee Benefits Research Institute, the median holding for individuals 55-64 in 401K/IRAs at he end of 2008 declined by 30%. A look at individuals cash flow needs shows that a reverse mortgage may become a financial necessity. The reverse mortgage can allow the retiree to stay in their home without a mortgage payment or increase the monthly cash flow.

Reverse Mortgage 2011

southsoundreversemortgages — Fri, 08 Oct 2010 00:27:55 +0000

October 4th, HUD implemented changes to its Reverse Mortgage program. Most of the changes were anticipated but not all. There was some good news, and some not so good news. In the not so good news, HUD increased the annual mortgage insurance premium from .50% to 1.25%. This does not effect the amount of loan proceeds received by the borrower, but it does add to the loan balance. HUD’s insurance fund had been depleted and this increase will make the insurance fund more financially sound. Also, in the not so good news, HUD reduced the principal Limit Factors which determine the maximum loan amount. This reduction effectively reduce’s the amount that can be borrowed. Some of the good news is that HUD reduced the minimum interest rate in which the Principal Limit Factor is determined. Since we are currently experiencing very low interest rates, a borrower who chooses a 4.99% interest rate will be able to receive a higher loan amount that the previous floor of 5.50%.

Also, HUD introduced a new loan program called HECM Saver. This loan program has lower up-front costs. Only a .01 up-front mortgage insurance premium versus a 2% up-front permium for the standard reverse mortgage. One downside is that the Principal Limit Factor is lower, so the borrwer receives less loan. It seems this program was designed to complete with a traditional HELOC (Home equity line of Credit) with the reduced costs. It might be best suited for those who are uncertain how long that they might stay in their. So as you can see, there is some good news, and not so good new.

Jerry and Rachel