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Tuesday, August 23, 2016
In a recent post, Retirement Expert Dirk Cotton shares how the old tool is actually the NEW tool for retirees or those considering retirement…

“In my last post, The Mortgage is Dead; Long Live the (Reverse) Mortgage, I wrote about retirement researchers’ renewed interest in an improved reverse mortgage product, the Home Equity Conversion Mortgage, or HECM. The post spawned a great conversation in the comments area that pointed out, among other things, just how complicated these products are. But, that complexity contributes to the HECM’s versatility.

There is more than one way to use a HECM in retirement and there is more than one kind of HECM. HECMs can be fixed rate or variable rate and there are several ways the proceeds can be distributed. There is even a HECM program that makes it easier for seniors to buy a new home when they don’t have adequate income to qualify for a conventional mortgage.

This post is a summary of strategies – not an exhaustive list, by the way – compiled from the books, research papers and blog posts referenced in the endnotes below, that retirees might use to incorporate a HECM into a retirement plan.

As I suggested in the series of posts beginning with A Model of Retirement Planning, Part 1, approaching a retirement plan from a strategic perspective has several advantages. In effect, strategic planning identifies and answers the larger problems first (What do I want to achieve? What do I want to protect? What do I want to leave to my heirs?) and only then considers the best tactics to achieve those objectives (Should I use a reverse mortgage, equities or an annuity?). Once you have identified your strategic goals, some of these HECM strategies might help you achieve them.

Refinance Strategy

Do you currently make a monthly mortgage payment to the bank and would prefer that they send you a check every month, instead? If this sounds like magic or the late-night rantings of Fred Thompson, it isn’t. The difference is that a conventional mortgage is building the equity in your home while the reverse mortgage is essentially spending it. Retirees who want to pass their home without debt to heirs should go the conventional route, while those who are happier depleting some or all of the home’s equity to pay bills will favor the reverse mortgage alternative.

Refinancing is probably the most common use of HECMs. A retiree can refinance an existing conventional mortgage with a HECM and exchange her monthly mortgage payments for monthly loan distribution checks to spend as she sees fit. This is a double win for a retiree who currently holds a conventional mortgage – consumption is increased by spending home equity while expenses are reduced by eliminating the conventional mortgage payments.

The downside of the reverse mortgage is that spending the equity will have an impact on heirs, though they will have the opportunity to pay off the HECM and keep the home by arranging their own mortgage if your estate cannot. This is the strategy discussed by reverse mortgage originator, Jim Dean, in the comments section following my previous post. It is also thoroughly covered in Shelley Giordano’s book, What’ the Deal with Reverse Mortgages? (available at Amazon, see link below).

Credit Line Growth Strategy

A unique feature of HECMs is that the line of credit automatically grows over time by roughly the loan’s interest rate and it increases with the age of the younger borrower. The longer you wait to spend the proceeds after taking out the mortgage, the larger your line of credit will be when you do spend it. This feature can be used to increase borrowing by taking out the loan early in retirement and spending the money years later.

As retirement researcher, Wade Pfau points out in Incorporating Home Equity into a Retirement Income Strategy, “. . . opening the line of credit at the start of retirement and then delaying its use until the portfolio is depleted creates the most downside protection for the retirement income plan. This strategy allows the line of credit to grow longer, perhaps surpassing the home’s value before it is used, providing a bigger base to continue retirement spending after the portfolio is depleted.” This strategy can be combined with others to increase the amount that could be borrowed later in retirement, for example, to pay for long-term care.

Income Strategy of Last Resort

The most common use of home equity by retirees today is probably to support spending when resources run low at the end of retirement. This was the common wisdom prior to recent research. The new research, however, suggests that spending from the HECM early in retirement rather than as a last resort tends to lead to better outcomes. When the spending will occur later in retirement, the research suggests it’s better to lock in the HECM early and let the line of credit grow. This is especially true in today’s low-interest rate environment that will contribute to growth of the line of credit as rates rise. According to Pfau, “the strategy for using home equity as a last resort supports the smallest increase in success.”

Term and Tenure Strategy

Tenure payments are one of the options for HECMs. These are monthly payments issued to the borrower for as long as he or she lives in the home. They are similar to an annuity, except that annuities pay as long as the annuitants are still living.

Another major difference between tenure payments and an annuity is that the retiree may “leave money on the table” if she dies soon after purchasing an annuity. If that happens with a HECM, there will be no such loss because the borrower will simply have borrowed less of her home equity. With tenure payments, the borrowed amount may eventually exceed the value of the home, but the borrower will never need to repay more than the home’s then-current value.

A paper by Gerald Wagner entitled, “The 6.0 Percent Rule”, explains the value of the term and tenure options of HECM loan disbursements in greater detail.

HECM for Home Purchase Strategy

After you retire, you may find it difficult to qualify for a loan no matter how high your credit score because you won’t have adequate income. (Former Federal Reserve Chairman, Ben Bernanke, says he was once turned down when trying to refinance.) A HECM has less rigorous credit qualification because it is backed by the home that you already own and it might be the answer to your problem.

HECM for Home Purchase is an FHA program that allows seniors, age 62 or older, to purchase a new principal residence using loan proceeds from the reverse mortgage. The program was designed to allow seniors to purchase a new principal residence and obtain a reverse mortgage within a single transaction and avoid double closing costs. The program was also designed “to enable senior homeowners to relocate to other geographical areas to be closer to family members or downsize to homes that meet their physical needs.”

According to Jack Guttentag, author of the Mortgage Professor‘s website, “Prior to the HECM for Purchase program, the senior who wanted to purchase a house but could not afford to pay all-cash had to take out a forward mortgage to buy the house, then repay it by drawing on a reverse mortgage. Because the senior had to qualify for the forward mortgage in the same way as any other home purchaser, insufficient income or poor credit could bar the way. Furthermore, the senior who did qualify had to pay settlement costs on both the forward mortgage and the HECM. The new HECM for purchase program eliminates these problems.”

The Mortgage Professor website provides a nice overview of the HECM for Purchase program (link below) and the alternatives a retiree should consider.

Emergency Backup Strategy

A HECM can be established to act as an emergency fund. As described above in the Credit Line Growth Strategy, it might be wise to secure the mortgage early in retirement to allow the credit limit to grow over time.

Long-Term Care Strategy

Some retirees who find long-term care insurance unaffordable or flawed plan to tap home equity to pay for those potential expenses. A HECM line of credit is a good way to achieve this. Again, securing the mortgage in early retirement will maximize the amount of credit available when needed.

Divorce Settlement Strategy

Divorce can have a huge impact on retirement security and the incidence of elder divorce is growing. To show the broad range of retirement strategies afforded by reverse mortgages, consider this possible strategy for providing equal housing after divorce suggested by Giordano.

“For clients who qualify, a reverse mortgage can provide two options that may restore desirable housing to both spouses. By providing financing without a monthly debt obligation, each former spouse can enjoy equal housing without necessarily requiring portfolio distributions. Retirement security is enhanced for both without downgrading the living situation for either”, says Giordano.

A HECM might allow the couple to split the equity of the existing home, which one former spouse can then own, while providing funding for the second spouse to make a down payment on another home. The second spouse might also then combine that down payment with a HECM for Purchase mortgage, enabling both former spouses to own their homes without making mortgage payments. This may be a much better solution than liquidating the original home so the assets can be evenly split.

Social Security Bridge Strategy

Retirees are repeatedly told that they can mitigate longevity risk by delaying their Social Security benefits claiming age. Most households, though, claim Social Security benefits at earlier ages, probably because they need the benefits right away. (The most popular age to claim benefits is the earliest, 62.)

HECMs should be considered as a possible source of funding to help bridge the gap while you delay those benefits. Tom Davison provides a case study of this strategy at his Tools for Retirement Planning blog (link below).

Davison’s case study assumes that the retiree plans to live in the home throughout retirement, so it is worth a note of caution here. For strategies that spend from a HECM early in retirement, like this one, the borrower will need to repay the loan if she decides to change housing later in retirement. Retirees who believe they might not stay in the current home throughout retirement need to perform further analysis before deciding on the strategy.

HECM Stock Purchase Strategy

One dangerous strategy, used so often that FINRA felt the need to warn against it (see Betting the Ranch, below), involves obtaining a line of credit secured by the investor’s home to buy stocks. If you must buy stocks on margin – and I generally recommend that you don’t – pledge the equities as security, not your home. If the market crashes you will go broke faster, but you will lose your stocks and not your home.

(Update: I asked FINRA if their Betting the Ranch warning applied equally to HECMs and conventional mortgages and they referred me to a newer warning entitled Avoiding a Reversal of Fortune (link below) that addresses the issues specific to HECMs. Short answer: it does.)

What To Do

Given the wealth of strategies, how should you integrate a HECM into your retirement plan? Very carefully.

Most every reverse mortgage expert with whom I spoke mentioned that careful planning is needed to integrate a reverse mortgage into a retirement plan. Giordano pointed out that spending proceeds early in retirement cuts off some later options. Davison noted that just because the Social Security Bridge strategy can improve benefits doesn’t mean that using the Credit Line Growth strategy and spending later in retirement won’t be even better for some households, so multiple strategies should be compared.

I have a couple of concerns. First, this product is very complex. After two months of research, I have not mastered the subject. Second, as Giordano explains in her book’s Chapter 13, How Do I Discuss This With My Financial Adviser?, advisers may not recommend them for various reasons even if they are in your best interests. Many advisers don’t understand them. Other advisers are not allowed by their compliance officers to offer them.

Your options are to find an adviser who does understand them and is willing to recommend them if they are the best solution for you, or to invest a lot of time understanding them yourself. Given the potential benefits, I think either path is worth the effort.


Ten strategies for using a reverse mortgage in retirement.

 

 

 

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Posted by on August 26, 2016 in Uncategorized

 
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Even State Legislatures Look to HECM as Recommendation…

shutterstock_Money under lock & key 49213123State Campaign Points to Importance of Reverse Mortgages in Long Term Care

 

March 17th, 2014  |  by Elizabeth Ecker Published in News, Retirement, Reverse Mortgage

A state and federal initiative launched in 2012 has resulted in a report to lawmakers on long term care financing including the use of reverse mortgages to help Americans fund longevity.

The Own Your Future initiative in Minnesota was launched in 2012 to make recommendations to state and federal lawmakers on paying for long term care. Between 2005 and 2009, 26 states each sponsored Own Your Future campaigns to educate their residents about long term care challenges and make them aware of options and planning methods.

In Minnesota, the campaign was expanded to include an ongoing public awareness campaign throughout the state; efforts to make more affordable and suitable long-term care products available to Minnesota’s middle-income households; and evaluation of possible changes to Medical Assistance (MA) to better align with and encourage private payment for long-term care.

Among the recommendations developed by the state initiative: the use of reverse mortgages. An advisory panel has accepted the recommendations of the subcommittee with a separate set of recommendations having been sent to Congress.

“The Lieutenant Governor [Prettner Solon] has assured us that now that the report is out, it’s not a report that sits on the shelf. Action will be taken,” says Beth Paterson, a Minnesota originator who was appointed by the state’s governor to serve as the reverse mortgage representative on the advisory panel.

The report covers 11 recommendations, narrowed down from 16 that were considered, toward solving long term care funding problems for older Americans.

“The current long-term care financing marketplace consists of insurance products, home equity options  such as reverse mortgages, and health and retirement savings plans,’ the report states. “None of these products has seen widespread use recently due to a number of factors, including the perception of their stability, their safety and their benefit levels.”

Specific to the reverse mortgage market, the report indicates, are public perception challenges that are making it even more difficult for reverse mortgages to gain a place in the long-term care conversation.

“The market for reverse mortgages (RMs) is likewise in a difficult position,” the report writes.”Recently, state and federal  agencies have changed regulations governing the program to address consumer issues with the program, but the perception persists that RMs, as currently constituted, do not have adequate consumer protections.”

Advocates have developed action items for helping the perception around and access to reverse mortgages among Minnesotans.

Written by Elizabeth Ecker

 

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Reverse Mortgages Can Benefit Retirees, Both Wealthy and Not

Move Can Help Retirees Keep Investments Until Right Time to Sell

By Kelly Greene, WSJ
Jan 16, 2014 4:29 p.m. ET

Home = Cash 2Reverse mortgages aren’t just for people struggling to keep their homes anymore.

The loans also can work for well-heeled retirees looking for a buffer to keep them from selling investments at the wrong time, according to academic researchers. And Congress last month gave a boost to the type of reverse mortgage that works best for that purpose.

Reverse mortgages let homeowners who are at least 62 years old borrow against their home equity. The loans don’t have to be used for a specific purpose, but typically are used for home modifications, repairs, medical expenses or home care that elderly people might not otherwise be able to afford.

The loan is due, with interest, when homeowners move out, sell the home, die or fail to pay property taxes or homeowner’s insurance premiums. The homeowner’s heirs typically sell the house, pay the balance and keep whatever is left. At least 595,000 households have an outstanding reverse-mortgage loan, according to the National Reverse Mortgage Lenders Association, a Washington industry group.

In the past, many financial planners recommended reverse mortgages for their clients only as a last resort because fees were relatively high—as much as 5% of the loan amount. That changed a few years ago, when a new product was developed by the industry and insured by the Federal Housing Administration called the HECM Saver, which typically has lower upfront borrowing costs than earlier types of reverse mortgages. (HECM stands for “home equity conversion mortgage.”)

With lower borrowing costs, some planners are finding new ways to use reverse mortgages to avoid selling depressed investments or to lower tax bills. “Retirement is really about cash flow,” says Martin James, a certified public accountant in Mooresville, Ind. “Even for a person who’s got their mortgage paid off, it’s nice to have a line of credit sitting there.”

Earlier this year, the HECM program was eyed by federal lawmakers as a financial risk to the FHA, and lawmakers considered curtailing the program. The bill, passed by Congress and signed by President Barack Obama, is intended to give the Department of Housing and Urban Development the leeway to make changes to keep the program going, probably after Oct. 1, says Peter Bell, chief executive of the lenders’ group.

Getting a reverse mortgage takes some due diligence on the part of homeowners and their families. Big-name banks largely quit the business in the aftermath of the financial crisis, leaving smaller companies and independent brokers to make the loans. Some financial advisers have been accused by regulators of encouraging elderly homeowners to put their reverse-mortgage proceeds into questionable investments, such as annuities with steep penalties for cashing in.

The Consumer Financial Protection Bureau said last year that it would coordinate with other regulators to root out reverse-mortgage scams, monitor the market closely for deceptive and abusive practices and consider further measures. Interested in tapping your home as a security blanket?A few things to consider:

 Your house could be a reliable credit line. If your home-equity line of credit gets canceled, a reverse mortgage might be a good substitute.

Three certified financial planners at Texas Tech University in Lubbock and Edinboro University of Pennsylvania published a paper last year in the Journal of Financial Planning that recommends using a reverse-mortgage line of credit to meet retirement-income needs during a big market drop, rather than selling investments. “A few years ago, we were starting to get calls from clients saying, ‘Hey, my line of credit’s been canceled.’ They have plenty of resources, but that was an emergency pot of money,” says John Salter, the paper’s lead author. “It doesn’t do you much good if the bank’s going to pull it before you need it.”

The researchers used what they called a “standby” reverse-mortgage strategy, meaning the reverse-mortgage line of credit served as a source of readily available cash when retirees’ portfolio values dropped below the level where they could meet their goals.

Using a portfolio worth $500,000 and a home value of $250,000, among other assumptions, the researchers found that using a reverse mortgage’s line of credit significantly improved the chances the portfolio would last through the retiree’s lifetime, because it reduced the risk of having to sell investments when they had fallen in value.

Tapping home equity could lower tax bills. Some retirees pay off their mortgages with taxable withdrawals from their 401(k) or other accounts. Yet they might be able to lower their income taxes by using reverse mortgages to pay off their traditional mortgages, Mr. James says, if they have substantial equity. That means they wouldn’t need to withdraw as much tax-deferred retirement savings, which are subject to income tax and can bump retirees into higher tax brackets.

Plus, without investment distributions needed to make mortgage payments, they might be able to keep their overall incomes under the income threshold at which Social Security retirement benefits are taxed, Mr. James says.

He also is looking at using reverse mortgages as a “bridge” to Social Security, allowing retirees to delay taking Social Security and increase the size of their monthly payments—and those of a surviving spouse—down the road.

Consult an expert. Before you start talking to lenders, consider getting advice from a reverse-mortgage counselor certified by HUD to learn more about the options and mechanics. The National Council on Aging and other nonprofit groups sometimes offer such counseling, often at reduced rates.

There is a directory of reverse-mortgage counselors at hud.gov. Click on “Talk to a Housing Counselor” and then “Search online for a housing counseling agency near you.”

Keep the kids in the loop. When Mr. James broaches the idea of a reverse mortgage with clients, “the first thing they do is wrinkle their nose,” he says. One big reason: Many parents want to leave their home, often their biggest asset, to their children as their inheritance.

Mr. Salter acknowledges that leveraging the family home can be “a touchy subject.”

Still, he contends that many adult children “don’t really want the house” and that they are eager for their parents to use their assets to have “a better rest of their life.”

Besides, Mr. James says, “you still have costs associated with selling the house. You may not get as much as you think you’re going to.”

“Using a reverse mortgage allows for a little more diversification,” meaning retirees could leave other investments with potential for better returns to their families, Mr. James says.

“My first answer, when people ask how to approach the kids, is to ask them if they have an extra room in their house for their parents,” Mr. Salter says.

 

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Elder Wisdom: What A Tale Their Thoughts Could Tell

Amara Rose October 8, 2013 1

Gordon Lightfoot (whose signature lyrics from If You Could Read My Mind are reflected in the post title) turns 75 this November, and Bob Dylan has said that when he listens to a Lightfoot song, he “wishes it would never end.” That’s pretty high praise from a fellow septuagenarian maestro. Perhaps this is because seasoned songwriters instinctively weave life’s essence and lessons into a succinct truth that resonates to the marrow with those who listen, and thus appereverse mortgage newsals across the decades to both original fans as they age, and to a new audience.

The same might be said of elders. There’s so much wisdom to be gleaned from older team members. Consider this recent ad on CraigsList.com, headlined, “Looking for a 72-year-old writer”:

“I’m looking for a few good writers between the ages of 70 and 74. Seeking contributions from geographical locations all over the United States from persons who were in high school during 1959. For details about my project please go to http://www.classof59.net. It is okay if someone younger writes a contribution that was obtained orally from a member of the high school class of 1959.”

What a lovely tribute to what has been labeled, “The Silent Generation.”

“It is not how old you are, but how you are old,” said Academy Award-winning actress Marie Dressler. We’re moving from a model that focuses on disease, disability and death to one of “passion, purpose, and participation,” which happens to be the tagline of COPA (Collaborative on Positive Aging), a new volunteer division of the Council on Aging in one California community.

At the initial COPA gathering, much of the guiding wisdom for how future meetings might be organized was provided by people in their 70s and 80s, such as: “To remain vital, we need a mix of social/learning/leisure/contribution.” How perfect a reminder to anyone who serves seniors — reverse mortgage professionals obviously included — that as people age they become not a group apart, but more of who they’ve been, with a blend of needs and desires to enrich and fulfill these later years.

Consider the Sun City Poms, Arizona cheerleaders whose minimum age requirement is 55, along with the requisite “dance skills of rhythm, agility, poise, energy, and showmanship for performing. Acrobatics and baton twirling are a plus.” Wow! These women are weaving their social, leisure, learning and contributing into a bountiful blessing for everyone.

In his brilliant essay on conscious aging, Rabon Delmore Saip, a presenter at the COPA meeting, quotes developmental psychologist Paul Baltes: “One of the great challenges of the 21st century will be to complete the architecture of the human life course.”

The seniors reverse mortgage professionals serve today are playing a vital role in constructing the future of humanity, as they (and we) reinvent what it means, and what it “looks like”, to be “old”.

 
 

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NY Times: Carrying Debt After Retirement

life-settlement-awareness-money
By LISA PREVOST

If College debt is a hindrance to young adults, mortgage debt is the drag on homeowners heading into retirement.

A much higher proportion of homeowners over 65 are carrying mortgage debt compared with past generations. And that debt could make it harder for them to stay in their homes.

The Consumer Financial Protection Bureau estimates that 30 percent of all homeowners 70 and older have mortgages to pay off. In 2001, just 8 percent of owners 75 or older carried mortgage debt, according to the Federal Reserve’s Survey of Consumer Finances, published in 2010.

The trend is noteworthy because the retiree population is about to get bigger. Speaking at a recent forum on the future of housing, sponsored by the National Association of Home Builders, Eric S. Belsky, the managing director of Harvard University’s Joint Center for Housing Studies, said the number of households with people over 65 would increase by nearly 11 million over the next decade.

One repercussion for older borrowers is that they will have to work longer, said Christopher J. Mayer, a professor of real estate at Columbia Business School, who also spoke at the forum. Another likely outcome is a spike in demand for reverse mortgages. This program enables homeowners 62 and older to borrow money using their home equity as collateral. The loan is repaid to the bank, along with interest and fees, after the borrower moves or dies. The funds must first be used to pay off the mortgage, which then frees the homeowner from monthly payments.

Few people take advantage of this option now — only about 70,000 new reverse mortgages are originated each year, according to the Consumer Financial Protection Bureau. Major lenders like Wells Fargo, meanwhile, have exited the business.

But as they struggle to cover mortgage costs along with health care bills, property taxes and home insurance, more older Americans may have to rely on reverse mortgages to remain in their homes.

The amount of mortgage debt they are carrying is not insignificant. As of 2010, the average amount of mortgage debt carried by new retirees was $70,000, according to Alicia H. Munnell, the director of the Center for Retirement Research at Boston College. “In the past,” she said, “people saved their home equity to leave it for their children or some other purpose. I think that’s a luxury many people are not going to be able to enjoy in the future.”

(Mr. Mayer and Ms. Munnell have interests in a new reverse mortgage company, Longbridge Financial; Mr. Mayer is a partner and Ms. Munnell is on the board.)

Buyers of reverse mortgages have not been immune to the unscrupulous practices that put many others into loans they couldn’t afford. Homeowners who don’t understand the complex loan terms, or who can’t maintain insurance and property tax payments, could lose their homes.

Recent rule changes announced by the Federal Housing Administration, which insures most reverse mortgages, require that lenders verify an applicant’s ability to make tax and insurance payments over the life of the loan. And a restriction on the amount that can be taken out upfront may encourage borrowers to use their money more slowly, Ms. Munnell said.

A study of people seeking reverse mortgages could help the government further revise the program. Stephanie Moulton, an associate professor at the John Glenn School of Public Affairs at Ohio State University, is heading a study of 32,000 people who sought counseling for reverse mortgages from 2006 to 2011. Her initial findings will be released in November. But she says her subjects confirm the debt trend: about 60 percent got a reverse mortgage, and about half already had mortgage debt.

 
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Posted by on October 1, 2013 in Uncategorized

 

Bankrate: Will FHA Changes Spark Reverse Mortgage Revival?

Money in home 1September 24th, 2013  |  by Alyssa Gerace Published in HECM, News, Reverse Mortgage

The housing market bust correlated strongly with a sharp decline in reverse mortgage origination, but with the federally-insured program set to undergo substantial changes, the product could experience a rebirth, says a recent Bankrate article.

Reverse mortgage volume increased significantly during the height of the housing market bubble and were touted as a way for retirees to convert their home equity into cash. However, as home values dropped, so did home equity conversion mortgage (HECM) volume, indicates data from the Federal Housing Administration.

The FHA’s insurance fund suffered substantial losses on its reverse mortgage book from defaults of HECMs originated prior to the housing bust, prompting upcoming changes to the program, says Stephen Malpezzi, a professor at the Wisconsin School of Business’ Graaskamp Center for Real Estate in Madison, in an interview with Bankrate.

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The effectiveness of the upcoming FHA reforms in the event of another boom-and-bust cycle are unclear so far, says Malpezzi, but the reverse mortgage product has upside.

“[T]here is certainly room for this market to expand somewhat as market conditions improve, if FHA’s reforms take hold,” he tells Bankrate. “There are about half a million HECMs outstanding, but there are roughly 25 million homeowner households with a head 62 or older.”

Other topics addressed in the interview include changes in home equity and value, the consumer protections that have been put in place in the last few years for reverse mortgages, and how consumers can distinguish the difference between beneficial and non-beneficial usage of the loan.

Read the full article at Bankrate.

 
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Posted by on September 25, 2013 in Uncategorized

 

Navigating The Retirement Labyrinth

Senior Couple 2

Retirement planning can be confusing. Here are some major milestones on the retirement timeline:

Age 55. If you leave your job after age 55, you can begin taking penalty-free 401(k) withdrawals. Withdrawals from traditional 401(k)s will be taxed as income.

Age 59 ½. IRA withdrawals are allowed without penalty and are taxed as income.

Age 62. Social Security eligibility begins, but your checks will be reduced 25 to 35 percent if you begin claiming at this age. If you are under full retirement age and you work and earn above the annual earnings limit of $15,120 in 2013, excess earnings are deducted from your benefits.  If you plan to continue to work, benefits are also reduced by 50 cents for each dollar you earn above $15,120 in 2013.

Age 65. Medicare eligibility kicks in. Beneficiaries may sign up for Medicare Part B during a 7 month window around their 65th birthday, beginning 3 months before the month you turn 65 and ending three months after. It’s a good idea to sign up right away because your Medicare Part B monthly premium increases 10 percent for each 12-month period you were eligible for Medicare Part B, but did not enroll. If you or a spouse are still employed and covered by a group health plan after age 65, you have 8 months to sign up after you leave the job before the penalty kicks in.

Age 66. Baby boomers born between 1943 and 1954 are eligible to receive full Social Security retirement benefits at age 66. For boomers born between 1955 and 1959 the full retirement age gradually increases from age 66 and 2 months to 66 and 10 months. The month you reach your full retirement age, your benefit checks are no longer reduced if you continue to earn income from work.

Age 67. For those born in 1960 and later, the age you can receive full Social Security retirement benefits is 67.

Age 70. Your Social Security benefits further increase by 7 to 8 percent each year you delay claiming up until age 70. After age 70 there is no additional incentive to put off collecting.

Age 70 ½. Those aged 70½ or older must take annual required minimum distributions from retirement accounts. The proceeds will be taxed as income. Seniors who fail to withdraw the correct amount must pay a 50 percent tax penalty and income tax on the amount that should have been withdrawn.

Contact your financial planner to discuss your specific situation.

 
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Posted by on August 22, 2013 in Uncategorized