Posted tagged ‘financial stress’

Changing the Role of Home Equity

July 15, 2009

j0440988I recently have read a the results of a study issued by MetLife and the National Council on Aging called Tapping Home Equity in Retirement. The purpose of the study was to examine the different options for using home equity in responding to new retirement realities. The study comes from the consumer perspective and the role that home equity is having on retirement. As retirement resources have changed, due to recent economic conditions, this report analysis their findings and provides legitimate opportunities for many retirees when evaluating their retirement resources. As the Baby Boomer generation matures and swoops into the retirement scene, home equity may become a very good option for security during this time period. On the other hand, if used unwisely, without proper counsel, it could become a source of financial insecurity, according to the report.

The study breaks down the market into four different groups: 1) Affluent, 2) Middle Income, 3) Poor. Each demographic is impacted differently in their use of equity in retirement, and each has different implications.

For financial planners, CPA’s, attorney’s and other professionals who deal in the retirement market, this report is thorough. It really is a must read as we all work to educate, inform, and provide guidance into the financial world.

Tapping Home Equity in Retirement


Medicare News

April 28, 2009

42-16163361I am sorry to my readers for including this information in my blog today, but I think it is worthwhile information. With federal, state and local economies bringing out their axes, we are seeing a host of cuts in every industry across the board. It is no different with the medical insurance programs that seniors rely on to cover the majority of their medical needs.

Fast Facts from Medicare Right Center: Only 25 percent of US retirees in 2009 say they are very confident that they will be able to cover the cost of medical expenses during their retirement, compared to 41 percent of retirees in 2007. (Employee Benefit Research Institute, The 2009 Retirement Confidence Survey: Economy Drives Confidence to Record Lows; Many Looking to Work Longer, April 2009).

For many seniors, the increase in costs or the reduction in coverage in Medicare could bring with it critical shortfalls in care and/or a shortfall in senior’s ability to afford such care.  If this is of interest to you, sign up for Medicare Watch.

Cash Flow Advantage = Tax Free Income

April 3, 2009

eaglefinancialgrp1Recently I was handed an article from a friend from the magazine Portland Home. In the Feb/March 2009  edition, Eagle Financial Group (EFG) wrote an article about reverse mortgages. I was very impressed! Today we are seeing  that financial advisors are getting asked a lot of questions about this unique method of increasing cash flow. EFG did a nice job on the article and actually brought up a benefit of reverse mortgages that I haven’t commented much on. . . . the issue and benefit of tax free income.

One of the ways in which reverse mortgages are used is to receive a monthly income (draw) that is guaranteed for as long as the homeowners remain in their home.  Based on the value of the home and the equity available, this could range from as much as $2,000 per month or more. Eagle Financial Group brought up the point that one could decrease the amount of income recieved from other means, that is taxable, while increasing the tax-free income from the reverse mortgage. This would lower the amount of taxable income yet keep the total cash flow level (if you so wish). It provides some flexibility in the amount of taxable income one recieves, and could kep one in a lower tax bracket during retirement. Now wouldn’t that be nice!

Now that this product is getting the attention of the financial advisory world, it appears that there is becoming more creative means of using the reverse mortgage as a legitimate tool for retirement planning.  If your financial advisor is not aware of the details surrounding reverse mortgages, feel free to share my blog with him/her. As a teacher at heart, I enjoy working with financial advisors and helping them to provide solutions for their clients.

Reverse Mortgage as Bridge Loan

November 1, 2007

House1In light of the current downturn in the real estate market, it has become apparent that reverse mortgages are being used more and more as bridge loans for seniors. It is an interesting concept, and one that will likely continue to grow. Since houses are taking longer and longer to sell, from 6 months to a year in different areas around the country, it may make sense for a senior homeowner to wait until the market comes back, then sell at a more reasonable sales price.

The likely scenario would be that there is a need for immediate cash and an unwillingness to sell at a low price. The loan, likely to be a proprietary reverse mortgage (though still non-recourse), would make most sense as the closing costs are much less for proprietary products. Though one could make an argument to do a HECM (FHA) if sale prices are super low. Rates on a propreitary reverse mortgage range from mid- 7% to mid-8%. For a bridge loan (short term), that is not bad.