Reverse mortgages shift gears
Ann Tubbs and Ehtesham Majid left behind their house in Moraga more than
two years ago to enjoy the urban lifestyle of San Francisco. The
retired couple ended up renting a place in the city but eventually
hoped to buy a home, a place they could personalize and make their own.
ß Now, a new program made possible by federal legislation passed last
year to address the foreclosure-driven housing crisis is also helping
seniors use a reverse mortgage to help buy a home, provided they can
come up with a large down payment. Before the Home Equity Conversion
for Purchase program rolled out in January, seniors 62 years and older
could only use reverse mortgage loans to draw out tax-free payments
from the equity held in an existing home while continuing to live in
it.
Tubbs and Majid used the new program to help purchase a $625,000
two-bedroom condominium located downtown near the city’s waterfront.
“We like city living. We like to walk around at night and look in
windows,” said Tubbs, who retired from a 30-year-career at Planned
Parenthood. She and her husband moved into their new home in August.
“It’s a great program for people like us. We don’t have any children
and want the urban lifestyle,” said Majid, a retired software engineer.
Many lenders are starting to offer these new loans in addition
to traditional reverse mortgage products. But as with traditional
reverse mortgages, there are costs involved that can add thousands of dollars to the loan amount,
which grows over time and has to be repaid after the last borrower
leaves or sells the property or dies and the home is passed on to
heirs.
Optimistic investors more active in retirement planning, Fidelity says
Optimistic investors tend to be more
active retirement planners than pessimists, according to data released
by Fidelity Investments today.
Out of the 1,000 husbands and
wives who participated in Fidelity’s survey, 89% of couples had one
partner who tended to be more optimistic than the other and was more
involved in making decisions about retirement.
More than 80% of optimists said they expected a comfortable lifestyle in retirement, while just 61% of pessimists agreed.
When
the recession hit, 22% of pessimists said, they panicked and wanted to
flee the market, compared with just 11% of optimists. Meanwhile, 77% of
optimists — but only 57% of pessimists — wanted to stay the course.
Although 27% of optimists have completed a detailed income plan to
lay out their retirement finances, just 15% of pessimists have done so.
A quarter of pessimists — more than double the number of
optimists — aim to preserve their money and tend to accept
considerably lower returns. And 45% of pessimists, compared with 33% of
optimists, said they were worried about risks to their retirement
funds, like the possibility of Social Security being reduced.
Most Affordable Places to Retire
These days, the idea of retirement can be a little scary. With the stock marke’s fall last year, taking 401(k) and IRA account balances with them, and the cost of everything going up, the thought of going onto a fixed income and retiring from your job is very daunting. Fortunately, one thing you can do to help mitigate all those risks is move to a place in the United States, or beyond, that favors retirees.
That’s why I always enjoy articles that point out the best and most affordable places to retire. Whether it’s because of good home prices or a lower cost of living or just favorable tax benefits for retirees, these lists offer a great start if you’re deciding on a move.
BusinessWeek has published their latest survey of the best places to live and tops on the list is Tucson, Arizona. With 284 sunny days and a cost of living index of 109.44, so close to average (100) in the US.
Tucson, home of the University of Arizona, is a scenic, affordable place to retire. It is surrounded by mountains and the dry beauty of the Sonoran desert. It has its own airport, just six miles from downtown Tucson, more than 100 parks, a good public transportation system, and plenty of public and private golf courses. The university and University Medical Center are among of the state’s largest employers.
When Does a Reverse Mortgage Make Sense?
Reverse mortgages have recently come into the spotlight as a band aid for seniors with cash flow problems. Unfortunately, the media attention has been generally negative, focusing on a small set of shady brokers that give the entire niche a bad name.
Despite working in the mortgage industry, I’ll be the first to tell you that reverse mortgages are NOT smart for every situation because of the high up front cost. However, if you qualify and need to tighten your financial belt a bit, a reverse mortgage could make sense. Here’s a few situations where a reverse mortgage could be a sound financial decision.
If you’re retired and don’t have any cash left over at the end of the month. Some seniors are still paying a mortgage payment every month and don’t have much left after living expenses. With a reverse mortgage, individuals in this situation could completely get rid of that monthly mortgage payment. Most likely that would amount to freeing up over $1,000 every month.
If your home is paid off but your investment or pension income isn’t paying the bills. In the same vein as the first situation, it might make sense to pursue a reverse mortgage when a homeowner has a large chunk of equity in the home and their monthly income is insufficient. Equity can be cashed out up front or as a monthly payment like an annuity.
If you have high interest debt on your home or some other asset. This is a less common use for reverse mortgage proceeds but in some cases it makes sense. Say for instance, you have a home equity line of credit at 8% or more. That amount could potentially be refinanced at a lower rate or just paid off in full with a reverse mortgage.
Like any loan program, every situation warrants a individual assessment from an experienced professional. If you think a reverse mortgage might make sense, I encourage you to check out our article on the pros and cons of a reverse mortgage and check out our other resources.
Brandon Laughridge is the editor of the Mortgage Loan Place Blog and specializes in educating consumers on the merits of FHA, VA, and Reverse Mortgage programs. To learn more, please check out the MLP blog or follow Brandon on Twitter.
‘Working until I drop’: Economy hits Boomers’ retirement hopes
‘Working until I drop’: Economy hits Boomers’ retirement hopes
‘Working until I drop’: Economy hits Boomers’ retirement hopes
Social Security & Medicare in Financial Distress
Earlier this week Treasury Secretary Timothy Geithner revealed that the Social Security trust fund might be exhausted as early as 2037, which is four years earlier than the estimate last year! The main reason for this adjustment comes from the rising unemployment rate, which affects how much is being paid into the trust fund, tax breaks in the stimulus package, and an increase in demand for benefits. By definition, the Social Security trust fund is exhausted when they can only pay 76% of benefits.
It’s not all that surprising when you consider that since January 1, 2008, approximately 5.7 million jobs have disappeared and another 4.3 million jobs are now part-time. That’s going to hit the Social Security collections pretty hard.
Medicare is worse off than Social Security and it’s forecast to be exhausted by 2017, two years earlier than was estimated last year. For Medicare, exhaustion means they can only pay out 81% of costs. The cause is again rising unemployment, since it’s funded from payroll deductions, and what’s especially shocking is that it has paid out more than it collected starting last year.
Experts say the only way to fix it is for broader healthcare reform…
Recession hits Social Security hard [CNNMoney.com]
Grande Village Retirement Community begins $2.7-million expansion
TWINSBURG — Grande Village Retirement Community has only been open for three years, but it is already expanding. Grande Village, 2610 E. Aurora Road, has started construction on a $2.7-million expansion to its rehabilitation center. Grande Village is owned and…
TWINSBURG — Grande Village Retirement Community has only been open for three years, but it is already expanding. Grande Village, 2610 E. Aurora Road, has started construction on a $2.7-million expansion to its rehabilitation center. Grande Village is owned and…
Strategizing a retirement rebound
Question: I plan to retire in about two years, but I’ve lost a lot in my retirement savings account.
Question: I plan to retire in about two years, but I’ve lost a lot in my retirement savings account. Currently my money is spread out over small and midcap stocks, growth shares and safe investments. But I’m thinking of moving my balance to an account that tracks the Standard & Poor’s 500 index, riding the upswing until the S&P hits 1,100 or 1,200 and then diversifying into something safer. Do …
Delay retirement to grow savings, boost payments
Although a troubling number of executives and brokers with bailed-out firms still seem to be on track with an ultra-cushy retirement, yours might be derailed. Reality-check time: You probably won’t be able to retire when you hoped to unless you make a lot more money and save it. Since your retirement funds are probably ravaged, it’s no surprise that you may need to work longer.
Although a troubling number of executives and brokers with bailed-out firms still seem to be on track with an ultra-cushy retirement, yours might be derailed. Reality-check time: You probably won’t be able to retire when you hoped to unless you make a lot more money and save it. Since your retirement funds are probably ravaged, it’s no surprise that you may need to work longer. This is bitter …
Computerized calculators for retirement planning often not very accurate
If you’ve talked with a financial adviser about retirement planning or waded through an online calculator, chances are you’ve answered questions about your income and assets and received a snapshot of the type of retirement you’re on track to achieve.
If you’ve talked with a financial adviser about retirement planning or waded through an online calculator, chances are you’ve answered questions about your income and assets and received a snapshot of the type of retirement you’re on track to achieve.
