Will a Reverse Mortgage Help Me in Retirement?
Reverse Mortgage Can Help in Retirement

Will a Reverse Mortgage Help Me in Retirement?

It’s not uncommon for a homeowner to take out a home equity line of credit or borrow against an existing one. A reverse mortgage can provide the funds to pay some bills and stay afloat.

Another option if you’re at least 62 with a home that’s not heavily mortgaged, is to take out a reverse mortgage. A revere mortgage gives you tax-free cash. No repayments are due, until you die or move out of the house.

However, these loans are expensive. In addition, reverse mortgages aren’t for those people who want to give their home to heirs, because most or all of the home’s equity may be eaten up by the loan principal and interest.

Fed Week’s recent article entitled “Considerations for Borrowing in Retirement” explains that reverse mortgages work best for seniors who need cash, who want to stay in their homes and who have few other options.

These HECM reverse mortgage loans are insured by the Federal Housing Administration (FHA). They let homeowners convert their home equity into cash with no monthly mortgage payments.

After getting a reverse mortgage, borrowers are still required to continue to pay property taxes and insurance. They also must maintain the home, according to FHA guidelines.

People use reverse mortgage loans to pay for home renovations, as well as medical and daily living expenses. Some homeowners who have an existing mortgage will use their reverse mortgage loan to pay off their existing mortgage and get rid of their monthly mortgage payments.

When the homeowner moves, sells the house, or passes away, the loan becomes due. If the house is held until death, heirs have the option to take out a conventional mortgage, pay off the reverse mortgage and continue to live there.

Other options include loans against your life insurance or your securities portfolio.

Ask a qualified estate planning attorney or elder law lawyer how a reverse mortgage might fit into your situation.

Learn how to protect your life savings from the cost of long-term care.

Reference: Fed Week (May 16, 2019) “Considerations for Borrowing in Retirement”

The Estate Planning Conversation To Have with Your Parents
Discusing Your Parents' Estate Planning Starts With Discussing Your Own

The Estate Planning Conversation To Have with Your Parents

Sometimes the way to ease into a conversation with aging parents about money and their estate planning plans for the future, is to start by discussing your own. You want to know about their estate plan or retirement finances? Start by explaining your own estate plan, how you’ve decided to set up your estate and then ask what they’ve done for themselves.

The conversation may feel awkward the first time you start it, says the Daily Local News in the article “Ask your folks about their financial plans,” but you need to get to where everyone is comfortable having the conversation. Your parents’ plans might impact yours, and visa versa. So, it’s good to talk, “early and often” about how they are planning for retirement and the high costs of retirement, including health care.

If something happens to their parents, the children are the most likely ones to step in and take charge, whether it’s caring for a surviving spouse or stepparent or of the entire estate. The more you know in advance, the better equipped you’ll be.

Your first real job is a good opening to talk about saving for retirement. Ask them what they did, or do, about 401(k) contributions. This will give you insight into how well-prepared and knowledgeable they are about retirement savings. If you’re house hunting, that’s an excellent opportunity to get them talking about their retirement plan. Do you need to buy a home with a possible “in-law” suite in mind? It’s not a bad question to ask. It shows that you are thinking about their future needs.

Untangling an estate when there’s no will and no advance planning has been done, can tear a family apart. That’s the last thing you or your parents want. Talking openly with them about money, trusts, wills, life insurance and advance medical directives, will give you an idea of what they have or have not done to plan for the future. It may spur them on to move forward with plans that they’ve procrastinated on.

Even if you learn that they haven’t done any planning and don’t have a will, that is better than not knowing until it’s too late. If you learn that this is the case, you can start educating them about what will happen, if they don’t meet with an estate planning attorney. You can offer to take them to meet your estate planning attorney or offer to get them a few names so that they can decide who they are most comfortable with.

Starting a family and setting up your own estate plan is another opportunity to ask your parents what they did and what their thoughts are about your plans. Their family may have never done any estate planning, and they might have more than a few family horror stories to share. In that case, you can help them change the family’s dynamic, by helping them to take a different path.

Learn how a trust is a fantastic estate planning solution.

Reference: Barchart (April 16, 2019) “Ask your folks about their financial plans”

Adulthood Means Getting 10 Estate Planning and Other Documents
Adulthood Means Getting 10 Estate Planning and Other Important Legal Documents

Adulthood Means Getting 10 Estate Planning and Other Documents

Fifty is a little on the late side to start taking care of estate planning and other important life matters. However, it is better late than never. It’s easy to put estate planning, since the busyness of our day-to-day lives gives us a good reason to procrastinate on the larger issues, like death and our own mortality. However, according to Charlotte Five’s article “For ultimate adulting status, have these 10 documents by the time you’re 35,” the time to act is now.

Here are the ten documents you need to get locked down.

A Will. The last will and testament does not have to be complicated. However, it does need to be prepared properly, so that it will be valid. If your family includes minor children, you need to name a guardian. Pick an executor who will be in charge when you pass. If you don’t have a will, the law of your state will determine how your assets are distributed, and a court will name a guardian for your children. It is better to have a will and put your wishes down in writing.

Life insurance. There are two basic kinds: term insurance, which covers about twenty years, and universal or whole, which covers you for your lifetime. You need enough to cover your liabilities: your home mortgage, college funding for your kids and any outstanding debts, like credit cards or a car loan. This way, you aren’t saddling heirs with your debt.

Durable power of attorney. This document lets you designate someone to pay your bills, manage your money and make financial decisions for you, if you become incapacitated. Without it, your relatives will need to go to court to be appointed power of attorney. Pick a trusted person and have the form done, when you meet with your estate planning attorney.

Twice your annual income in savings. Most Americans don’t do this. However, if you start saving, no matter how small an amount, you’ll be glad you did. You need savings to avoid creating debt, if an emergency occurs. A cash cushion of six months’ worth of monthly expenses in a savings account will give you peace of mind.

Insurance coverage. Make sure that you have the right insurance in place, in addition to life insurance. That means health insurance, auto insurance and disability insurance.

Credit report. People with better credit reports get better rates on home and auto loans. You can get them free from the big credit reporting services. Make sure everything is correct, from your address to your account history.

A letter of instruction. Where do you keep your estate planning documents? What about your bank statements, taxes and insurance documents? What about your digital assets? Keep a list for easy access for those who might have to figure out your affairs.

Retirement plan. Most people only know they don’t have enough saved for retirement. That’s not good enough. If you aren’t enrolled in your company’s 401(k) or other retirement savings plan, get on that right away. If your company matches contributions, make sure you are saving enough to get every bit of those matching dollars. If your company doesn’t have a retirement plan, then open an IRA or a Roth IRA on your own. You should try to contribute as much as you possibly can.

Updated resume. It also helps to do the same thing with your LinkedIn profile. No matter how long you’ve been in your field, everyone looks at your LinkedIn profile to see who you are and what and who you know. Make sure you have an updated resume, so you can easily send it out, whether it’s a casual conversation about a speaking opportunity or if you’re starting to look for a new position.

A budget. Here’s how you know you’re really an adult. Budgets went out of fashion for a while, but now they are bigger than avocado toast. If you don’t know what’s coming in and what’s going out, you can’t possibly have any kind of control or direction over your financial life. Start tracking your expenses, matching with your income and making any necessary changes.

One last thing—do you have a bucket list? Don’t wait until you’re 70 to consider all the places you’d like to go or the people you’d like to meet. It’s true–you only live once, and we should enjoy the ride.

Learn how a last will and testament is a great way to communicate your wishes.

Reference: Charlotte Five (April 23, 2019) “For ultimate adulting status, have these 10 documents by the time you’re 35”