A 401k is a good place to start in planning for your future retirement, no matter how far away you may be from the actual time. A 401k account is a special type of savings account that is funded directly through your paycheck each pay period. How it works is that you and your employer determine the amount that is to be deducted from each paycheck you receive, then the employer determines your pre-tax earnings and deducts your 401k funds from the paycheck prior to taxes.
Once deposited in the special savings account, the funds in the 401k are then invested into many different types of mutual funds, bonds, and stocks. The great thing about a 401k retirement plan is that all of these investments are completely free of taxes until the time comes for you to withdraw your money from the 401k account.
Beginning in the early part of the 1980’s congress created the 401k retirement plan to allow people to begin saving money before they retire from their employment. It works as something of a financial net, ready for you when the time arrives.
There are several advantages with a 401k other than simply being a tax-exempt method of savings. Your employer may also have a match program. With this program, your employer would match part of your contribution into 401k. This means that whatever you contribute to your 401k, your employer will match a portion of it each pay period. Additionally, some employers raise the amount of their contribution when you have worked for them a certain number of years.
Another exciting aspect of 401k is that you have the option to determine where your funds will go when it is invested. To some, this is important and gives them the opportunity to maximize their retirement savings.
Furthermore, 401k has portability. If you should ever change jobs, you have many different options available in regard to your 401k. One of these options is to simply leave your 401k with your previous employer. This is the easiest option. However, you should be aware that the plan administrators could charge you for maintaining the account records. Another option is to roll the 401k over to the new employer’s plan. This will allow you to continue to deposit money into your 401k to add to the money you have already earned and saved.
You may also be able to rollover the 401k into an IRA. This is a great option, especially if employers only offer limited investments. You would have greater control over where your money is invested. Last, you could opt to completely cash the 401k out. This option has a few drawbacks. When you cash out your 401k plan, you must pay the taxes on that money and you could also be accessed a penalty for early withdrawal.
It is extremely important that you fully understand all of your options. Weigh the results of each one prior to making any decision about your 401k. Being educated, practical and informed before making your decision will help benefit your 401k and retirement in the long run.
Permission is granted to reprint this article as long as no changes are made, and the entire resource box is included.
{In retirement, you find a lot of old folks getting tallow skin. Bad, bad. And it’s because they did not care to care for themselves. You can tell a different tale, you know. Spend more time in the sun.|You can do wonders for yourself even in retirement, if you could just find something to do. Even if you cannot travel the world as you would love to, try to offer something to the people who live around you. Their appreciation can be your reward.}
{Waking up in the morning on the first day of your retirement should be with a feeling of excitement, and not one of dread. If you are in dread, it must be because you failed to plan properly for that day. Try and help the next generation with better advice than you took.|In your retirement, you should stay in contact with friends. It helps your heart rate to be able to talk to someone from the past in an excited way. And it’s a lot better than sleeping and waking up unhappy every day.|Staying active in retirement is much easier when you have spent a whole lifetime in practice, preparing for it. Sincerely, what you get then is what you have planned for since now. Plan wisely. Map out what you want to achieve with your life at that time, eat well in preparation for it, exercise as much as you can, and save up good money to make such pursuits a possibility. That is how to make meaning of a retirement.}
{Your retirement can be much more enjoyable if you are in control of it. Only if you have let matters slip out of hand will you have that consternation that comes from uncertainty in your gut. So, which is it?|With the number of pension and retirement plans out there, you really have no excuse. You can have your retirement a fulfilling one if you can let them help you with the plans. It’s simply common sense.}
{When you have someone to do things with, retirement is often easier on you. How about you make a friend? How about you make new ones every day? Try different things all the time. It can help bring a little sunshine back into that leathered face.|There’s nothing better than a retirement well planned. You can do all the things you planned to do, and enjoy yourself doing them. The flipside is a horrid affair; one in which you get to become this sad defeated person because you did not put things in place when you could have… a curse of negligence that will have you waste away as a consequence of your non actions. |A country walk with friends often does magic for the back and the bones if you do it often enough. But lying or sleeping in during retirement is not an option. Now get off of your lazy behind and see what you can make of it.}
If you are purchasing a home and have a substantial portion of your assets inside of a retirement account such as a 401K, 403B or other retirement product or annuity, you may choose the increasingly popular option of tapping those funds to make a down payment on your new home. Like any other accounts you may have in your name, such as brokerage accounts and bank checking, savings and money market accounts, most popular retirement accounts qualify as assets to be counted toward your “reserves”, a measure used by mortgage lenders to determine how many months of payments you must have in order to serve as a buffer covering payments you might miss if there were any interruption of your income.
Retirement accounts such as 401(k) or 403(b) annuity accounts are generally administered or sponsored in whole or in part by your employer. In addition to serving as excellent documentation of your earnings and savings, your 401K or 403B accounts can be used in a variety of ways to help finance your new home purchase. Depending on the specific restrictions applied to your account, you may have the option of withdrawing money directly from the account or “borrowing” money in the form of a loan (against your own funds) which is repaid at a generally low rate of interest. Regardless of whether you cash money out of your account or take a loan against it, be sure to thoroughly document any details of the transaction, including any withdrawal or loan application paperwork, demand drafts, cashier’s checks, deposit tickets, etc. for the purpose of substantiating this source of funds to your lender.
Lenders do treat down payment money from retirement accounts differently from program to program and state to state, sometimes from case to case. In particular, borrowing money in the form of a loan may increase what the lender’s perceives as your monthly debt obligations, because even though you are borrowing money from your own account, you are still obligated to make a payment every month which you wouldn’t have to make otherwise, and lenders will often consider this to be detrimental to your qualifying DTI or Debt to Income Ratio, making it harder to borrow as much money as you may need. On the other hand, cashing out any type of retirement account will always create a taxable event and sometimes also a penalty fee, which generally accounts to more than the nominal interest rate common to the loan option. Speak with your loan officer about the requirements of your individual program and weight the options with him/her or another trusted financial professional.
You may also consider speaking to your employer about any down payment assistance programs which may be available to you as part of your benefits package. These can come in many forms, but it is important to clarify with your employer that any down payment assistance granted does not amount to a loan and that there is no expectation of payment. Why would an employer want to help you make a down payment? Call them old fashioned, but most companies do want their employees to stick with them, and if your employer helped you achieve ownership of your dream home, how would you feel about them? As with the 401K, 403B or other retirement account options, down payment assistance from your employer should be documented in detail and all copies of communication, checks, deposit tickets and statements of account, along with signed records stipulating that the funds are given freely and not to be repaid, should be kept for submission to your lender.
Roth 401k is a good retirement savings option. Although it does not provide an up-front tax-deduction, the account eventually becomes tax-free, because the withdrawals taken at retirement are not subject to income tax.
This tax benefit can only be provided to persons who are at least 59.5 years old, or are disabled, and who have held the account for a minimum period of five years. Roth 401k provides an opportunity to save with a different kind of tax treatment. It is a good option for those who are just starting their careers, and expect their income to grow in the future.
Eligibility for Roth 401k:
Anyone whose employer offers Roth 401k is eligible for this investment option. If an employee leaves his/her job, the Roth 401k balance can be rolled over into a Roth IRA. One major benefit of enrolling in Roth 401k is that an account holder does not lose eligibility when the income becomes very high. There is no provision of helping a person open this account if his/her employer does not offer Roth 401k yet. Employers provide a form to their employees to state some, or all, of their 401k contributions that will go into their Roth 401k account.
Difference between 401k and Roth 401k:
401k makes available some tax relief in the year a person may have contributed into the account. However, a 401k-account holder is liable to pay taxes on his/her contribution, along with all the investment earnings, later.
A Roth 401k account holder does not get any tax benefit in the year of the contributions, but all the earnings in the account will be free of tax for as long as the account exists. Besides, a Roth 401k-account holder can roll his/her account to a Roth IRA. The Roth IRA account continues to grow with tax-free earnings for as long as it exists. However, Roth IRA is not available to taxpayers with an income above a certain level.
Advantages of Roth 401k:
Since tax rules allow a person to make it as large as a traditional account, the Roth 401k account is more valuable compared to it. Therefore, saving in a Roth 401k account can make a person much better off at retirement. Given below is a table showing the amount required in a traditional account to have the equivalent of $100 in a Roth Account.
If a person is in the 33% tax bracket, he/she will have to withdraw $149.25 from a traditional account in order to spend $100. This is because $49.25 is used to pay the tax on the distribution. Roth 401k provides more wealth at retirement, as the distribution from it is tax-free.
While many companies that already have the traditional 401k plans, wanted to implement Roth 401k plans, which have been effective from January 1,2006 according to the law, in reality only a few actually have done it, because of the extra expenses involved. These companies want to first observe the success of Roth 401k before actually undertaking the cost of the implementation.
Roth 401k is a good investment option to save tax-free earnings for retirement. People can take advantage of it to be able to have a secure retirement, which is free from monetary worries.
Estimates indicate that there is a target population of some 8.8 million senior households that both qualify for and are good potential candidates for HUD’s home equity conversion mortgage (HECM) reverse mortgage program. (Under an HECM loan, a lender advances money to a elderly homeowner, in the form of a series of fixed monthly payments, a line of credit on which the borrower may draw, or a combination. The senior homeowner is not required to make any payments on the loan so long as he or she remains in the house. The lender collects the loan balance-which includes the accrued interest and other charges as well as the amounts paid out-when the house is sold or the owner dies.) Yet in the most recent federal fiscal year, just 43,131 HECM loans were originated; over the sixteen year history of the program, a total of 162,268 HECMs have originated, representing only a tiny share of the potential market.
There are some obvious and tangible factors that help explain this low market penetration, most notably the high origination fees and closing costs relative to amounts that can be borrowed through the program. Less obvious are the intangible psychological fears that may prevent senior homeowners from stepping into a reverse mortgage. Being aware of these factors can help potential borrowers more clearly assess their own situation and make a more calculated decision about whether or not a reverse mortgage is right for them:
* Fear of Giving-up a Hard-Earned Goal – Most elderly homeowners have spent their working lives focused on the goal of “paying off the mortgage.” Taking out a reverse mortgage is, in essence, a decision to do a complete turnabout and initiate the process of growing a new mortgage. For some seniors, this just doesn’t make sense, no matter how rational the decision to trade-in home equity for better living standards in later life may appear to a detached observer.
* Fear of Being Suckered – HECMs are administered, heavily regulated and insured by federal government agencies (in particular HUD). From the standpoint of protecting innocent borrowers from ruthless lenders, HECMs are about as “safe” a mortgage product as can be imagined. Yet there are true horror stories from the pre-HUD reverse mortgage era about seniors being forced to sell their homes or lose them to foreclosure. Unfortunately, these stories have now become urban legends and still taint the phrase “reverse mortgage”.
A related issue is the ongoing problem of elderly homeowners being contacted by “home repair” companies, annuity salespersons, and other pitch-men promoting the reverse mortgage as the ideal way to pay for their valuable product or service. The tacky nature of this type of solicitation further increase doubts and fears about whether reverse mortgages are truly legitimate.
* Fear of Financial Complexity – There is no question that reverse mortgages are complex financial tools. Moreover, by their very nature they run counter to many of the golden financial management rules that senior homeowners have strived to abide by over their adult lives – i.e. “reduce debt”, “avoid high transaction fees”, “grow your home equity”, etc. Largely because of the complexity, HUD requires all HECM applicants to participate in counseling sessions to ensure they have full understanding of the reverse mortgage process and the other alternatives that may be available. Yet, while necessary and well-intended, the counseling requirement itself may scare-off some potential applicants who feel that they just won’t be capable of digesting all the new information presented.
* Fear of Not Leaving an Inheritance – For many seniors, the desire to leave an inheritance to children or grandchildren is quite strong – even to the point of accepting a more modest than necessary lifestyle to ensure that an estate survives them. Seniors who have this goal and whose largest asset is their homestead, clearly will perceive that a reverse mortgage runs directly counter to their strong bequest motive.
* Fear of Sacrificing Future Flexibility – To be a sensible financial decision, a reverse mortgage should equate to a conscious decision by the homeowner to stay put for the long term – minimally 5-7 years and, ideally, for the rest of the homeowners’ lives. Obviously, this commitment is especially difficult for the elderly homeowner. Death, long-term illness or incapacity and similar issues weigh heavily on the minds of many seniors and make long-term housing commitments especially stressful.
To a large extent, further growth in the reverse mortgage area will depend on the success of efforts to educate the target population. Some observers feel that the next generation of retirees -i.e. baby boomers – will enter their retirement years with a far greater understanding of financial matters and with less aversion to indebtedness. This may prove true but the reverse mortgage concept is so fundamentally different from what people are used to that overcoming the fears of potential borrowers will remain a challenge.
Reverse Mortgage: A Dignified Way For Retirees To Supplement Income And Take Care Of Expenses
For many Americans reaching the retirement age, the equity build up in their home is their only real asset. Reverse mortgage is a way to tap into this asset and create a stream of income needed for retirement or take care of an unexpected financial need that is usually related to health care costs in the elderly.
Reverse mortgage is not like a refinance, equity loan or a second loan on your home and there are some pitfalls.
So what is a reverse mortgage?
As the term implies the flow of money is reversed. Instead of the homeowner paying the lender on a predetermined schedule, the lender pays the homeowner and there aren’t any payments due until the home owner moves or dies.
How did reverse mortgage start?
Roger Maris broke Babe Ruth’s single-season home-run record in 1961 but like most things in life, a single act of kindness has a much longer longevity and a more widespread influence than that of fame and ironically these acts of kindness remain obscure.
The history of reverse mortgage can be traced to Nelson Haynes of Deering Savings & Loan (Portland, ME) who made the first reverse mortgage loan to Nellie Young, the widow of his high school football coach. This event was reported to be motivated by kindness and started a chain of events over the following forty years to extend a helping hand to today’s retirees.
Reverse mortgage helps many retirees cope with their financial difficulties and more importantly,helps them to have a way to retain their independence and dignity. And retirees are reaching for this solution in record numbers. According to the National Reverse Mortgage Lenders Association in 2004, lenders originated a record 37,829 HECM loans during the most recent federal fiscal year – a 109 percent increase over the 18,079 loans closed the previous year.
Why would a lender do this?
The act of kindness may have started this idea but lenders are not charitable organizations and they will not be in business long if they don’t have a return on their investments. In this case, they calculate the amount they lend based on the value of your home, projected appreciation, your age and a number of other factors. They expect to get paid the money they have lent plus the interest when the homeowner moves or dies.
What are HECM Loans?
Federally-insured home equity conversion mortgage (HECM) is the most common of reverse mortgage loans that the U.S. Department of Housing and Urban Development started offering in 1989.
Who cares about federal insurance?
In traditional loans, when you borrow the money, you have the cash in hand and the lender has taken all the risk secured by your home. However in a reverse mortgage, you may plan to receive a monthly payment over a period of time. What will happen if the lender is no longer around to pay you?
This is why the federally insured reverse mortgage ads another dimension of safety and peace of mind. This peace of mind also comes with a price tag. HECMs limits the maximum loan amount a homeowner can borrow.
What about Non-HECM?
Many lending institutions offer this category of reverse mortgages and their limits are usually higher than that of HEMD. However they are not federally insured and they can have a much higher expense associated with their processing.
Can any one qualify for a reverse mortgage?
The eligibility requirements for a reverse mortgage are:
* You are a homeowner
* You are 62 years of age or older
* You own your home outright, or have a low mortgage balance that can be paid off at the closing with proceeds from the reverse loan
* You live in the home
* In case of HUD, you are also required to receive consumer information from HUD-approved counseling sources prior to obtaining the loan. You can contact the Housing Counseling Clearinghouse on 1-800-569-4287 to obtain the name and telephone number of an HUD-approved counseling agency and a list of FHA approved lenders within your area.
* Upkeep of property taxes and staying out of bankruptcy are also required.
How much money can I borrow?
The amount of money you can borrow is based on a different set of formulas than the traditional mortgage qualifications. Your age, the value of your home, the current interest rates, and the loan costs impact the amount. Older individuals with more valuable homes in lower interest rate environment can borrow more.
What types of homes are eligible for reverse mortgages?
Single family, two-to-four unit properties, townhouses, detached homes, units in condominiums and some manufactured homes are eligible. However various restrictions apply to all with most significant being that you own them, live in them and have kept them in reasonable condition.
What about my heirs?
If death occurs while you still owe money to the lender, your heirs are obligated to pay the borrowed amount, plus interest and other fees, to the lender. They usually do this by selling the house. Whatever remains after paying the lender belongs to your heirs. The loan cannot be passed along.
What are my borrowing options?
You have five options:
* Tenure – equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence.
* Term – equal monthly payments for a fixed period of months selected.
* Line of Credit – unscheduled payments or in installments, at times and in amounts of borrower’s choosing until the line of credit is exhausted.
* Modified Tenure – combination of line of credit with monthly payments for as long as the borrower remains in the home.
* Modified Term – combination of line of credit with monthly payments for a fixed period of months selected by the borrower.
What about reverse mortgage scams?
Like most other scams directed to senior citizens, telemarketing is on top of the list. Never agree to anything over the phone, especially on the first call and do not give personal information, financial or otherwise, over the phone.
There is never a cost associated with getting information on reverse mortgages. This information is available for free. Ask for written copy of everything that should include an address and a phone number so that you can confirm the data.
* DISCLAIMER: Vishy Dadsetan, FreeCreditReport.ws or My Favorite Shop, Inc. do not endorse any reverse mortgage product or lender. This article and website does not provide legal, accounting, or other professional services. If legal or other expert assistance is required, the services of a competent professional should be sought. Although Vishy Dadsetan has made every effort to ensure the accuracy and completeness of the information contained in this site, it assumes no responsibility for errors, omissions, inaccuracies, or inconsistencies.
Retiring or leaving the company–How to Properly do an IRA Rollover
Retiring or leaving the company–How to Properly do an IRA Rollover
Whether you are retiring or changing jobs, you need to know what to do with your employer sponsored retirement plan before your leave. Once you leave a job for whatever reason, you can choose to:
•Rollover the money into an IRA (ira rollover)
•Take the lump sum and pay the income tax and potential penalties
•Leave the money at the company if the company offers that as an option
•Rollover the money into your new employer’s plan, if that plan accepts rollovers
Realize that the above are options offered by IRS. However, your employer’s rules may be more restrictive and if so, there’s nothing you can do. For example, if you have a pension plan that offers payout options over your lifetime or jointly over the lifetime’s of you and your spouse, but there is no option to rollover a lump sum to an IRA (ira rollover), than the rollover option isn’t available to you. In other words, the “summary plan document” rules. You may want to get a copy of that now and have your financial advisor review it so that you know what options you have.
So the starting point is to get the information from your employer plan as to the options available to you.
What is an IRA Rollover?
IRA rollover means to move money from a retirement plan such as a 401(k), 403b (tax sheltered annuity) or 457 (municipal deferred compensation) into an IRA or other plan. If you receive a payout from your employer-sponsored retirement plan, a rollover IRA could be to your advantage. You will continue to receive the tax-deferred status of your retirement savings and will avoid penalties and taxes.
There are two reasons that rollovers are favored over other options:
•You have virtually unlimited investment selections. Unlike your employer’s plan which may have six investment options or even 50 investment options, in a self-directed IRA, you can choose any stock, any mutual fund and a host of other options listed later.
•Company plans often can restrict choices for non-spouse beneficiaries. Specifically, they may not be able to stretch IRA distributions over their lifetime. The benefit of this “stretch” is it defers taxes and allows the funds to potentially grow longer and larger in a tax-deferred environment.
The reason to leave your retirement plan with your company (if they permit this) is because your company plan is covered by ERISA and is protected from creditors. However, under the new Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, the creditor protection will follow the money if it is rolled into an IRA and not commingled with other IRA money (from annual contributions).
Combining with Other Retirement Accounts
The rollover IRA is usually funded by the eligible distributions from a company sponsored retirement plan. These distributions can be combined with your existing IRA(s) or placed into a separate IRA, but see the new creditor protection rule mentioned above. In fact, the IRS permits these funds to be combined with other types of retirement accounts. For example, say you have been self- employed and you have a one-person profit sharing plan (often referred to as Keogh plans), you could rollover the employer-plan assets into your profit sharing plan. Or, if you have a second job and that employer has a 403(b) plan and also accepts IRA rollover contributions, you could rollover your 401(k) balance into that 403(b) plan.
Completing your IRA Rollover
When it’s time to retire, you have a few options on moving the money from your employer’s plan.
Direct IRA Rollover:Your employer can directly rollover your retirement plan payout into a Rollover IRA and you will avoid the 20% IRS withholding tax. This is exactly what you should do by providing your employer the name, address and account number for your new Rollover IRA custodian. For example, you give your employer instructions to send your retirement account to ABC securities, account #8889999. Funds are sent directly to the IRA account and you never touch them. This is the preferred method of moving retirement funds.
Payout by Check: If your employer hands you a check for your retirement funds, the employer must withhold 20% for potential taxes. You can avoid the 20% IRS withholding tax on a payout by check from your employer if you deposit the check plus 20% into a rollover IRA within 60 days. In order to complete the tax free rollover, you now have 80% of your IRA rollover in your hand and you must take the other 20% out of your pocket so that you have a completely tax free rollover (you will get the 20% income tax withheld as a refund after you file your tax return). Don’t allow your employer to give you a check, as this requires you to take money out of your pocket to complete your rollover.
Taking a lump sum distribution: This is typically not a wise option because you will pay income tax on the distribution and a 10% penalty if under age 59 ½. However, there may be reasons to take a taxable distribution. If you are set on buying a $300,000 boat and spending the rest of your life floating about the globe, then you may need to take your retirement funds now and pay tax. However, if you can avoid using these funds currently, you’ll hopefully have a nest egg when you’re old.
This is a great option for a lot of people when they
retire. Retirement villages vary in the services they
provide depending on needs.
Some a very lavish, and very large, with stand-alone
houses, others might be smaller, with units, and some might
have a lodge type set-up with apartments or rooms. Retirement homes also can fit into this category on a
smaller scale.
Villages can be a resort styled with activities. It may be
based around a lake or near the beach, usually a large golf
course is included and shopping facilities.
Houses are generally 2 bedroom, 2 bathrooms with garages
etc. priced from $300,000 to over $600,000. Of course this
is for the a very grand resort type retirement village. You
can also lease at $1,100 to $2,500 a month.
Retirement homes can be on a much smaller scale and
generally have three main categorties they fall into.
Active, Semi-Active and assisted.
Active basically means the residents are physically fit and
actively take part in life, and they usually provide
amenities such as golfing, boating etc.
Semi-active has residents who are still independent but may
need assistance in some areas or want a medical source on
hand constantly.
Assisted is basically residents with full medical care, and
generally need assistance in their everyday life, and need
medical staff daily.
If you factoring a retirement village or home into your
retirement planning, have a good look around. Once you find
a few perfect candidates go for a visit before you choose.
When you search for retirement poems online, they will yield two results. There are free retirement poems and for sale. You don’t have to worry if your research will direct you to the ones that require you to take out some money from your wallet, because you are still left with other option – the free retirement poems.
The free retirement poems you can find on the internet are not only available for you to read, but also you can use them as retirement gift ideas or for which might inspire you to write one in your own words. That is if you prefer to have original ones. But, there’s more! You can also make them part of your retirement speech. As a matter of fact, some of the sample free retirement poems are specially made so that some of the words rhyme with toast. Here is an example of free retirement poems that could be inserted after rendering your speech and before the retirement toast:
This final time you leave your post
Your workmates here would like to boast
We’ve wished you the most
Happy life – down on the coast
While we continue here –
In our daily work engrossed.
And with that,
Let us together toast
You
Our friend and colleague (name)
Or, you can have the option to change some of the wordings to best suit the one who is retiring. For instance, if the person who is retiring is not spending his time at the coast, you could fill in something that would still rhyme with toast for as long as it makes sense, of course!
If you need free retirement poems that are of humorous message, this is a good example:
Warning
Jenny Joseph
When I am an old woman, I shall wear purple
With a red hat that doesn’t go, and doesn’t suit me.
And I shall spend my pension on brandy and summer gloves
And satin candles, and say we’ve no money for butter.
I shall sit down on the pavement when I am tired
And gobble up samples in shops and press alarm bells
And run my stick along the public railings
And make up for the sobriety of my youth.
I shall go out in my slippers in the rain
And pick the flowers in other people’s gardens
And learn to spit.
You can wear terrible shirts and grow more fat
And eat three more pounds of sausage at a go
Or only bread and pickles for a week
And hoard pens and pencils and beer nuts and things in boxes.
But now we must have clothes that keep us dry
And pay our rent and not swear in the street
And set a good example for the children.
We must have friends to dinner and read the papers.
But maybe I ought to practice a little now?
So people who know me are not too shocked and surprised
When suddenly I am old, and start to wear purple.
Do you need to finance a home improvement? Pay off a current mortgage? Supplement your retirement income? Take care of healthcare expenses? If so, a reverse mortgage lender will do wonders for you. With a reverse mortgage, you can turn the value of your home into cash without having to repay your loan each month.
When Is It Repaid?
A reverse mortgage is a loan taken out against your home. The best thing about it is that you don’t have to pay it back for as long as you live there. Reverse mortgage lenders only collect repayment when you
– die
– sell your home
– or move to another house and live there permanently
What Types Are Available?
There are three basic types of reverse mortgages, and they are classified according to who the reverse mortgage lender is.
1. Single-purpose reverse mortgage
This is offered by non-profit organizations, state governments, and local agencies.
2. Federally-insured reverse mortgage
This is also know as HECM, or Home Equity Conversion Mortgage. It is backed by the U.S Department of Housing and Urban Development, or HUD.
3. Proprietary reverse mortgage
The reverse mortgage lender of this type of mortgage is a private company.
Are There Other Differences Between Types?
The three types of reverse mortgages also differ in other aspects, particularly in their terms and manner of use.
1. Single-purpose reverse mortgage
This has very low costs, and you can only qualify for one if you have a low to moderate income. There are two drawbacks to this type of reverse mortgage. First, it is not available everywhere. Second, it can only be used for the purpose specified by the government or by the reverse mortgage lender. Such a purpose may range from paying for home repairs to paying off property taxes.
2. HECM and proprietary reverse mortgage
These tend to be costlier than the other two home loans. In fact, the up-front charges could be very high. These two types of reverse mortgage, however, are not without their advantages. For one, many reverse mortgage lenders offer them. For another, HECM and proprietary reverse mortgage lenders do not ask for proof of income or a bill of good health. Finally, these two mortgages may be used for any purpose.
How Much Can You Borrow?
In single-purpose reverse mortgage, the amount is set according to how much you need.
In a proprietary reverse mortgage or HECM, the reverse mortgage lenders offer amounts depending upon a combination of factors, such as:
– the type of reverse mortgage you choose
– present interest rates
– the appraised value of your home
– your address
– your age
Reverse mortgage lenders put a high premium on age. As a rule of thumb, the older you are, the more valuable your home is. Secondly, the less mortgage you have left to pay, the more money you can get.
How Will You Get What You Borrow?
A reverse mortgage lender gives you cash in several ways:
1. all at once, in a single chunk of cash
2. as a credit line, wherein you can decide when and how much of the money available is paid to you
3. on a regular basis, with the amount and schedule of payment fixed
4. as a combination of the three previously mentioned payment methods
How Do You Qualify?
To be eligible for a reverse mortgage, you must be at least 62 years old and must live in your own house.
If you are cash-strapped, a reverse mortgage may just be the answer you need. Be sure to research about this type of loan first, though. In loans, as in all other things, it is better to be safe than sorry.
Health insurance considerations weigh heavily on the
minds of people wanting to retire before Medicare
coverage kicks in at age 65. Many people put off
retirement simply because the cost of an individual
health insurance policy is too great on a limited
income.
What options for health insurance do you have if you
choose to retire before age 65? Although they are not
required to, you may be able to get COBRA-like
coverage from your employer.
As an added retirement benefit, your employer may
allow you to pick up the premium on your policy;
although paying 100% of your premium may initially
appear to be an expensive option, purchasing an
individual policy apart from a group may be even more
costly and not provide you with the level of coverage
you previously had.
Some companies are offering basic high-deductible
insurance reasonably in the hopes that they will be
able to enroll you in Medicare Part C (supplemental
insurance) when you retire.
Another option is to budget and save money to cover
your anticipated medical costs for the time period
between retirement and age 65. If you are in very good
health, this may be a viable alternative for you.
Pre-planning for retirement is an important issue; the
earlier you start planning, the better. Realizing the
Medicare does not pay all of your medical expenses,
you should budget money for medical expenses even
after retirement.
When it comes time to think about the future because you are getting older and closer to retirement, you may want to consider getting a reverse mortgage for your home. This is a rather new thing among mortgages, but it can provide you with a stable income until you no longer have need of the house. Here are some things you should know about a reverse mortgage.
The idea of a reverse mortgage is to provide you with an income in your senior years when your income level may be lower or nearly non-existent. To start with, you must be at least 62 years old, and have some equity in your home. Other considerations of how much you can get include the value of the home and how much remains on the mortgage that is unpaid.
What Is It For?
The goal of getting a reverse mortgage is to tap into the equity of your home and use it to provide you with cash so that you can either meet upcoming expenses (possibly medical), or simply use it to maintain a certain level of living. Payments from the mortgage company to you can be obtained in a number of ways, including monthly payments as long as you live in the house, a lump sum, monthly payments over a term, payments plus a line of credit, and combinations of these things. Your options and amount you can receive are based on things like age and the amount of equity that you have in the house. The older you are the larger payment you will be eligible to receive.
How Does It Work?
A reverse mortgage works differently than a regular mortgage. The first difference is that they pay you instead of you paying them. You make no payments until you, or those also named, no longer live in the house. At that time, however, the full amount becomes due, and generally will need to be sold in order to make the payment.
Who Qualifies?
Another difference that applies to a reverse mortgage is that it does not matter how much you make in income at any time. Since you are not paying them – you can automatically qualify. There are, however, some things that remain the same as a regular mortgage – the fees and closing costs. When you no longer need the house, that is, either you move to a nursing home, or, at death, the house will be sold and you will pay back the principal and the interest. Any mortgages that exist on the house when you get a reverse mortgage will automatically be paid off at that time.
Many people find that reverse mortgages can be rather confusing. This demands that you take a little extra time to learn about them well enough to know what is involved. Different lenders have different features, and you need to know that there are scams out there that deal with reverse mortgages. Compare each of them carefully. Most agencies, especially the Federal ones, will require counseling to help you understand all the options of a reverse mortgage before you apply.
Reverse mortgages are designed to provide those who are retired, or near retirement with a way to keep on getting an income, or money to meet other expenses as they grow older. While it may not be the way for everyone, it certainly is a valid option for many. Here are some things you need to know about reverse mortgages to help decide if one should be in your near future.
What Is It For?
The purpose of a reverse mortgage is to provide some income so that a person 62 and older can be able to continue at a higher level of living than what social security alone could do. This is especially important because of the way that social security and the economy is headed.
Where Does The Money Come From?
The money comes from the equity that is built up in the house over the years. This means that the more equity there is, the greater the payments could be. The amount of money that is still owed on any outstanding mortgages is paid off immediately, and payments are based on the balance.
What Are The Qualifications?
A reverse mortgage is for any homeowner that is aged 62 or older. They must be a homeowner and have some equity in the home. There are absolutely no conditions as far as amount of income needed since you actually make no payments to them. This means anyone can qualify.
What Are The Terms?
As long as the named individual lives in the house, no payment needs to be made. An individual can also put their spouse or another named person onto the mortgage, so that it will not need to be sold to make repayment until the house is no longer needed.
How Is The Money Received?
The way that you receive the money is largely left up to your choice. This is because it is your money and you are free to use it as you wish. You can get a lump sum – if you want, or one of several other options. There is the option of getting monthly payments, or monthly payments over a specified period of time, and a line of credit is possible, too. You can also get a combination of any of these, too.
Is The Estate Lost?
You are able to keep your estate when the home is sold. Profits can be made from the sale
if the home sells for more than was paid out and applied to the estate.
What Charges May Apply?
Just like most mortgages, a reverse mortgage has most of the typical fees that apply to any mortgage. There are closing costs and service fees that will probably bring it up to somewhere between five to seven thousand dollars.
You want to take the necessary time to look over all the details when you start thinking about getting a reverse mortgage on your home. Federal reverse mortgages require professional counseling in order to help you understand all the issues and help you to be sure of your next decision to get one. Compare several offers in order to be sure you are getting the best deal.
So what is a 401k retirement plan? A 401k plan is actually a retirement investments plan that is subsidized by employee or worker payments and often, corresponding involvements from your manager or employer. In addition, the most important draw for these plans is that the payments are taken from your pre-tax wage, and the funds rise tax-free until such time that it is withdrawn or pulled out. Also, the plans are, to some degree, independent and self-sufficient, and the good thing is that they are manageable and convenient.
401k retirement plans are for profit and many kinds of tax-exempt associations and institutes can create these plans for their employees and working staff. Moreover, a 401K plan is a corporation-supported retirement plan for workers. Payments and earnings in a 401K retirement plan are not subject to federal and most state income taxes until the account is withdrawn or pulled out. With a 401K plan, you can save and invest cash from a pre-tax starting point with the employers contributing corresponding funds to add to yours, which makes the plan even more profitable. Most of the time, you will have the option to choose how much you want to contribute, up to the maximum allowed by the government and also the option to choose where your contributions go. You pick your investment vehicle from a directory of funds provided by your retirement plan sponsor or manager.
You can learn when you are entitled and permitted to start contributing in your business’s 401K retirement plan from your assistance manager or director. In addition, once you are qualified to sign up, you will be given an inventory of funds in which you can choose to invest in. You can choose to invest the maximum of $14,000 in 2005 and $15,000 in 2006. There are numerous benefits and gains to 401k plans.
First and foremost, since the contributor is permitted to make a payment to his or her plan with pre-tax cash, it lowers the total tax taken out of every pay check. Subsequently, all company payments and several enlargements in the principal capital are free of tax until withdrawal. Moreover, the compounding result of steady cyclic payments over the phase of 25 or 35 years is remarkable.
In addition, you can decide where to target upcoming payments or place present savings, giving more power over the assets to the contributor. Consequently, if your company matches your contributions, it is like receiving additional funds on top of your earnings. In addition, unlike a regular retirement fund, all payments can be shifted from one business plan to another company plan if you change jobs.
Because the plan is an individual investment for your retirement it’s sheltered by the retirement fund (ERISA) laws and regulations. This gives you the extra security of keeping your funds from the hands of creditors in case of bankruptcy. This does not apply to household relations court cases that deal with divorce orders or child support orders. Indeed, a 401k retirement plan is a good way to start setting yourself up for an enjoyable retirement.
Many seniors want to enjoy their golden years, but are unable to find a way to increase their monthly income or decrease enough of their monthly expenditures in order to retire at an age that will afford them the opportunity to do so. One way to circumvent this problem is through obtaining a reverse mortgage. A reverse mortgage enables homeowners older than sixty two years of age to convert the equity in their homes into tax-free income while they continue to reside at their property. Instead of making monthly payments as with a traditional mortgage, seniors who hold a reverse mortgage are compensated now for the current value of their property.
But how do you decide if a reverse mortgage is right for you? Reverse mortgages are an excellent option for many, but take careful planning and consideration. Since the pay out terms can be structured in a variety of ways, including various pay out term periods, lines of credit or both, it is essential to look at the amount you are able to get for your home in the context of your long term financial needs. Of course, there are no restrictions on the use of funds, meaning you can do anything you like with the proceeds of a reverse mortgage, including renovating your home.
Reverse mortgages won’t affect regular Social Security or Medicare benefits but can affect Medicaid eligibility in some instances. Counseling is a mandatory for those who wish to apply for a reverse mortgage, and a government sponsored lending agency counselor can answer all your questions related to benefit reductions that may apply.
Reverse mortgages can be a very effective method of supplementing your post retirement income, provided you are aware of how proper pay out structuring can positively affect your long term financial picture. The best way to decide whether a reverse mortgage is right for you is simply to view all the information available in order to make an informed decision. For those who have paid the majority or their entire home, their post retirement lifestyle need not be hampered by a lack of cash flow.
All retirees pray that they will have enough cash to see them comfortably through their retirement years. The alternative is obviously more ominous – that they will outlive the comfort of their savings. The truth that most baby boomers have yet to comprehend that even through they will have their parents savings and life insurance plans to live off of we are living longer. Baby boomers will need to carry themselves on their retirement savings many times longer than life span that actuaries used in their precious calculations.
The magic retirement age of 65 was historically chosen not arbitrarily by the German Kaiser in the introduction of the first pension plans as this at the time was the average life span of most male workers. As most baby boomers know and anticipate modern medicine and conveniences have pushed that envelope. You may like it or not before your retirement savings anticipated a 10 year payout period. Now it may be closer to 25 to 30 years.
The thought of having to lower their standards of living and giving up some luxuries to make end meet is for many people, the most worrying aspect of their leisure years. Often, though, the imagined fears are exaggerated. It is often said that 99 % of the things you fear will never come to pass. But why chance it. The basic rule is that by not planning and leaving things to the last moment severely limits your options and causes unnecessary stress and worry.
The good news is that those who planned their finances carefully during their working years will adjust with ease, and their retirement years can be the most enjoyable years of their existence.
Part of the secret knows to manage one’s savings in retirement. Basically today’s workers are looking at two choices. They can work longer so that they can spend more or they can retire sooner and spend less. Another option is to do a bit of both and reduce your workload and in effect semi-retire. By planning ahead you may well have more than one option.
Taking early retirement before your pension begins offers a number of options. You can downsize your house to free up some of your tax free holdings – and live on that pool of cash. This is especially a valuable option now with low interest rates drive large increases in the value of real estate and as well creating a frenzy of buyers willing to snap up your property. If the retiree has profited from company stock options they can use these to bridge them over until the time their company pension plan kicks in. Or they can withdraw from their 401k plans if allowed or withdraw from their savings.
Managing one’s investments does not stop at retirement. Individual income, needs and expenditures will vary, but when liquidating investments a tax efficiency strategy will conserve more of your hard earned investment dollars.
If you are not to be dictated by your tax bracket you should keep foremost in your mind when you are trying to figure out strategies. The goal is not how much you make; it is how you much you keep. The same of course is true when cashing in investment vehicles. You always have to be conscious of the tax consequences.
Much of retirement planning strategy depends on the difference between the two tax brackets at the time if investing during your tax earning years compared to your tax bracket during withdrawal in your retirement years.
Remember those that those that fail to plan ahead will plan to fail.
How a Reverse Mortgage Can Benefit Homeowners 62 or Older
Reverse mortgages give eligible homeowners the ability to access the money they have stored up as equity in their homes. They are designed to build seniors’ personal and financial independence by providing funds without the requirement of a monthly payment for as long as they live in the home.
Homeowners age 62 or older may benefit greatly by discussing the possibilities and options a reverse mortgage can afford them with a lender or counselor. These types of loans offer a way to borrow against the equity in your home to create a stable, continuous and tax free source of usable income or a substantial source of supplemental income, all without having to change your current living conditions.
The best part of this type of loan is that you aren’t required to repay any part of the loan as long as you live in your house and don’t breach any of the terms and conditions of the reverse mortgage. However it is important that you are diligent in researching this unique loan product as it may not be right for every situation. This is why we encourage any potential borrower interested in a reverse mortgage to investigate their options first with a HUD certified counselor or lender.
Other great sources of information include family and friends who have experience dealing with reverse mortgages before, nonprofit organizations offering help to seniors’, the AARP, American Society on Aging, and authority sites on the internet that provide helpful articles and resources concerning the reverse mortgage industry.
While simple to understand in theory, it is important to know how reverse mortgages work. The reverse mortgage loan product got its name due to the fact that instead of making mortgage payments, the lender actually pays the borrower creating a kind of inverse relationship compared to the traditional mortgage product. The source of funds for the money received is the equity stored in your home. The unique feature of this loan is that unlike conventional mortgages where the loan balance becomes smaller each moth you make a payment, the loan balance of a reverse mortgage grows larger over time.
The principal on the loan increases with each payment received, this includes interest and other charges accrued each month on the total funds advanced to you. You retain ownership of your home in all reverse mortgages, and many do not require repayment for as long as you occupy your home, pay your property taxes and hazard insurance charges, and continue to maintain the property.
When you leave your home permanently your loan balance becomes due. It is also important to note that your legal obligation to repay the loan cannot be more than the market value of your house at the time you leave the property. This means that your lender can never require repayment of the loan from your heirs or from any asset other than the property itself.
Today the 2 major reverse mortgage loan types provided by the Fannie Mae (Federal National Mortgage Association) are the HECM and Home Keeper. These loans assure the borrower that he or she will never owe more than the loan balance or the value of the property, whichever is less, and no assets other than the home must be used to repay the debt.
Also unlike conventional mortgages these loan types have neither a fixed maturity date nor a fixed mortgage amount. Many borrowers familiar with the home equity loan are often times skeptical about reverse mortgages and simply see it as a different type of home equity loan and sometimes even think it’s a scam.
For this reason it is important to understand the difference between home equity loans and reverse mortgages. With a HELOC (Home Equity Line of Credit) you must make regular monthly payments to the lender in order to repay the loan, in fact, your repayments begin as soon as your loan is made. If you fail to make the monthly payments on a traditional home equity loan, a mortgage lender can foreclose on your home, putting you in a position where you either have to sell your home to repay the loan or lose it to the lender.
Another notable difference is the fact that some home equity loans also require you to re-qualify for the loan each year, and if you fail to re-qualify, the lender may require you to pay the loan in full immediately. In addition, in order to qualify for a traditional home equity loan, you must have sufficient funds and debt-to-income ratio in order to be approved on the loan.
Reverse mortgages however, such as the HECM and the Home Keeper Mortgage, do not require monthly repayments, saving you from the need to qualify through the traditional and often times difficult loan process. In fact, repayment of these loans is not required as long as your property remains your primary residence and you stay current in paying your property taxes and hazard insurance charges. Another stipulation that makes the reverse mortgage so special is the fact that your income does not become a factor in qualifying for these loans, nor are you required to re-qualify each year.
Statistics show that more than one million people in the United States start a new business each year. That number would be much higher if all the would-be entrepreneurs had the financing required to get a business up and running. In order to accomplish their dream of business ownership, entrepreneurs are finding new and innovative ways to finance their new ventures.
According to Leonard Fischer, President/CEO of BeneTrends, one of these new financing options is the use of a person’s existing retirement funds-a pension, profit sharing, 401(k), IRA-which allows that person to start the business he or she has always dreamed of without tax penalties, consequences or mountains of debt.
Under the Employment Retirement Income Security Act (ERISA), retirement funds can be transferred into usable capital for business investments or operations. If a person has more than $40,000 in a retirement account and is not currently employed by the company that holds those funds, he or she qualifies for this Small Business Administration (SBA)-recognized financing approach to start a business.
Retirement funds can be used for any business purpose, including:
• Purchasing a franchise or existing business
• Start-up expenses, such as purchasing property, equipment, etc.
• Working capital, including paying salaries, franchise fees, etc.
• Business expansion, such as funding additional franchises, locations, etc.
• Equity toward SBA or other loans.
The thought of dipping into one’s retirement can cause some apprehension. Through this investment strategy an individual actually has more control over his/her retirement-instead of gaining minimal growth dependent on the stock market, those savings are actually being invested in one’s own business. This approach often allows an individual to set aside more money for retirement than ever before.
“Today’s entrepreneur faces an environment of tremendous competition, complexity and opportunity, so starting a business the right way is more important than ever,” says Dr. Germain Boer, Director of Vanderbilt University’s Center for Entrepreneurship. “This financing method is a good option for an individual who has accumulated funds in his/her retirement accounts.”
The entire process generally takes two to four weeks to be completed, and can be done by phone, email, fax, FedEx and regular mail.
Working with an experienced employee benefits plan expert, starting a business is as simple as these four steps:
Step 1: Establish a C-corporation.
Step 2: The new corporation creates a retirement plan.
Step 3: Funds are rolled over into the corporation’s new retirement plan.
Step 4: The new retirement plan purchases the stock of the corporation.
“So many people have watched their dream of owning their own business go out the window due to lack of funding options. We help people achieve that dream every day using money they already have,” says Fischer.
If you’re ready to explore this innovative financing option, be sure to consult an expert to guide you through the specialized process.
A reverse mortgage can be an attractive option for many home-owning seniors that are having a hard time making ends meet. With a reverse mortgage, a senior homeowner will receive money for their home equity from a lender without having to make repayments for as long as they live in their home. So with the right reverse mortgage a senior homeowner can maintain their standard of living while retaining ownership of their home.
This of course, is the picture that all the reverse mortgage companies try to paint for prospective borrowers. Nonetheless, there are many differences that have to be understood between reverse mortgage’s and conventional loans. If these differences are not understood, they can cause financial problems for reverse mortgage borrowers.
Disadvantages of Reverse Mortgages.
The first disadvantage is the relative cost of a reverse mortgage. Reverse mortgages tend to be very expensive when compared with a conventional mortgage. This is due to the rising-debt nature of reverse mortgages. For example, a typical reverse mortgage may provide a homeowner with a $300 per month payment with a yearly interest rate of 12 percent compounded monthly. Over the course of ten years, the homeowner will receive $36,000 in payments, but will owe almost $70,000-almost twice as much as received.
The second disadvantage is the complex and confusing contracts of reverse mortgages, that can have a tremendous impact on the overall cost of a reverse mortgage to the borrower. The complexity of the contracts often allow lenders and third parties involved in arranging reverse mortgages to not fully disclose the loan’s terms or fees. These numerous other front-end and/or back-end fees can also quickly drive up the cost of a reverse mortgage. These fees can include origination fees, points, mortgage insurance premiums, closing costs, servicing fees, shared equity and shared appreciation fees.
Out of all these fees, the shared equity and shared appreciation fees should be avoided, as they can quickly raise the cost of the mortgage without providing any benefit to the borrowers. As an example, a shared appreciation fee can give a lender an automatic 50% interest in the difference between the current value of the home when the loan is signed and the appreciated value of the home when the loan is terminated. What makes the fees unfair is the fees have no relation to the amount that is borrowed.
The third disadvantage is the reverse mortgage payments can affect eligibility for old age pensions, Medicaid, or supplemental Social Security income. Senior’s may not even realize this problem until after they already have their reverse mortgage, and only then do they find out that this can have the opposite affect on a seniors finances then what they were trying to accomplish in the first place by taking out the reverse mortgage.
Another disadvantage is the fact that reverse mortgages reduce the value of a senior’s assets and estate. This will affect the amount of inheritance received by the borrower’s heirs.
How to avoid these hazards
The best way for a senior to avoid these hazards is to be careful when choosing a lender, by obtaining bids from three separate lenders. They should take these contracts to a reverse mortgage counselor for evaluation. This will allow them to accurately evaluate the three contracts before deciding on best one for their situations.
To qualify for a reverse mortgage, you must be at least 62 and have paid off all or most of your home mortgage. Income is generally not a factor, and no medical tests or medical histories are required. If you seek an HECM, you also must undergo free mortgage counseling from an independent government-approved “housing agency. ” Financial institutions offering proprietary reverse mortgages may require similar counseling or homeowner education.
The amount you can borrow depends on your age, the equity in your home, the value of your home, and the interest rate. If it’s an HECM, federal law limits the maximum amount that can be paid out.You can be paid in a lump sum, in monthly advances, through a line of credit, or a combination of all three.
Common Features Reverse mortgages offer special appeal to older adults because the loan advances, which are not taxable, generally do not affect Social Security or Medicare benefits. Depending on the plan, reverse mortgages generally allow homeowners to retain title to their homes until they permanently move, sell their home, die, or reach the end of a pre-selected loan term. Generally, a move is considered permanent when the homeowner has not lived in the home for 12 consecutive months. So, for example, a person could live in a nursing home or other medical facility for up to 12 months before the reverse mortgage would be due.
However, be aware that:
· Reverse mortgages tend to be more costly than traditional loans because they are rising-debt loans. The interest is added to the principal loan balance each month. So, the total amount of interest owed increases significantly with time as the interest compounds.
· Reverse mortgages use up all or some of the equity in a home. That leaves fewer assets for the homeowner and his or her heirs.
· Lenders generally charge origination fees and closing costs; some charge servicing fees. How much is up to the lender.
· Interest on reverse mortgages is not deductible on income tax returns until the loan is paid off in part or whole.
· Because homeowners retain title to their home, they remain responsible for taxes, insurance, fuel, maintenance, and other housing expenses.
Are you currently get yourself ready for your retirement? After you have determined that the money is up to date, you might be worried about your living plans. Even though many retirees decide to stay exactly where they’re, a lot more go for retirement home communities. If you are looking at doing this, you will need to choose your retirement community wisely.
The initial step in selecting a retirement community involves familiarizing yourself wonderful your choices. Are you aware that you’ve multiple choices? You need to do. Retirement communities come in many different formats.
Independent retirement communities and facilities are typically the most popular choice among retirees who’re in good condition. They are establishments where you stand basically by yourself. It is just like you’re just renting a condo. Frequently occasions, the only real onsite staff people are workers in offices, maintenance workers, and security personnel. Many independent retirement communities are made to offer you easy living. Including making onsite activities, like exercise classes and crafts and arts, available.
Aided living communities and facilities are perfect for retirees whose health is simply beginning to worsen. If you want assistance on occasion, an aided living retirement community may work best with you. The help provided does vary, but you will get assist with taking a walk outdoors, cooking, get yourself ready for your entire day, or taking your medication.
Nursing facilities and facilities are another retirement choice for individuals poor in health. Nursing facilities are basically hospitals having a more laidback atmosphere. They are equipped for those who cannot take care of themselves. If you’re researching nursing facilities, it is possible a relative from the retiree, not her or him. When surviving in an elderly care facility, people are supplied with around-the-clock care. This can be a nice option to coping with family or constant home nurse care.
Ongoing care retirement facilities and communities are an alternative choice you have. This method is one that’s growing in recognition. Ongoing care retirement facilities and communities basically provide residents with independent living, aided living, and around-the-clock care, with respect to the resident’s needs. These facilities are ideal for retirees who’re worried about their own health and finances. Yes, your wellbeing might be good now, but there aren’t any guarantees using the future. Relocating and putting force on your loved ones isn’t advised. That’s the reason ongoing care facilities are frequently suggested.
When creating your retirement community and care decision, it’s important examine your requirements. Do you want help with day-to-day activities? Vitality ? from the debilitating ailment that is only going to still worsen? If that’s the case, you need to examine aided living communities, nursing facilities, or ongoing care facilities.
Next, examine your retirement community wants. Would you like to make new friends and develop new friendships? If that’s the case, make certain the retirement community or facility is well populated. Also, examine onsite activities, because they allow it to be simpler to make new friends.
Finally, examine cost and placement. Always select a retirement community that you could afford. If you’re the relative of the retiree who needs care, make sure to keep quality in your mind. Affordability is essential, although not if quality should be compromised. For location, select a retirement community that’s nearby your loved ones. While you age, you’ll need the romance and support of ones own more.
Once you’ve done your quest on reverse mortgages and acquired a far more complete knowledge of the merchandise, the next thing is to determine if your reverse mortgage suits your circumstances. If you are qualified (a house owner 62 years old or older with equity inside your principal residence), this is usually a quick decision a treadmill that needs a little more consideration. Just like any decision, it’s usually useful to obtain the perspectives and encounters of other people who have faced the same situation and requested the same questions. So for individuals other people who’ve made the decision to obtain a reverse mortgage, what were their reasons? We’ve requested a lot of our readers and visitors and here are the top five reasons people get reverse mortgages:
1.Retire in fashion! – Most owners approaching retirement have spent that last three decades or even more making mortgage repayments based on where you reside, this monthly obligation might be between a couple of $ 100 per month to some couple of 1000 dollars per month and beyond – phew! Each month that certain big check goes out of the door towards the bank and gives you much less money in order to save, invest or invest in the products you’ll need and wish. How great could it be to finally turn the tables on Primary Street Bank, where they now give back a cheque every month? Most retirees have steady monthly costs, for example housing, medical, insurance along with other necessary expenses. For non-working retirees, individuals expenses are managed having a fixed earnings from retirement accounts, pension plans, social security or any other plan. Overturn mortgage enables a retiree to improve their fixed earnings and supply cash to complete things that they may otherwise be unable to manage to do. Typically, the private quality of existence is the main reason people get reverse mortgages.
2.Pay hospital or hospital bills – For a lot of older Americans and retiree’s health problems are an growing reality within their lives. Using the ever rising price of healthcare, this could put tremendous demands on the fixed earnings. Ongoing treatments, prescription medication regimens, or perhaps a large one-time (possibly unforeseen) medical expense are main reasons that individuals get reverse mortgages.
3.Improve or modify a house – While it isn’t really an expansion of the house, the first a part of retirement is a superb time for you to re-purpose your home to support how you is going to be living for the following ten, twenty, three decades as well as on. Maybe it’s time for you to expand your kitchen, widen the hallways or remove some steps, or exchange that old pool outside for any superbly landscaped garden. As we age, a high reason people get reverse mortgages would be to outfit their property for his or her new lifestyle.
4.Dream vacation anybody? – Selection time for you to just escape than whenever your business days are behind your weather turns a little gloomy? Arises from a reverse mortgage have permitted many householders to consider that vacation they’ve always imagined about, but didn’t have time or sources to consider. Bon voyage!
5.Repay high rate of interest or problematic financial obligations – Using the great deal of debt the American consumer builds up more than a lifetime, it ought to be no real surprise that this can be a top reason people get reverse mortgages. Be it high rate of interest charge cards, a relative’s education loan debt, or perhaps a potential property foreclosure that must definitely be worked with, reverse mortgages could be a very effective method of getting a sizable amount of cash to handle other financial obligations.
Fundamental essentials 5 best reasons people get reverse mortgages – once you’ve decided to proceed with a reverse mortgage, send us your main reasons and we’ll add these to their email list!
Being an older American you can look to “reverse” mortgages to find money to repay your present mortgage, finance a significant do it yourself, supplement your retirement earnings, or to cover individuals unpredicted healthcare expenses. These type loans can permit you to convert area of the equity inside your homes into cash – without getting to market your homes, re-locate OR undertake any extra monthly debt.
Inside a “regular” mortgage, you are making monthly obligations towards the loan provider. However, having a “reverse” mortgage, you, the homeowner, get money In the loan provider and, generally, it’s not necessary to repay it as lengthy while you live in your house. Rather, the borrowed funds is paid back whenever you die, you sell your house or you will no longer reside in it as being your principal residence. Reverse mortgages are perfect for homeowners who’ve quality value at home but they are missing in available cash, or earnings! It enables you in which to stay your house but still meet your obligations! Oftentimes, these type mortgages can increase the caliber of your live in the extra earnings you otherwise wouldn’t have experienced!
To qualify, for many reverse mortgages, you’ve got to be a minimum of 62 and live in your house. The proceeds from the reverse mortgage are usually tax-free, but seek advice from an accountant, or CPA, safe. Additionally, the normal reverse mortgage doesn’t have earnings limitations whatsoever .
The 3 Fundamental Kinds of Reverse Mortgages are:
– Single – purpose reverse mortgages that are provided by some condition and native government departments and certain nonprofit organization’s
– Federally – insured reverse mortgages, which are classified as Home Equity Conversion Mortgages (HECMs), and therefore are supported by the U. S. Department of Housing and concrete Development (HUD) .
– Proprietary reverse mortgages, that are private loans which are supported by the businesses which have developed them.
Single purpose reverse mortgages will often have really low costs. However they have limited availability and may simply be employed for just one purpose – that is per the federal government or nonprofit loan provider making the borrowed funds. A good example is always to purchase home repairs, home enhancements or property taxes. To be eligible for a these financing options you need to presently maintain the reduced to moderate earnings brackets – generally.
HECMs, and proprietary reverse mortgages, tend to be pricey than different kind mortgage loans. The upfront costs can, sometimes, be very steep. They can be most costly should you only stay in your house for a while of your time – say under three years. They’re, however, broadly available and also have no earnings or medical needs. Additionally they can be used as any purpose you would like.
You have to consult counselor from your independent, government approved housing counseling agency, before you make an application for an HECM . The counselor is needed to describe the loan’s costs, financial implications, and every one of your options. For example, counselors or supposed to let you know about other government, or nonprofit programs, that you may qualify. The Counselors should also tell you any single-purpose, or proprietary reverse mortgages, that are offered in your geographic area. How much money you are able to borrow having a HECM, or proprietary reverse mortgage, depends upon several factors. They are:
– How old you are
– The kind of reverse mortgage you decide on
– The present appraised value of your house
– The present rates of interest
– Where your house is located.
Theoretically:
– The older you’re and
– The greater valuable your house is and
– The less your debt onto it
– The greater money you are able to really get.
The HECM mortgage provides you with choices in the way the loan proceeds are compensated for you. They are:
1) The choice to pick a set monthly cash loan for any specific period or as lengthy while you live in your house.
2) A choice of a credit line enabling you to use the borrowed funds proceeds anytime in amounts you have selected.
3) The choice to obtain a mixture of monthly obligations Along with a credit line.
4) HECM’s generally provide bigger loan advances, at lower total costs, than proprietary reverse home loans.
However, proprietors of greater – valued homes can most likely get bigger loan advances from the proprietary reverse mortgage. This really is only true for those who have a greater appraised value along with a smaller sized mortgage balance. If that’s the situation, you might likely be eligible for a greater funds having a proprietary reverse mortgage.
NOTE The place, of the neighborhood, is just one area of the resolution of appraised value.
Loan Feature’s
Reverse home loan advances aren’t taxed and, generally, won’t affect your Social Security or Medicare benefits. You’ll still support the title to your house and you don’t have to create any monthly obligations. The borrowed funds should be paid back once the last surviving customer has died, or sells the house, or no more lives in your home like a principal residence. Within the HECM program, a customer can reside in a elderly care or any other hospital for approximately 12 several weeks prior to the loan becomes due and payable. This prevents you against having your home repossessed if you need to have extended health care for many several weeks at any given time!
If you are looking at a federally-insured HECM, realize that ALL HECM lenders are required to follow HUD laws and regulations . Most of the loan costs, such as the rate of interest, would be the same whichever loan provider you decide on. A few of these pricing is:
– The origination fee
– Settlement costs and
– Servicing charges will be different among lenders.
If you reside in a greater – valued home you most likely can borrow more from the proprietary reverse mortgage than from your HECM . Even though it also, generally, is more expensive to gain access to the cash! The easiest method to see key variations from a HECM along with a proprietary loan is by using an in depth side-by-side comparison for the future costs there benefits. Most HECM counselors, and lenders, can certainly offer you this essential information.
Whichever kind of reverse mortgage you’re thinking about, make sure you recognize all the problems that might make the borrowed funds become due and payable. Ask your counselor, or perhaps your loan provider, to describe the entire Annual Loan Cost (TALC) rates. These demonstrate the forecasted annual average price of a reverse mortgage that also includes all of the itemized costs.
The typical existence expectancy has become greater than ever before due to advancements in technology and treatments. Due to this, lifetime annuities are used to finance an individual’s retirement. You should note there are essentially 2 kinds of lifetime annuities namely the fixed type and also the variable type. Many people choose to sell retirement award in early stages simply because they need immediate cash. Before we consider that, it is important to know very well what award investments actually are.
The variable award is a great investment option for those who wish to have retirement funds since the rates of interest of the award rely available on the market rates. For instance, you may choose to place profit stocks, in bond, in other money market options, as well as in property. The variable option also provides tax deferral by using insurance plans. Which is notable the underlying advantage of variable award is around the capital gains in the investment amount since it is not susceptible to tax.
Award payments are certainly a great way to have monthly earnings on your retirement. But you will find cases in which you’ll need cash immediately you can’t wait for a scheduled award payments that frequently arrive. It’s a good factor then that you’re because of the choice to sell your retirement award for lump sum payment amount. Selling your retirement award payments can allow you to get the cash you’ll need right when it’s needed most.
Many people hesitate before deciding to market their retirement award since the security they accustomed to enjoy won’t exist. However, you should understand that selling your retirement award will have lots of benefits especially when you really need cash immediately. What matters is you can convert your award to cash to ensure that once the need arises, you are able to profit from your investment funds.
There’s also many people who purchase award in early stages but choose that awaiting the monthly structured payment isn’t on their behalf. It is because various existence changes can happen and a few individuals discover the regular flow of monthly earnings restricting simply because they cannot combine payments they receive. Additionally, many people choose to change their estate plans and discover their retirement award doesn’t squeeze into their plan.
As you can tell, you will find certainly advantages in selling your retirement award particularly if you find better possibilities for the money elsewhere. For instance, many people uncover there are more lucrative options that they can take their capital on although some people just choose that they would like to diversify their investments.
If this sounds like the situation for you personally, it’s important that you should locate an award buyer who provides you with an acceptable one time payment for the retirement award. Remember that you’re not only making money in your investment at this time, additionally, you will give in the security of getting a stable monthly earnings later on. You have to determine if it might be a great decision for you personally within the lengthy term of sell retirement award.
But whoever you hire, one factor is for certain, you have to make certain that you’re making the best decision whenever you sell retirement award. This is actually the make sure that you will love the fruits of the investments and have no regrets afterwards.
Reverse mortgages are loans upon your home that need no repayment as lengthy while you live there. Instead of regular home loans, reverse mortgages don’t have any earnings needs and therefore are based exclusively around the equity of your house or condo. There aren’t any monthly obligations to create because the mortgage arrives only if the customer is not living in the residence.
Seniors older than 62 are qualified for reverse mortgages in america, as long as they own their very own single family dwelling. No health needs have to be met, neither is there any lack of government benefits such Social Security and Medicare because of acquiring a reverse mortgage. Some benefits, however, for example Supplemental Security Earnings (SSI) and State medicaid programs could be reduced under specific conditions. Tax liability for monies received via a reverse mortgage really are a non-issue, as loan advancements aren’t taxed, although interest around the loan is consequently not tax deductible.
There aren’t any earnings needs to be eligible for a a reverse mortgage. You might be qualified for any reverse mortgage even though you still owe cash on a current mortgage. Overturn home loan should be big enough reverse mortgage to repay the present loan entirely, however.
The advantages of a reverse mortgage are lots of, and can include elevated income at any given time when most are on the fixed earnings, putting the equity of your house to make use of and the opportunity to pick the way you’re compensated. Several installment options exist to assist seniors structure their advances to suit their budgetary concerns and funds flow needs, affording them the opportunity to effectively arrange for their immediate and lengthy term financial future.
Many seniors may go through that borrowing against their house, especially later in existence, is really a dangerous endeavor. Reverse mortgages hold minimum risk for that customer, however, as seniors aren’t borrowing against future earnings. Since checking up on monthly obligations isn’t an problem with a reverse mortgage, in fact lots who choose this kind of mortgage can enjoy what they’ve labored all of their lives for within their publish retirement years.
A reverse mortgage is definitely an attractive choice for many home-owning seniors which are getting difficulty balancing the budget. Having a reverse mortgage, a senior homeowner will get money for his or her home equity from the loan provider without getting to create repayments as lengthy because they reside in their house. So with the proper reverse mortgage a senior homeowner can maintain their quality lifestyle while retaining possession of the home.
This obviously, may be the picture that overturn mortgage companies attempt to paint for prospective borrowers. Nevertheless, there are lots of variations that has to be understood between reverse mortgage’s and traditional loans. If these variations aren’t understood, they are able to cause financial trouble for reverse mortgage borrowers.
Disadvantages of Reverse Mortgages.
The very first disadvantage may be the relative price of a reverse mortgage. Reverse mortgages are usually very costly in comparison with a standard mortgage. It’s because the increasing-debt nature of reverse mortgages. For instance, an average reverse mortgage may give a homeowner having a $300 monthly payment having a yearly rate of interest of 12 % compounded monthly. During the period of 10 years, the homeowner will get $36,000 in payments, and can owe almost $70,000-almost twice around received.
The 2nd disadvantage may be the complex and confusing contracts of reverse mortgages, that may have a tremendous effect on the total cost of the reverse mortgage towards the customer. The complexness from the contracts frequently allow lenders and organizations involved with organizing reverse mortgages not to fully disclose the loan’s terms or charges. These numerous other front-finish and/or back-finish charges may also rapidly increase the price of a reverse mortgage. These charges may include origination charges, points, mortgage insurance costs, settlement costs, servicing charges, shared equity and shared appreciation charges.
In the these charges, the shared equity and shared appreciation charges ought to be prevented, as they possibly can rapidly raise the price of the mortgage without supplying any help to the borrowers. For example, a shared appreciation fee can provide a loan provider a computerized 50% curiosity about the main difference between your current value of the house once the loan is signed and also the appreciated value of the house once the loan is ended. Why is the charges unfair may be the charges don’t have any regards to the quantity that’s lent.
The 3rd disadvantage may be the reverse mortgage repayments can impact eligibility for senior years pensions, State medicaid programs, or supplemental Social Security earnings. Senior’s might not even realize this issue until after they have their reverse mortgage, and just then will they discover this might have the alternative impact on a seniors finances then the things they were attempting to accomplish to begin with by detaching the reverse mortgage.
Another disadvantage is always that reverse mortgages reduce the need for a senior’s assets and estate. This can affect the quantity of inheritance received through the borrower’s heirs.
How to prevent these hazards
The easiest way for any senior to prevent these hazards will be careful when selecting a loan provider, by acquiring bids from three separate lenders. They ought to take these contracts to some reverse mortgage counselor for evaluation. This allows these to precisely assess the three contracts before choosing right one for his or her situations.
