No Cold Soup At Your Retirement

No Cold Soup At Your Retirement

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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

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.