The #1 Fear in the United States is
not the fear of death!
Why are so many of us approaching our retirement years with
such trepidation? It’s pretty simple – the # 1 fear in the United States is the
“fear
of running out of money before we die”! Recently replacing the “fear of death” – now
#2.
Who are they who fear entering their golden years most? The Baby
Boomers who are turning 65 at the rate of 10,000/day and have experienced
unprecedented losses in their retirement savings and decline in overall wealth
due to the recent economic meltdown. In
fact many Boomers do not plan on retiring anytime soon – determined to acquire
enough money to maintain the lifestyle to which they’ve grown accustomed. The
especially fear running out of money before they die! Does this mean we’ll be seeing 90 year old
executives, salespeople or office workers? Or is there another solution?
Although investment portfolios are depleted and replacing
lost savings may require working a few more years there is a bright spot. Recent homeownership statistics report a
growing area of untapped wealth. Home
Equity is now increasing in homes across the nation as real estate regains its
value and we call that “Housing Wealth.”
In fact “housing wealth” is now considered a resource by many financial
planners that can be used to strengthen and preserve the longevity of assets. Potentially making it possible for Baby
Boomers to have the financial resources necessary to retire and enjoy their
golden years!
In previous generations “Housing Wealth” was the family
inheritance and was sacred. It was expected that parents would leave the home,
free of any mortgage, to their children.
People routinely had sufficient assets for their retirement years – not
only their home but also savings, a pension from the job they worked for 40
years; and passing those assets plus the family home to the next generation was
what everybody did.
Attitudes are rapidly changing as the new wave of retirees
cannot afford to follow in those footsteps.
For Baby Boomers who have lost their savings, did not work the same job
for 40 years with a pension, and whose only asset may be their home, funding
retirement requires a new approach. Boomers
are eyeing their housing wealth - the increased home equity - as their ticket
to a decent retirement.
Baby Boomers are increasingly accepting the use of the Home Equity
Conversion Mortgage (HECM) to
tap into a portion of their housing wealth to fund retirement. Recent changes
in the HECM (a federally insured reverse mortgage) have given it legitimacy
with financial advisors as an important weapon in their financial arsenal. When the homeowner has sufficient home equity
the HECM is extremely versatile.
Financial advisors often recommend:
·
Using this source of tax free cash rather than
draw down their portfolio in a bad market. Thereby preserving the longevity of
their assets.
·
To postpone taking social security until a later
date when the payout will be greater; and instead temporarily meet their cash
flow needs with the HECM line of credit.
·
Using the HECM as a line of credit for funding
future health care needs like in-home care, buying long term care insurance and establishing an
emergency fund
The HECM is only for homeowners over the age of 62, who
continue to live in their home as their primary residence. There are no monthly principle and interest
payments required until a repayment event occurs. The loan balance, which includes the
principle, accumulated interest and mortgage insurance, is due when the last
borrower on title permanently moves out, or if the homeowner fails to pay the
property taxes or hazard insurance or other property charges, or does not
maintain the property to FHA standards.
Changes in the HECM occurring October 1, 2013, now preserve
more home equity, reduce loan costs for most borrowers, and settle concerns
about the payment of property taxes, hazard insurance and other property
charges with set asides (similar to an escrow account). On the horizon there will be financial
assessment requirements to make sure the borrower will be able to meet all of
their obligations after receiving the HECM.
The stability and preservation of this valuable financial
tool for generations to come is important to everyone who cares about the older
generation – especially since in the future most of us will be joining them. The Home
Equity Conversion Mortgage (HECM) allows people to live out retirement in
the home of their choice without monthly principle and interest payments, in many cases providing added cash flow and
strengthening the longevity of assets. It can be said that the HECM has helped
to remove the fear of running out of money before one dies!
Michel Kole is a Home Equity Conversion Mortgage Specialist
with Golden Equity Mortgage, the Reverse Mortgage Division of Land Home
Financial Services. With over 25 years
as a lending professional. NMLS/CA-DBO#248631.
Golden Equity Mortgage
7670 Opportunity Road, Suite 165
San Diego, CA 92111
Office:
858-256-7119
Cell: 858-34-5998
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http://bit.ly/ReverseMortgages1
Visit us at www.altagolden.com to learn more about AltaGolden and our services. Have a great day! Laura
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