05/17/2007

Financial Security in Retirement

During our careers, most of us purchase life insurance to provide a nest egg to our loved ones when we die that can be used to satisfy debts, replace monthly income, or a mix of both of these options. Bottom line, this is prudent planning. But what if we live longer in retirement years than our retirement next egg will last? Let’s discuss some ideas that will help in planning for financial security during retirement.

First, we need to estimate how long we will live during retirement. How healthy are you now? What are you doing to maintain your health on a long-term basis? Does your family history indicate that you will likely live past 65? 75? 85? Even longer? Combine this information with life expectancy tables or calculate your life expectancy on the internet.

Next, we need to evaluate our income level between now and our anticipated retirement age. What percentage of our income level will we need to live comfortably during retirement?  There are online retirement calculators to help with this.

Next, we need to assess our current savings along with current amounts we continue to invest on a regular basis. When these two factors are added together with interest earnings over the years, we begin to see our retirement nest egg take shape. Don’t forget to deduct for taxes and inflation!

Finally, we apply the annual retirement income we estimated to the number of years we expect to live during retirement to see if we will have enough money to maintain the lifestyle we desire. There are several options if we come up short on money.

We can continue to work full-time past the normal retirement age. We can retire and pick up a part-time job to subsidize retirement income. A relatively new option we now have is longevity insurance. While life insurance provides benefits to loved ones when we die, longevity insurance provides benefits to us when we live! Yes, we can buy an insurance policy that will pay us monthly payments past our estimated life expectancy. Be sure to get all of the facts on these policies and understand that the benefits are greater with fewer exceptions written in the policy. In other words, a longevity policy with death benefits and access to our money prior to our expected year of death yields greatly reduced monthly benefits.

Always consult a trusted financial advisor when planning for retirement.

05/24/2007

What Are Reverse Mortgages?

For most of us, the family home is the largest purchase we ever make. Changing styles and fluctuating home values often present opportunities to upgrade to that ultimate dream home. No matter how you slice it, we pay a lot of money for a long period of time on home mortgage loans. It’s a huge investment that we work hard to have paid off by retirement time. When retirement finally hits, we’re lucky to have an asset in our home that appreciates in value with no more monthly payments to make. Sounds great, right?

What about the equity in your home? You have paid hard-earned money for many years to support the value of your home. What if, during retirement, you need cash for living expenses? A reverse mortgage presents an opportunity to tap the equity in your home without having to pay monthly payments. Let’s discuss how reverse mortgages work.

A reverse mortgage basically converts the equity in your home to tax free income. You must be 62 years old to obtain a reverse mortgage. You sign the paperwork and continue to live in your home while receiving either a lump sum of money, fixed monthly payments, or a line of credit to use as you wish. The amount you can borrow depends on the value of your home, your age, and the interest rate that will be charged. The older you are, the more you can borrow because the mortgage company will figure the interest and fees due back to them for a shorter period of time until your death – based on calculations of your life expectancy. If you are younger, the mortgage company has to include more years of interest and fees to be paid back along with your mortgage loan amount, so the amount of your loan would be less. The amount of your loan, plus interest and fees are paid off when your house is sold. You or your heirs will get the difference in the sales price of your home and the reverse mortgage payoff.

If contemplating this product, get an attorney or trusted mortgage professional to review the contract terms with you. Beware of non-interest fees that can run between 10-20% of your loan amount. And measure this product against other financial options before you sign the dotted line.

Back to President's Articles

05/17/2007

Financial Security in Retirement

During our careers, most of us purchase life insurance to provide a nest egg to our loved ones when we die that can be used to satisfy debts, replace monthly income, or a mix of both of these options. Bottom line, this is prudent planning. But what if we live longer in retirement years than our retirement next egg will last? Let’s discuss some ideas that will help in planning for financial security during retirement.

First, we need to estimate how long we will live during retirement. How healthy are you now? What are you doing to maintain your health on a long-term basis? Does your family history indicate that you will likely live past 65? 75? 85? Even longer? Combine this information with life expectancy tables or calculate your life expectancy on the internet.

Next, we need to evaluate our income level between now and our anticipated retirement age. What percentage of our income level will we need to live comfortably during retirement?  There are online retirement calculators to help with this.

Next, we need to assess our current savings along with current amounts we continue to invest on a regular basis. When these two factors are added together with interest earnings over the years, we begin to see our retirement nest egg take shape. Don’t forget to deduct for taxes and inflation!

Finally, we apply the annual retirement income we estimated to the number of years we expect to live during retirement to see if we will have enough money to maintain the lifestyle we desire. There are several options if we come up short on money.

We can continue to work full-time past the normal retirement age. We can retire and pick up a part-time job to subsidize retirement income. A relatively new option we now have is longevity insurance. While life insurance provides benefits to loved ones when we die, longevity insurance provides benefits to us when we live! Yes, we can buy an insurance policy that will pay us monthly payments past our estimated life expectancy. Be sure to get all of the facts on these policies and understand that the benefits are greater with fewer exceptions written in the policy. In other words, a longevity policy with death benefits and access to our money prior to our expected year of death yields greatly reduced monthly benefits.

Always consult a trusted financial advisor when planning for retirement.

05/24/2007

What Are Reverse Mortgages?

For most of us, the family home is the largest purchase we ever make. Changing styles and fluctuating home values often present opportunities to upgrade to that ultimate dream home. No matter how you slice it, we pay a lot of money for a long period of time on home mortgage loans. It’s a huge investment that we work hard to have paid off by retirement time. When retirement finally hits, we’re lucky to have an asset in our home that appreciates in value with no more monthly payments to make. Sounds great, right?

What about the equity in your home? You have paid hard-earned money for many years to support the value of your home. What if, during retirement, you need cash for living expenses? A reverse mortgage presents an opportunity to tap the equity in your home without having to pay monthly payments. Let’s discuss how reverse mortgages work.

A reverse mortgage basically converts the equity in your home to tax free income. You must be 62 years old to obtain a reverse mortgage. You sign the paperwork and continue to live in your home while receiving either a lump sum of money, fixed monthly payments, or a line of credit to use as you wish. The amount you can borrow depends on the value of your home, your age, and the interest rate that will be charged. The older you are, the more you can borrow because the mortgage company will figure the interest and fees due back to them for a shorter period of time until your death – based on calculations of your life expectancy. If you are younger, the mortgage company has to include more years of interest and fees to be paid back along with your mortgage loan amount, so the amount of your loan would be less. The amount of your loan, plus interest and fees are paid off when your house is sold. You or your heirs will get the difference in the sales price of your home and the reverse mortgage payoff.

If contemplating this product, get an attorney or trusted mortgage professional to review the contract terms with you. Beware of non-interest fees that can run between 10-20% of your loan amount. And measure this product against other financial options before you sign the dotted line.

Back to President's Articles