Now 57, you’re planning to take early retirement from your current full-time position in order to be more available to help your parents, who need assistance getting to doctors’ appointments and with managing their affairs.  You may or may not find yourself able to take on some temporary consulting work in your field for the remainder of this year, but will certainly explore options going forward.

Meanwhile, your Human Resources people have explained to you that the company allows you to take early 401(k) withdrawals under the Rule of 55 (allowing you to avoid early withdrawal tax penalties). You have some personal savings, and your own home is fully paid for and in good shape maintenance-wise. Your wife is in agreement with your plan to retire. Her own parents are deceased, and with her work requiring frequent travel, she is not in a position to help with your parents. Now 59, she plans to continue to work full time for the foreseeable future.

You have not mentioned whether your parents reside in a home, an apartment, or in a facility.

If they do own their primary residence and assuming their health would allow them to occupy it for the remainder of their lives, you might discuss them taking out a reverse mortgage loan.

In any event, once you reach age 62, a reverse mortgage on your own property will allow you to replace taxable withdrawals from 401(k) with tax-free withdrawals from a reverse mortgage line of credit.

Sounds as if the next few years will be a time of adjustment, carefully weighing alternatives in terms of both your own earning opportunities and of your parents’ developing needs.  

Think Rule of 55 now, reverse mortgage later.

https://mutualreverse.com/david-garrison

Readers, if you’d like to see what you might qualify for with a reverse mortgage in Indiana, or to download your Reverse Mortgage Guide Click Here(and scroll down).

David Garrison, NMLS ID 1595194. Mutual of Omaha Mortgage, Inc. dba Mutual of Omaha Reverse Mortgage, NMLS ID 1025894. 3131 Camino Del Rio N 1100, San Diego, CA 92108. Indiana-DFI Mortgage Lending License 43321. Michigan 1st Mortgage Broker/Lender/Servicer Registrant FR0022702. These materials are not from HUD or FHA and the document was not approved by HUD, FHA or any Government Agency. Subject to credit approval. For licensing information, go to: www.nmlsconsumeraccess.org | Equal Housing Lender

“For some clients, a second home might sound like an impossible dream. But advisors warn that the maintenance, tax bills, and insurance headaches (if you can even get insurance) can easily turn the reverie into a nightmare,” Ben Mattlin cautions in Financial Advisor Magazine.

On the positive side, CEO Brett Bernstein of XML Financial points out (in the same article), there is substantial value to be gained by owning a second home – not only the sheer enjoyment of using the property, but potential income from renting it out, possible appreciation in value, and a legacy for heirs.

For homeowners over the age of 62, using the housing wealth they’ve already acquired and by taking out of reverse mortgage loan, can take some of the “sting” out of the purchase of a second home, using the equity built up in their “home base” property to help finance the acquisition of a second property. While Federal mandates require that the mortgaged property continue to be the owner’s primary residence, so long as at least six months out of the year are spent “in place”, there is plenty of opportunity to enjoy time spent in the second home.

 Of course, no one needs a second home, as one advisor points out in that Financial Advisor article, concluding that, “it’s important to think this step through logically”, given that “the abrupt rise in property values, insurance costs, and interest rates have made real estate ownership a lot more expensive. 

“Thought through strategically”, as Wade Pfau, retirement researcher and professor at The American College of Financial Services comments, “The reverse mortgage can help people maximize their invested assets and end up leaving heirs with more than they otherwise might.” 

Investment New Article

https://mutualreverse.com/david-garrison

Readers, if you’d like to see what you might qualify for with a reverse mortgage in Indiana, or to download your Reverse Mortgage Guide Click Here(and scroll down).

David Garrison, NMLS ID 1595194. Mutual of Omaha Mortgage, Inc. dba Mutual of Omaha Reverse Mortgage, NMLS ID 1025894. 3131 Camino Del Rio N 1100, San Diego, CA 92108. Indiana-DFI Mortgage Lending License 43321. Michigan 1st Mortgage Broker/Lender/Servicer Registrant FR0022702. These materials are not from HUD or FHA and the document was not approved by HUD, FHA or any Government Agency. Subject to credit approval. For licensing information, go to: www.nmlsconsumeraccess.org | Equal Housing Lender

You’ve long understood the wealth-building power of real estate, but, until recently, the demands of family and career have made becoming an investor a non-feasible proposition. Now retired and “born again single”, you are considering buying and renting out (initially one, eventually a couple of other) modest residential properties in or near Indianapolis. Your one son is very handy, and you plan to hire him to work on renovations, which would help him out financially while he completes his “re-careering” education.

As an active 71 year old, your own plan is to continue living in your well-maintained home, which is now fully paid for and which you updated after the divorce. Your initial intention was to partially finance the first new purchase of rental property update through a bank loan. You have a nice portfolio, but enough of the investments are inside tax-deferred retirement accounts, so you’d need to take a home equity loan to start with.

Tapping your home equity rather than your portfolio makes sense, but it might be better to do that through a reverse mortgage on your primary residence, drawing down from an equity line of credit to finance your first investment in rental real estate. Your portfolio can remain intact, and there will be no monthly mortgage payments required.  In fact, the unused portion of your equity will continue to be credited with growth (at the same rate as the interest being charged on the loan balance.)

Your home “wealth” can allow you to build wealth by owning and renting out investment property.

https://mutualreverse.com/david-garrison

Readers, if you’d like to see what you might qualify for with a reverse mortgage in Indiana, or to download your Reverse Mortgage Guide Click Here(and scroll down).

David Garrison, NMLS ID 1595194. Mutual of Omaha Mortgage, Inc. dba Mutual of Omaha Reverse Mortgage, NMLS ID 1025894. 3131 Camino Del Rio N 1100, San Diego, CA 92108. Indiana-DFI Mortgage Lending License 43321. Michigan 1st Mortgage Broker/Lender/Servicer Registrant FR0022702. These materials are not from HUD or FHA and the document was not approved by HUD, FHA or any Government Agency. Subject to credit approval. For licensing information, go to: www.nmlsconsumeraccess.org | Equal Housing Lender

You and your sister have been told by your 72-year-old mother that she has met the man with whom she intends to “finish out her days”. While you’re very happy for her, you want to be sure she protects her own finances and property. Each of you has college-bound teen children and obligations of your own that must be prioritized, so you are in no position to offer financial support.

Your father passed away more than twenty years ago, and Mom, a very active senior, has continued to occupy the large family home, long mortgage-free, in which you grew up. There are no plans for marriage, your mother has explained, but “Fred” will be moving in with her and sharing all ongoing household expenses.

Your mother has always wanted to travel, but has been reluctant to go alone. Now that she has found a companion, Mom is talking about taking out a modest mortgage on the house to fund her share of at least one big trip a year. While the two of you agree that realizing her dream while good health and vigor allow, you’re concerned about her incurring debt. Neither of you expects to occupy that home, but you don’t want Mom to put her ownership in jeopardy. 

There is another way for your mother to access her housing wealth. With a government-insured  HECM reverse mortgage, she can make withdrawals from an equity line of credit secured by the property. So long as Mom continues to occupy the home, covering the property taxes and upkeep costs (you mentioned that “Fred” will be sharing those expenses), there will be no required repayments. Any used portion of the equity will continue to grow at the same rate as the interest being charged on the loan.

Your Mom’s housing wealth can help her make that brand new start.

https://mutualreverse.com/david-garrison

Readers, if you’d like to see what you might qualify for with a reverse mortgage in Indiana, or to download your Reverse Mortgage Guide Click Here(and scroll down).

David Garrison, NMLS ID 1595194. Mutual of Omaha Mortgage, Inc. dba Mutual of Omaha Reverse Mortgage, NMLS ID 1025894. 3131 Camino Del Rio N 1100, San Diego, CA 92108. Indiana-DFI Mortgage Lending License 43321. Michigan 1st Mortgage Broker/Lender/Servicer Registrant FR0022702. These materials are not from HUD or FHA and the document was not approved by HUD, FHA or any Government Agency. Subject to credit approval. For licensing information, go to: www.nmlsconsumeraccess.org | Equal Housing Lender

You have always made clear to your children that, once you’d helped them get through four years of college, they would be expected to take full charge of their own financial futures.  Apparently, your one grandchild was raised with the same expectation. In a recent discussion, though (much to your consternation), this grandson revealed that he and his new bride have no aspirations of ever becoming homeowners; they are in despair at ever being able to afford a down payment on a home in a decent neighborhood, much less one near enough to their respective jobs. 

Neither set of this young couple’s parents has offered to help (given that there are younger siblings still in high school and college), and so you would like to “step up to the plate”, convinced that home ownership is the best path towards building wealth. Your own home has appreciated considerably over the years, and you have been careful to keep it in good repair, hoping to spend the rest of your lives there. You do not know whether making a gift of the down payment is allowed, and you are somewhat concerned about depleting your own cash reserves, which you have been careful to set aside for future contingencies.

In this era of high – and rising – rents, your desire to help your grandson and his wife build equity in a home is understandable. Be assured that it is possible for the couple to use your gift of funds to make a down payment on a primary residence. Within the 2024 gift tax limit ($18,000 per donor per recipient), the two of you could certainly make a gift sufficient to fund the down payment on a starter home for the couple. Gifted funds are allowed to be used for a down payment (you might be required by the mortgage lender to sign a gift letter). You will want to be sure that the couple is able to shoulder the ongoing maintenance and mortgage costs, and that they share your vision of wealth building through homeownership.

In terms of your concern about depleting resources, you might consider accessing the equity built up in your own home in the form of a reverse mortgage. With no monthly mortgage payments, you will have a resource to tap for your own possible future needs. Meanwhile, the unused portion of your reverse mortgage line of credit will continue to grow at the same rate as the interest being charged on the borrowed funds.

You will be using your own housing wealth to help get the young’uns started on building theirs.

https://mutualreverse.com/david-garrison

Readers, if you’d like to see what you might qualify for with a reverse mortgage in Indiana, or to download your Reverse Mortgage Guide Click Here(and scroll down).

Borrower must occupy home as primary residence and remain current on property taxes, homeowner’s insurance, the costs of home maintenance, and any HOA fees. Please consult a tax advisor. David Garrison, NMLS ID 1595194. Mutual of Omaha Mortgage, Inc. dba Mutual of Omaha Reverse Mortgage, NMLS ID 1025894. 3131 Camino Del Rio N 1100, San Diego, CA 92108. Indiana-DFI Mortgage Lending License 43321. Michigan 1st Mortgage Broker/Lender/Servicer Registrant FR0022702. These materials are not from HUD or FHA and the document was not approved by HUD, FHA or any Government Agency. Subject to credit approval. For licensing information, go to: www.nmlsconsumeraccess.org | Equal Housing Lender

Now that retirement has become a reality for both of you, you feel blessed to have been able to devote more time to charitable projects, in particular those that relate to medical care for impoverished people around the globe.

As part of the process of preparing to retire, you had your 70-year old home and surrounding property completely remodeled and prepared for you to “age in place”. Your living expenses are covered by pension income along with withdrawals from a jointly held portfolio. 

You have one son and three grandchildren who live in a neighboring state. Your son is professionally secure and he and his wife have not depended on you for financial support.

Years ago, from your own father, you inherited stock of what is now a publicly traded company.  While the dividend income from these shares has enabled part of your charitable giving, you have never sold any of the shares themselves. Originally intending for those shares to be part of your legacy to your son someday, you have lately been considering donating some or all of the shares to charity. At the same time, you want to continue the tradition of leaving wealth to the next generation after you’ve both died.

The secret to satisfying your desire to make an impactful charitable gift, while still preserving an income “safety net” for the two of you while creating a meaningful legacy for your own son may lie within the “walls” of your own home.  

As Part A of this plan, you might discuss with legal counsel the benefits of setting up a charitable lead trust, using part or all of the stock to fund the trust.  Within the trust, assets can be sold without triggering a capital gains tax, with the proceeds put to use in supporting your chosen causes. Whatever assets remain in the trust, though would “lead” back to your heirs. Your attorney can explain all the gift and estate tax benefits of such a trust.

Meanwhile, your own future income stability can be bolstered through a reverse mortgage on your home, set up as a line of credit, allowing you and your spouse to draw on your housing wealth as needed for healthcare needs or luxury spending as you move through retirement.

Let your housing wealth provide the “ballast” for your charitable giving, allowing part of your wealth to “lead” back to your son  while providing a “reserve” source of funding for your own future needs.

https://mutualreverse.com/david-garrison

Readers, if you’d like to see what you might qualify for with a reverse mortgage in Indiana, or to download your Reverse Mortgage Guide Click Here(and scroll down).

David Garrison, NMLS ID 1595194. Mutual of Omaha Mortgage, Inc. dba Mutual of Omaha Reverse Mortgage, NMLS ID 1025894. 3131 Camino Del Rio N 1100, San Diego, CA 92108. Indiana-DFI Mortgage Lending License 43321. Michigan 1st Mortgage Broker/Lender/Servicer Registrant FR0022702. These materials are not from HUD or FHA and the document was not approved by HUD, FHA or any Government Agency. Subject to credit approval. For licensing information, go to: www.nmlsconsumeraccess.org | Equal Housing Lender

At age 63 and recently retired from a long-time, top-level corporate sales training position, you’re looking forward to having greater control over your own time. An idle existence, on the other hand, would never be to your liking, and the plan is to develop an online sales training business offering a series of advanced, top-of-the-line courses in sales and marketing, focusing on four specific industries. While the “students” might be located anywhere in the world, the plan is to hire four locally-based instructor/trainers, who will earn teaching fees in addition to earning “commissions” for recruiting enrollees. 

The relatively modest capital investment needed will go towards converting two of the rooms in your home to “studios” for video recording, involving both some structural redesign and purchase of equipment. You’ve kept the home itself in excellent repair, and it became mortgage-free eight years ago. Meanwhile, as you work to get the new venture “off the ground” your own ongoing living expenses are covered by regular withdrawals from your IRA Rollover and personal investment accounts. You’ve maintained an excellent credit rating, keeping debt very low, and qualifying for a home equity line of credit should not be a problem.  

While leveraging the equity you’ve built up in your home over the years as the capital “boost you need to get your training business off the ground, you might consider doing that with a reverse mortgage, rather than using traditional mortgage financing. With a reverse mortgage line of credit, you’ll need to pay the property taxes and insurance, but there will be no ongoing required payments. What’s more, the “draws” you take out of the equity line of credit will be tax-free so long as you continue to occupy the home. Once the business begins to generate net profits, you may choose to partially or fully repay the loan. In the meanwhile, the untapped portion of your equity will be credited with the growth at same rate as the interest being charged on the outstanding loan balance. 

Putting your equity “to work” can make turning your home office into a sales training “command hub” a real possibility.  

https://mutualreverse.com/david-garrison

Readers, if you’d like to see what you might qualify for with a reverse mortgage in Indiana, or to download your Reverse Mortgage Guide Click Here(and scroll down).

Please consult a tax advisor. 

After retiring at the end of 2022 (at the age of 67), you began collecting Social Security benefits in 2023. Your wife retired at the end of last year, but she is not quite of age to qualify for a full benefit. Your plan was to wait until October of this year to “turn on” her “Social Security spigot”. Preparing your 2023 tax return, though, was a wake-up call, as you realized just how much of your own Social Security is being lost to taxes. 

Your home is fully paid for and has been kept in good shape. Still, continuing past this year to defer your wife’s Social Security benefits would mean taking more money out of both your rollover accounts (which would trigger tax as well!). A couple of years ago, you inherited a piece of property, which could eventually be sold, but that would still not provide enough to allow deferring Social Security for very long. Is a mortgage line of credit on your residence your best option, you wonder?

Using your housing wealth as a source of regular income in order to defer Social Security benefits can be an option. But rather than borrowing money in the form of a home equity line of credit on a traditional “forward” mortgage, consider using a reverse mortgage. That way, withdrawals will not generate taxable income, and there will be no need to repay the loan until you have either moved out of the home (or until you have both died). You, of course, retain the title to your home so long as you continue to maintain it and keep the property taxes and insurance paid.

Later, should you end up selling the inherited property you mentioned, you might wish to use the sale proceeds to “replenish” your reverse mortgage equity, which is always credited with growth at the same rate as the interest being charged on the outstanding loan balance. Meanwhile, as your wife continues to suspend her Social Security benefit payments, she will be earning delayed retirement credits, resulting in a higher ultimate monthly Social Security payout once she reaches age 70.

As Charles Rawl, CFP®, RICP® wrote in Kiplinger, “The intelligent use of a reverse mortgage, particularly a federally insured home equity conversion mortgage (HECM) line of credit, could extend an individual’s or couple’s retirement resources in a way that more traditional strategies cannot.” 

That April 15 reminder you got of the tax on Social Security benefits? It might point your way to a savvy retirement income management plan based on your own home.

https://mutualreverse.com/david-garrison

Readers, if you’d like to see what you might qualify for with a reverse mortgage in Indiana, or to download your Reverse Mortgage Guide Click Here(and scroll down).