A longtime believer in asset allocation in investing, you have been “in charge” of guiding the choices in your wife’s 401K (she is still working), as well as in your own SEP-IRA account (you continue to generate modest income as a self-employed metallurgics consultant), as well as in your jointly owned portfolio.

While 2023 turned out to be an excellent year for stocks, you can’t help but worry about the near future and the effects the world unrest along with upcoming election turmoil might have on stocks, at least in the short term.  You’ve begun to make some shifts in the two qualified accounts, but now realize the top-heavy issue in the jointly owned account is  harder to fix without generating significant taxable gains.

Without in any way attempting to offer either investment of tax planning advice, we’d like to suggest you consider your own housing wealth to be an important element in your asset allocation planning. Assuming that your intention is to continue living in the home for the foreseeing future, you can apply for a HECM reverse mortgage, set up as a line of credit (which would significantly increase the “fixed income” portion of your allocation strategy. (The unused portion of your home equity would be credited with growth at the same rate of interest as that being charged on the portion that represents borrowed funds.)

Consider bypassing the tax ramification of an asset allocation rebalance using a reverse mortgage balance..

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).

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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. 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.

After hearing so much about reverse mortgages, the two of you have become interested in exploring that option as a way of establishing a funding source as major updates become urgent on your seventy-year old home. Your big hesitation in moving forward is that, early in 2023, you spent a lot of time and money on finalizing your estate plan, and you do not want to have to redo all your documents.  As part of that plan, upon the second of your deaths, the home is to go to your daughter (the only one of the three children who lives nearby and who does not own a home), with other assets going to the others to “balance out” the inheritance values. If the home were to have a loan against it, you fear that would upset the balance you were trying to achieve.

Establishing a reverse mortgage line of credit would not necessitate a total reworking of your estate plan, and your documents can continue to state that your daughter will inherit ownership of your home. With reverse mortgage loan in place, upon the second of your deaths, your daughter would need to pay off the loan balance in order to keep possession. Were she to decide to sell the home instead, she’d retain any proceeds in excess of the loan balance. On the other hand, in the unlikely event that the home were to be appraised at less than the outstanding mortgage balance, your daughter would not need to pay back any money, because a reverse mortgage is a non-recourse loan.

 One tactic you might consider is to use a portion of your home equity to fund a survivorship (second-to-die) life insurance policy with your daughter named as beneficiary. That would ensure she’d have enough money to pay off the reverse mortgage balance.

Housing wealth is a very viable source of contingency funding for future remodeling needs, and a reverse mortgage need not mean a total “updating” of your carefully thought out estate plan.

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).

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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. 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

As a financial advisor, you’ve found, the trickiest aspect of advising clients who come to you at the brink of retirement, is helping them select an appropriate and “safe” system of withdrawals from their investment accounts to support their lifestyle needs. As Morningstar observed in its White Paper on “The State of Retirement Income 2023, many couples seek a “paycheck equivalent” in retirement, aiming to withdraw the same amount every month, (adjusted for inflation) for the duration of their lives.

Often, as an advisor, you spend time explaining to clients that for most retirees, spending patterns hardly turn out to be that regular. In reality, retirees tend to spend most during the beginning years of retirement, with spending leveling off in the middle to later years of retirement, when health concerns often escalate. The right level of withdrawal is going to need ongoing review and discussion. Obviously, a lot depends on variations in the investment markets, and you and your clients need to allow for the “sequence of returns” that has the power to sink or support even the most careful of withdrawal plans.

For clients who not only own their home, but who contemplate continuing to reside in that home for the rest of their lives, part of  your income planning discussion with them might include reverse mortgage funding. “Freeing up” the equity in their home allows their housing wealth to serve as a retirement income “buffer” injects greater elasticity into the income withdrawal calculation.

Set up as a line of credit (with the unused portion being credited with growth at the same rate as the interest being charged on the borrowed funds, the reverse mortgage can add a “client comfort factor that gets clients closer to an “aah-just-right” feeling about their brink-of-retirement income planning. 

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).

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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. 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

Over the years, when the grandkids were younger, the two of you always made efforts to help fund their college costs by both making direct cash gifts at holiday time and also by contributing to both their educational savings accounts. Now widowed yourself and with both grandchildren now started on their respective professional careers, you considered the college funding challenge a thing of the past. To your dismay, during the Christmas gathering, you discovered that lingering student debt continues to be a big challenge for both the grandkids and their parents. (Apparently, a recent Supreme Court ruling cancelled some debt relief on which they’d been counting.)

Years ago, as part of your estate planning, you’d included student loan payoffs as part of your legacy to your son and daughter (to the extent they had signed for student loans for their children), but thought that issue was largely a thing of the past. Now in the process of updating your estate planning documents, you’re thinking in terms of more immediate assistance. At the same time, you need to consider what impact significant monetary gifts might have on your own retirement finances.  (With a fully paid for home in excellent condition, you are still concerned with possible future health costs.)

Consider using the equity in your home to help the two graduates and their parents repay the student loan debt. With a Home Equity Conversion Mortgage, or HECM, you will be able to tap your housing wealth in the form of a line of credit, using the funds to bring meaningful relief to your children and grandchildren while the student loan debt relief issues are being debated by the U.S. Department of Education. Most important, you will not be impacting your own retirement finances.

A reverse mortgage can be a way to offer relief to your adult children, allowing the grandchildren to focus on building their careers and you to enjoy your own retirement.

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).

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“I’m not sure just where I’ll be going, but I can’t put up with all the repairs and upkeep this place needs. There are always things that need to be fixed and they are taking up more and more of my time, so I’ve decided to move to a retirement facility this spring. I’ve enjoyed hosting the monthly pitch-in lunches and book discussions, but I’ll be spending the next couple of months sorting things out and getting rid of a lot of stuff, and so will no longer be able to continue hosting our book club.”  This recent email has caused you to consider your own living arrangements.

A few years younger than this friend (a widower now in his eighties), you’ve taken for granted being able to continue living in your own home for many years to come, hopefully for your entire lifetime. You’ve kept the house in good shape, with a fairly new roof and a new heating/hot water system. A widower yourself, you are reassured by the fact that both your adult children, while they live out of state, are in constant touch with you. With a solid Long-Term Care insurance plan in place, you believe remaining in your own place is feasible.

On the other hand, you can’t help viewing that email message from the book club host as something of a warning call. You feel reasonably confident that your retirement assets will be sufficient to cover your regular lifestyle needs, but if major things were to go wrong with your home (or if home health care expenses were to exceed your insurance coverage). In short, you’ve been forced to confront some scary “what ifs”.

You might considerusing the equity built up in your home as the answer to those “what-if” scenarios. With a government-insured reverse mortgage, you’ll have a source of funds to use for “aging in place” home adaptations and to fund possible home health care needs. You will not be obligated to make monthly mortgage payments, with the home itself serving as collateral for the loan, so your current budget will remain unaffected. In fact, whatever portion of your home equity is not being used will continue to be credited with growth at the same rate as the interest being charged on the outstanding loan balance.

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Facing future uncertainties can feel a lot more comfortable with a reverse mortgage plan in place.

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).

When you retired a little over a year ago at age 66, your intention was to defer claiming Social Security benefits until age 70, so as to collect the maximum benefit possible. Now, after several unexpected home repairs and a big dental expense, not to mention the unexpectedly high costs of food and gasoline, it has become painfully obvious that your will be in danger of over-drawing your investment and IRA Rollover accounts to keep up with it all unless you do file for Social Security..On the positive side, your home was fully paid for prior to your retiring, and neither of your children wants or needs help (nor, on the other hand, would you ever want to request help from them).

Your decision to defer Social Security benefits makes a lot of sense, because for each year you wait past your “full retirement age”, 8% is added to your benefit. As you have surely realized, you cannot rely on having an increase of that amount or greater on your investment accounts, particularly since you are already drawing on those accounts.

You might consider turning to what is probably your largest asset, the equity built up in your home, as a source of income between now and your age 70. With a government-insured reverse mortgage, you will be able to make monthly or quarterly withdrawals, with no obligation to make monthly mortgage payments; the home itself will serve as collateral for the loan. Whatever portion of your home equity is not being used will continue to be credited with growth at the same rate as the interest being charged on the outstanding loan balance.

Once you’ve reached the magic age of 70 and are able to claim maximum Social Security benefits, you can pause those regular mortgage withdrawals.

Putting your housing wealth “to work”, while avoiding a drain on your retirement assets can be a winning way to supply an income stream while you wait.

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).

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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.

Four years ago, in establishing your reverse mortgage loan, you had been recently divorced. Your ex was moving to another state and you kept sole ownership of the home. Establishing a reverse mortgage at the time enabled you to revamp the home; you have now paid back almost all of the outstanding balance. While your plan continues to be aging in place in this very home, your situation has changed dramatically in that you have a new life companion sharing the space. You’re wondering if it is feasible to refinance the reverse mortgage, including her as a co-borrower. You are now 68. At age 66, she has resources of her own and has been, from the start, an equal contributor to all your living expenses. There are no plans to marry, and you have updated each of your estate plans so as to provide separately for your respective heirs.

Co-borrowers on a reverse mortgage don’t need to be married, so you can certainly apply together for a new mortgage. You must have enough remaining equity in the home to qualify, but, given the general rise in home values, that might well be the case. In addition, the HECM limit on loans has risen, which will work in your favor. The new loan amount will be based on your respective ages (the fact that you’re four years older than you were the first time will work in your favor), the new appraised value, and on current interest rates.

As was true the first time, you (now both of you) will need to show you have the financial resources to pay property taxes, homeowners’ insurance, and maintenance costs. Together, you’ll participate in the same kind of consumer information session by a HUD-approved counselor as you did the first time.

As you already know, you will be under no obligation to make monthly mortgage payments, with the home itself serving as loan collateral. Whatever portion of your home equity is not being used will continue to grow, providing a reserve for possible future increases in the insurance costs.

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).

The postal service has delivered some very bad news to you in the form of a major increase in the quarterly premium for both of your Long-Term Care Insurance policies. None of the choices offered is savory: In order to maintain your current coverage (which includes an annual increase in benefit), your combined quarterly premium will be increased by a four figure total each quarter. Needless to say, the company offers no guarantee that there won’t be further premium increases in coming years.There are two other options offered: dropping the inflation rider, or reducing the coverage from lifetime to a limited number of years.

While you are mortgage and consumer debt-free, paying the new quarterly amount needed to keep your current level of coverage intact is going to mean changing the Systematic Withdrawal Income Plan you have set up on your investment accounts, increasing the very real possibility of running out of money before you run out of years. Both in your late sixties, you have so far been largely free of major health problems, but are afraid of losing the protection against deteriorating health in your later years.

Consider tapping your housing wealth,(the equity built up in your home) to finance the Long Term Care insurance premiums. With a government-guaranteed HECM reverse mortgage, you can withdraw funds as needed to pay the premiums needed to continue your present levels of coverage (including the inflation riders on the policies). You will be under no obligation to make monthly mortgage payments; the home itself will serve as collateral for the loan begin to. Whatever portion of your home equity is not being used will continue to grow, providing a reserve for possible future increases in the insurance costs. Meanwhile, your investment income plan can continue undisturbed.

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).

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This is a hypothetical situation. 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.

While your late wife’s protracted illness forced you to put plans of launching a specialty LLC consulting/coaching practice on hold, you are now ready, at age 69, to get back to the project.. In reanalyzing your finances, you realize that, since you plan to work out of your home office, there will be few “capital expenses”, and that your retirement income is sufficient to cover your normal costs of living.

In order to promote the venture, however, you plan to engage the services of both a public relations firm and a company that creates podcasts, along with those of a business law firm to  help with contracts. Ultimately, you are confident you can more than recover these costs. Meanwhile, however, reluctant to draw down your investment account or trigger additional tax liabilities by taking withdrawals out of your SEP-IRA and/or your IRA  rollover account, you are planning to apply for a mortgage on your home to the tune of $60,000. That amount should be sufficient to cover the promotional and legal costs for the new business until you’ve established a regular clientele.

Rather than tapping the equity built up in your home through a “forward” mortgage, you might consider a HECM reverse mortgage set up as a line of credit. With no monthly mortgage payments required and no fixed due date for repayment (other than when you leave the home or sell it), there will be much more flexibility, with you drawing only the amounts actually needed.  If you are able to generate business more quickly than anticipated, you can stop taking the withdrawals and even begin to replenish the equity. Whatever portion of your equity is not being used will continue to grow, providing a reserve for possible future personal or business needs..

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).

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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.