Ever since first falling in love with this house some twenty five years ago, the two of you have agreed that this is where you want to spend the rest of your lives. Now, moving into retirement, with the house paid for, you have been taking steps to keep up the value and appearance of the property and grounds.  But as you’ve only now begun to realize, this home, like many of those of your friends and neighbors, was not designed with senior citizens in mind. Though thankfully, you’re hardly ready for a wheelchair ramp or stair lifts, there are some important renovations and repairs that will need to be done pretty soon; other changes that will become important in years to come. Installing solar roofing might involve upfront costs, but would probably save money on monthly expenses.  After doing extensive “homework”, getting a number of cost estimates, you’re now trying to decide how to best finance all these first-stage renovations, looking ahead to find room in your retirement budget for future costs. Options under consideration include a home equity line of credit and cashing in a portion of your investments, (neither of which had you considered in your original retirement planning). Also a possibility for financing later adaptations is selling the Florida timeshare you’ve owned for decades.

It seems one option you’ve apparently failed to consider is using the equity in the house itself as a financing tool for as-needed aging-in-place adaptations. A reverse mortgage line of credit would eliminate the need to make payments on a home equity line of credit, while providing a source for tax free withdrawals you would make on an as-needed basis to pay for the different stages of home adaptations. You’d continue enjoying the timeshare (perhaps selling it later should travel become a burden or should you need an additional funding source). While interest would be charged on the funds you withdraw, the unused portion of your home equity line of credit would continue to grow at a rate guaranteed to match the interest accruing on your silent loan balance. 

While the house may not have been designed with senior needs in mind, a reverse mortgage can help it become “future-proof .”

David Garrison
Home Equity Retirement Specialist
NMLS # 1595194
Serving the State of Indiana
p (317) 644-2595 c (765) 516-0130
e [email protected]

2169 East Rutland Lane, Martinsville, IN 46151
Corporate NMLS #1025894

Of all your investments, the one that, ironically, feels most comfortable right now is the one that’s the least exciting — a fixed annuity you bought seven years ago. That annuity has been faithfully delivering a monthly deposit into your bank account. Given the turmoil in both stocks and bonds, you’re now wondering whether you shouldn’t have put more of your assets to work in that “boring” fashion!

Now retired from your full-time career, you’ve been supplementing your income from Social Security and a modest pension with part time work. Your home is all but paid for, but the recent dramatic escalation in everyday living costs has begun to “squeeze” your budget. A couple of years ago, you converted some growth investments into those designed to generate higher income, but it has been uncomfortable watching the basic portfolio value erode.  Even understanding that converting to fixed annuities means using up principal over time (not to mention reducing the possibility of leaving a legacy to nieces and nephews), you’re wondering if setting up more fixed annuity income shouldn’t be your next move.  You’re facing a dilemma: Having more fixed monthly income, income flow guaranteed for life, is very appealing. Still you know your expenses are inevitably going to increase over time, and any fixed annuity payment will be just that – fixed.

One path to consider might be a reverse mortgage, which would be a way of “annuitizing” your housing wealth. So long as you are still occupying your home, keeping up with homeowner’s insurance, property taxes, and home repairs, you can make use of the equity you’ve built up in your home. There are two approaches to consider, with the first converting your equity into a “tenure” payment, in which regular monthly income payments would continue for the rest of your life regardless of changes in the value of your home, and regardless of the mortgage loan balance!

A second approach would allow more flexibility, in that you would establish a line of credit, taking “draws” as needed. Meanwhile the unused portion of the line of credit would continue to grow at a rate guaranteed to match the interest accruing on your silent loan balance, giving you much greater control over the “annuity” income flow, possibly even allowing you to make lifetime gifts to those nieces and nephews.

While you will want to consult your advisors before committing to annuitizing your housing wealth, such a plan will help stabilize your cash flow without needing to sell out of your portfolio investments just now when they are “down”.

Your home can be a “fixed annuity”, but one with wiggle room!

https://mutualreverse.com/david-garrison/

David Garrison
Home Equity Retirement Specialist
NMLS # 1595194
Serving the State of Indiana
p (317) 644-2595 c (765) 516-0130
e [email protected]

2169 East Rutland Lane, Martinsville, IN 46151
Corporate NMLS #1025894

After four decades as a kindergarten teacher, you retired just as the pandemic was getting underway. With your pension, investments, and Social Security allowing you to cover expenses with some luxuries added, you are now considering ways to raise your standard of living without re-entering full time employment.  One thing you’ve been considering is the purchase of a franchise in a children’s educational game and toy business, which is an enterprise you can run out of your home. 

Other than your home mortgage (now approximately two years from being totally paid off), you have managed to remain debt-free. Coming up with the franchise fee, however, would involve both borrowing on a credit card and cashing in a chunk of your IRA Rollover account (losing a third of the value to tax). At the same time, you realize you’ll need to sacrifice in order to build an income source that can stand you in good stead during your retirement years. There are less expensive franchises, but this one seems right, given your background in the education field. 

Don’t forget what might be your biggest asset, which is the equity you’ve built up in your home.A reverse mortgage will allow you to tap that resource without the need to generate new income tax liability. Once your franchise business becomes profitable, you may choose to partially or fully repay the line of credit, but until you leave the home, there will be no obligatory repayment.

Your housing wealth can be the secret to funding your new education-related home business.

https://mutualreverse.com/david-garrison/

David Garrison
Home Equity Retirement Specialist
NMLS # 1595194
Serving the State of Indiana
p (317) 644-2595 c (765) 516-0130
e [email protected]

2169 East Rutland Lane, Martinsville, IN 46151
Corporate NMLS #1025894

Even before starting the process of getting competitive quotes on the job, you can see that the framing around many of the windows is going to need reinforcing or even rebuilding. While your retirement planning is focused on long term benefits, such an ambitious redesign project would require you to cash in a substantial chunk of your investments and savings; obviously the timing for that is far from optimal. With your primary mortgage all but paid off and with interest rates on the rise, you’re reluctant to apply for a new loan.

Consider financing your energy-saving plans by using the “energy” contained in your own housing wealth in the form of a reverse mortgage. You would draw down (in the form of tax-free withdrawals) only as much of the available proceeds as needed to finance each phase of the window reconstruction project.  With no mortgage payments due until you leave the home, there would be no need to tap your investment portfolio.

Meanwhile, the energy cost savings will help fulfill your goal of retirement “budgetary survival”.  A reverse mortgage can help provide a new “window” for retirement planning.

https://mutualreverse.com/david-garrison/

David Garrison
Home Equity Retirement Specialist
NMLS # 1595194
Serving the State of Indiana
p (317) 644-2595 c (765) 516-0130
e [email protected]

2169 East Rutland Lane, Martinsville, IN 46151
Corporate NMLS #1025894

For a variety of reasons, the two of you have made the monumental decision to retire from your careers at the end of the next calendar year. The frustrations and issues have begun to outweigh the motivation to keep working, and, with your home fully paid for and no credit card debt, you believe that you are financially prepared to sever ties with your employer towards the end of 2023.

One big challenge you face is that there will be 3-4 years respectively before you can qualify for health insurance through Medicare. While you will both qualify for COBRA through your employer, that insurance is highly expensive and the coverage will not last until you are Medicare-eligible, you’ve learned. You have begun doing your homework on marketplace plans, which, assuming no surgeries are needed will be the way to go. Unfortunately, you will lose the excellent dental and vision coverage your employer plan provides. The only other significant concern is that, while both your cars are paid for, one will soon need replacing within the next year or so.

Until you become Medicare-eligible, accessing your housing wealth through a reverse mortgage line of credit might ease the wait. In the event that either or both of you need medical or dental treatment with cost that significantly exceeds insurance coverage, you can tap your line of credit. In addition, the equity in your home can be used to replace the car. All along the way, the unused portion of your line of credit will continue to grow, providing a reserve for other needs as you move into your life as retirees.

Between here and Medicare, a reverse mortgage can ease the wait. Then, beyond the magic Medicare qualification age, you’ll have the peace of mind knowing you have a backup resource. .

https://mutualreverse.com/david-garrison/

David Garrison
Home Equity Retirement Specialist
NMLS # 1595194
Serving the State of Indiana
p (317) 644-2595 c (765) 516-0130
e [email protected]

2169 East Rutland Lane, Martinsville, IN 46151
Corporate NMLS #1025894

Two years into what you’ve dubbed Retirement Stage One (the first six to seven years when you do your long-planned European and South America biking and hiking vacation trips while still keeping up some income flow through part time work), you’ve become concerned about Stage Two. You’ve read numerous reports about the fact that, twelve years from now (by which time you’d planned to be fully retired and focused on hosting gatherings in your home rather than on traveling), Social Security benefits are scheduled to be significantly reduced. In fact, while neither of you has yet claimed benefits, the plan was to start them year after next; your careful calculations don’t work well if, in fact, there is to be a 22% reduction in benefits.

One option to consider by way of “insuring” against that projected future cut in Social Security benefits is a reverse mortgage refinance. By using your housing wealth to build a reservoir of funds that can be used later on to supplement reduced social security income, you will be able to seamlessly execute your “Stage One-Stage Two” retirement plans. As you continue your Stage One biking/hiking adventures (keeping up your property taxes, insurance, and regular maintenance of the home) not only will no payments be due, but your reverse mortgage line of credit will actually be growing.

With a reverse mortgage, your home itself will function as insurance against future reductions in social security benefits.

https://mutualreverse.com/david-garrison/

David Garrison
Home Equity Retirement Specialist
NMLS # 1595194
Serving the State of Indiana
p (317) 644-2595 c (765) 516-0130
e [email protected]

2169 East Rutland Lane, Martinsville, IN 46151
Corporate NMLS #1025894

While the two of you had long ago made clear that your children were expected to manage their own affairs once they’d graduated and left the nest, life has not followed the expected pattern. Because of some mental health issues, one of your daughters has been forced to give up her full time employment. With her companion having abandoned her, moving out of their apartment, you have been helping your daughter financially. What appears to you to be the best course of action is having her live with you for awhile as continues her therapy and her part-time work. Six months remain on her apartment lease, and in that time you want to convert one area of your home into a studio “apartment” for your daughter.

No, this is probably not the picture you’d had in mind when you retired seven years ago, but you’re ready to “step up to plate”, knowing your daughter deserves the chance for a new start. After much research, you believe you’ve found contractors who can complete the project within the six month timeframe. However, the cost estimates indicate you’d need to liquidate a hefty chunk of your savings and investments.

Instead of tapping into your invested assets, consider using your housing assets to meet your home remodel needs. A reverse mortgage set up as a “line of credit” will enable you to make tax free withdrawals to pay the contractors as the remodeling work progresses.

Sometimes moving forward requires approaching matters in reverse!

https://mutualreverse.com/david-garrison/

David Garrison
Home Equity Retirement Specialist
NMLS # 1595194
Serving the State of Indiana
p (317) 644-2595 c (765) 516-0130
e [email protected]

2169 East Rutland Lane, Martinsville, IN 46151
Corporate NMLS #1025894

At a recent social gathering, friends of yours mentioned that they’d narrowly succeeded in winning the bid for their new home only because they’d been able to make a cash offer. The only way they’d been able to raise that cash before selling their prior home, they revealed, was that they’d. borrowed money using the stocks in their brokerage account as collateral.

Since the two of you are planning to relocate within the year, this tactic sparked your interest. You became quickly disabused of the notion after discussing the possibility with your own financial advisor. He explained that, if the assets you’d be using as collateral were to fall in value, you’d be forced to sell those holdings (possibly owing tax) to satisfy the debt. What’s more, you realized, you don’t have nearly enough in assets (other than investments in retirement accounts) to make a big difference in your home-buying plans. You’ve both retired ten years ago, and the goal is to downsize to a smaller, but more updated home in a 55+ community.

A HECM (Home Equity Conversion Mortgage) might offer one way to accomplish your goal. The concept – you would be financing the purchase of your new residence with a combination of a one-time down payment and a Lifestyle Loan (another name for a HECM for Purchase). The pre-qualification process for the HECM will ensure that your offer will be treated seriously, and remember – as long as the new house remains your primary residence, there will never be a requirement to make mortgage payments.

Meanwhile, in order to finance the cash down payment, you might consider a short term draw from your IRA or 401(k). Subject to IRS rules, if you replace the funds within a 60 day timeframe, you can avoid paying tax on the withdrawal.

This combo may not have the power of an all-cash offer to the home seller, but your pre-approval on the reverse mortgage will be a strong sign of your serious intention to buy the new home. In a way, you’ll be approaching the home-buying process in reverse!

https://mutualreverse.com/david-garrison/

David Garrison
Home Equity Retirement Specialist
NMLS # 1595194
Serving the State of Indiana
p (317) 644-2595 c (765) 516-0130
e [email protected]

2169 East Rutland Lane, Martinsville, IN 46151
Corporate NMLS #1025894

The hot topic in income tax and estate planning is converting traditional IRAs to Roth IRAs. When this occurs, the IRA is income taxed at the time of the conversion at the IRA owner’s ordinary income tax rate. Typically, the income tax is paid out of the traditional IRA funds reducing the benefit of the Roth Conversion.

David Garrison and I have been discussing over the last number of months using a taxpayer’s home equity to pay the income taxes on the Roth Conversion. Here’s how it works:

The taxpayer converts $1,000,000 Traditional IRA to a Roth IRA. On the conversion, the taxpayer is going to incur approximately $400,000 of income taxes depending on his or her state (this perhaps can be reduced by staging the Roth Conversion over a number of years).

The benefits of a Roth Conversion are:

• Invested funds in a Roth IRA are not subject to Required Minimum Distributions (“RMDs”)
• Funds can be withdrawn tax-free during life or after death, which is a significant benefit if you want to combine your Roth IRAs on your death with protection planning using trusts for the benefit of your children
• Funds in a Roth IRA grow tax free until 10 years after the death of the Owner (subject to certain other complex rules that require small RMDs after Roth IRA owner’s death if death occurs after age 72, and the shorting of the 10-year period if death occurs in the owner’s 80s)

The downside of the above strategy is how is the taxpayer going to pay the income tax without selling capital gain assets such as stocks in an investment account causing additional income taxes or depleting the converted Traditional IRA funds reducing the benefits of the Roth Conversion.

An alternative that everyone should explore is using a HECM (Home Equity Conversion Mortgage, also know as a reverse mortgage). The HECM depending on the age of the owners of the home and equity available in the home may provide the funds necessary to pay of the income taxes on the Roth Conversion without causing additional income taxes. Additionally, a HECM requires no monthly principal and interest payments which provides for maximum efficiency of the Roth Conversion strategy. This is a strategy that everyone should be considering when contemplating a Roth Conversion.

This Article is for education purposes only and are not intended, and should not be relied upon, as legal or accounting advice.

Pursuant to Circular 230 promulgated by the Internal Revenue Service, please be advised that this article is not intended or written to be used, and that it cannot be used, for the purpose of avoiding federal tax penalties unless otherwise expressly indicated.

Brian A. Eagle, managing partner of the law firm of Eagle & Fein, P.C. is celebrating 30 years of serving clients. Brian inspires families to plan to meet their goals and objectives based on a unique process that focuses on the definition of proper planning.

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David Garrison
Home Equity Retirement Specialist
NMLS # 1595194
Serving the State of Indiana
p (317) 644-2595 c (765) 516-0130
e [email protected]

2169 East Rutland Lane, Martinsville, IN 46151
Corporate NMLS #1025894