With the last two years of your careers having been marked by the pandemic (each of you, despite having been vaccinated and boosted, has now had COVID twice!), you were moved to make two admittedly emotionally driven decisions. First, despite the drop in the value of your accounts, you stuck with your original plan to retire. Secondly, you decided to take your two dream trips in the early years of retirement (you enjoyed a luxury cruise earlier this year and have another scheduled for next year), rather than waiting “until the market recovers”  before  spending the money. Careful savers over the years, you now feel “Carpe diem” is the motto to adopt.

According to plan, you’ve retired your mortgage, re-roofed the home, and installed new heating and air conditioning. While all these moves were designed to give you a sense of security, you realize that, if you continue to follow your original monthly withdrawal plan out of your portfolios – in addition to making large withdrawals to fund the upcoming trip expenses (carpe diem notwithstanding) – you will probably run out of money much sooner than years of life!. 

Perhaps it’s time “seize” the opportunity inherent in your own housing wealth, in the form of a government-insured reverse mortgage line of credit, allowing your investment accounts time to recover value over the next several years, funding your ongoing income needs – and the costs of your second round of travel adventures – through distributions from that mortgage.  Remember that fewer dollars will probably be needed, since draws from a reverse mortgage are tax-free.

While you cannot know what the future will bring – either in terms of the investment markets or in terms of your personal lives, a reverse mortgage might represent an opportunity worth “seizing”!

Please consult a tax advisor. These materials are not from HUD or FHA and the document was not approved by HUD, FHA or any Government Agency. 

A year or so ago, then four years into retirement and in the midst of the real estate “craze”, you had briefly considered selling your home, but instead made the decision to stay put. You arranged for a small home equity loan (less than a quarter of the home’s appraised value at the time) to finance a bathroom and kitchen makeover. As a divorced man in good health with no need to support either of your two sons, you had made a decision to “age in place”.

In the interest of paying off that loan without taking a “hit” to your investment accounts, at a time when they are diminished in value, you have been considering a reverse mortgage. However, you keep reading about analysts “slashing” their U.S. Housing market outlook” over the next year or two. What would happen, you wonder, if you arranged for a reverse mortgage line of credit and then home values dropped significantly?

Notwithstanding all the predictions you’re hearing from various pundits, there is no way to know what either interest rates or home values will be at any particular time in the future. Remember, though, with a reverse mortgage the unused portion of your line of credit will be growing at the same rate as the mortgage balance is accruing interest, and it will continue to grow independent of any change in home value.

The second factor to consider is the “protective effect” that a reverse mortgage can have on your investments, to the extent that you substitute tax-free withdrawals out of your own housing wealth to replace taxable distributions from retirement investment accounts.

Could the value of homes decrease over the next year or so?  The answer is yes, of course. But remember – unlike the case with your current line of credit, with a reverse mortgage, until and unless you leave your home permanently (move out or die), there is no obligation to make any loan payments at all. 

Your reverse mortgage loan proceeds (based on the current value of your home) would first go towards paying off your current “forward” line of credit balance, freeing you from monthly payments and then serving as a source for tax-free withdrawals as needed going forward, “shielding” your investment accounts by reducing your need to make withdrawals during stock market declines.. 

No matter the “what-if someday” scenario, it sounds as if a reverse mortgage decision could make a positive difference beginning right now.

Please consult a tax advisor. 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.

Over the four years since your father’s death, it has been a relief to you and your sister to see Mom, at age 76, resuming an active social life. While she is able to drive and continues to manage her own finances, she does use in home care several times a week to help with bathing and light housekeeping. While neither of you children is in a position to help her financially in any significant way, you help by preparing her taxes each year, and your sister helps when she can with bringing over some meals to Mom.

Mom is determined to stay in her own home for “the remainder of her time on Earth”, as she puts it. There is no mortgage on the home, but you can see that there will be some maintenance needed in the foreseeable future, including a new heating system and roof repair. You’re concerned that those costs will put a real strain on your mother’s ability to hire the help she needs and on which she relies (and will probably need even more of as she ages). Mom might set up a home equity line of credit just to have the security of knowing she’ll be able to handle everything easily, your sister has suggested. (Your mother’s credit rating would be excellent, you’re sure, since she has been meticulous about keeping bills paid.)

Rather than a home equity line of credit, where repayment would be needed, further straining her budget, have Mom consider setting up a government-insured reverse mortgage on her home. Home maintenance needs would thus be covered, without your mother needing to make payments.  In addition, the line of credit could be used to pay for increasing household and personal care needs. 

A reverse mortgage could help keep Mom in exactly the place she wants to be – in her own home sweet home.

You’ve just realized that all the Social Security “good news” flooding your newsfeed might well be bad news in disguise when it comes to taxes. Yes, you’re each scheduled to receive a hefty raise in your Social Security benefit due to the more than 8% cost of living adjustment. Yes, the standard deduction for married couples, you’ve learned, is also being raised, but, since you’ve already been paying tax on 85% of your Social Security, that means most of those “extra” dollars will be going to tax. When CNN recently commented that “the higher COLA could prompt some beneficiaries to get bumped into a higher tax bracket“ – they must have been talking about you!

https://www.cnbc.com/2022/10/19/irs-here-are-the-new-income-tax-brackets-for-2023.html

With both of you now in your fifth year of retirement (she’s 68, you’re 70), the rising costs of food and gasoline have so far not severely impacted your everyday lifestyle. A substantial portion of your income comes from a fixed joint lifetime annuity (from an inheritance she received), and you have been making regular withdrawals from both IRA Rollover accounts. There is a joint investment account as well, consisting mostly of municipal bond funds; you do not take money out of this joint account, considering it your “rainy day” backup account. In the year leading up to your retirement, you completed several home renovation projects, paying for those in full, and you made the final payment on your home mortgage at that time. Your estate plans have been recently updated, including paid-up life insurance policies that can be used for long term care if needed. You believe that your focus now needs to be on tax planning.  

It does sound as if tax planning might be needed now. Were you to apply for a HECM reverse mortgage on your home, you could replace, your taxable IRA withdrawals with tax-free withdrawals from a line of credit secured by your housing wealth. The money you receive will not affect your Social Security or Medicare benefits (in fact, you can each postpone IRA withdrawals until age 72).   

Substituting reverse mortgage draw-downs for at least a large part of your IRA withdrawals might well ease the burden implicit in the coming calendar year Social Security “good news”.

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

When you retired from full time employment just four years ago, you never imagined becoming a “poster child” for the “negative sequence of returns” you’d read about in the magazines and journals..  Divorced ten years ago, you were awarded sole ownership of your home, and are only months from totally retiring the mortgage on it. As a small business coach, you do bring in a semi-regular income stream to augment the monthly systematic withdrawals from your IRA Rollover Account and your Social Security benefit. 

In recent months, you have been in prospecting mode for new coaching clients, while also moonlighting as a “picker” at local retailer in order to keep up with rising costs. Normally a patient investor with an eye on long term rewards, you have always understood that there will be market fluctuations. Now, however, you’re undeniably concerned with the drop in value of the Rollover account, watching the cascading effect (downwards) exacerbated by your regular cash withdrawals. You’ve considered taking out a home equity line of credit as a temporary income “fix”,  but with a near-term meaningful stock market rally seeming less and less likely, that  would feel like going from the proverbial frying pan into the fire.

It appears that the equity you’ve build in your home might provide a solution, not in the form of a second forward mortgage, but with a HECM reverse mortgage set up as a line of credit. In accessing your housing wealth in this way (substituting tax-free withdrawals from your own home equity for those taxable withdrawals from the IRA account), you might well be in a better position to weather the current stock market turbulence without dangerously drawing down your investments.

With a reverse mortgage line of credit, your home equity can function as a storm shelter during stock market turbulence. 

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 past three years have, unfortunately, not been good ones for the two of you. Although you had generally been very prudent about managing your finances, you were forced into taking retirement years earlier than planned, because your employer suffered major setbacks due to the pandemic. (You had originally planned to work full time until age 70. Instead, unable to find full time replacement work, you have been working part time for a local merchant.) Your wife, meanwhile, suffered through several periods of ill health, further reducing the household income. Health wise, things have taken a turn for the better, but you are beginning to be have serious budgetary concerns and have been forced to make only minimum payments on your credit cards. So far, you have been able to totally abstain from touching either of your retirement accounts (your SEP from the company and her IRA). With interest rates unlikely to be lowered anytime soon, you realize that the timing is not advantageous for taking out a second mortgage on your home (the first mortgage has just three more years to go). Meanwhile, your adult children, while extremely loving and caring towards you, are not in a position to be of help..

Amidst all the setbacks, you’ve been able to build equity in a very important asset – your home. Now, establishing a reverse mortgage line of credit might be a pathway for handling your obligations, including both the existing mortgage balance and the credit card debt. The most threatening aspect of your current situation is, in fact, the credit card debt, because, should interest rates continue to rise, not only with those minimum payments be more, your credit rating might be negatively affected. With a home equity line of credit reverse mortgage, in contrast, so long as your income is sufficient to cover property taxes, upkeep, and homeowners’ insurance on the home, you would be able to use the proceeds of loan to eliminate both your first mortgage obligation and the credit card debt, vastly improving your monthly cash flow. Importantly, no monthly payments are ever required as long as loan terms are met.

Yes, a reverse mortgage, like your credit cards and like your existing “forward” mortgage, IS a form of borrowing. Yet, prudently handled (as you have apparently handled your finances up to this point in your lives), you may find it to be much more manageable form of debt.  

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

With retirement from full time employment planned for 2025 (when you will turn 65), you’re beginning to scrutinize your budget, estimating which expenses are likely to escalate (and at what estimated rate). In addition to holding a full time job, you run a part-time, independent landscaping/handyman business, which you plan to continue after retirement so long as health and strength permit. Through your employer, you have health insurance coverage (which can be continued at your own expense post-retirement) and an individually owned Long Term Care insurance policy. The premiums on the latter have twice escalated sharply, and you are concerned about future costs. 

On the positive side, as of last year, you own your home outright (despite multiple indications of interest by would-be buyers, you’ve decided to “retire in place”). As the sole owner and occupant of your home, you’ve kept it well-maintained, but a new roof and new driveway paving will become necessary within the next few years. While your car is paid for, you can foresee needing to replace it within the next couple of years; that, too, is a looming budgetary concern.  In addition, your home office equipment for the business will need replacing within the next few years (printer, scanner, desktop). One additional area of concern is a ten-year charitable commitment you have made that has six more years to go. 

Despite the sharp drop in the market value of some of your investments, you have resisted the impulse to pull out, understanding the value of “staying the course”. Assuming the economy recovers prior to your retirement, you believe that, with your pension and the income from independent gigs, you will be able to cover your own lifestyle needs until you qualify for Social Security benefits. The big unknowns are the need for major home repairs (despite being a seasoned handyman, you are no roofer or cement layer), replacing your current vehicle, and the likely rise in health and long term care insurance costs. At the start of your retirement budget planning process, you spoke with a banker about financing a line of credit mortgage on your home, but the recent rise in interest rates scared you away from that idea.  

To use your housing wealth as a resource to cover probable, but as yet unquantified future, expenses, a HECM reverse mortgage set up as a “line of credit” might prove very effective as a “budgetary resource”. Since you have no immediate need to finance the big home maintenance jobs, the office equipment replacement, or the car purchase, your reverse mortgage the line of credit can actually be growing, with the equity in your home functioning as a “buffer” asset.

Rather than merely lining up your resources in preparation for retirement, your housing wealth can be used to shore up your preparations against future budgetary strain.

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

As a single gentleman at the “ripe old age” of 71, you’re still able to command a sizeable income, and God willing, hope to continue your very active lifestyle indefinitely. While you travel extensively, you’re proud of your home, which you’ve kept in good repair and which is fully paid for (but, which, your one adult daughter has frankly stated, she has no interest in inheriting…

Interestingly, you have never been part of an employer pension plan, but have contributed the maximum every year to a self-directed Roth IRA, and intend to make the maximum allowable contribution again this year and in coming years, hopefully being able to keep the money growing tax-free with no obligation to make withdrawals. The Roth IRA will make the perfect inheritance for your daughter, you believe, with the entire sum of all your deposits over the years, plus the earnings, transferring to her as named beneficiary. (Under the latest changes in the law, you understand, she will be forced to withdraw the money within ten years of your death, but that will generate no tax liability for her, since you’ve held the account for longer than five years.)

Since you’re already maxing out your annual Roth contributions, you might consider “enriching” your daughter’s inheritance in an additional way, using the equity in your home. Although setting up a reverse mortgage will entail some upfront costs, you would be using your housing wealth to establish a second source of growing wealth earmarked for your heirs. Unlike the investments in your Roth account, if you make no withdrawals, the value of your home equity will never fluctuate downward due to stock market volatility; instead, the unused portion of your equity will in fact, be increasing. grow. Of course,, you’ll continue to be responsible for property taxes, insurance, and maintenance costs, but you’re obviously used to keeping the home in tip top shape. Best of all, should your income drop and you feel the need to use some of the available funds, you can do that without tax liability, leaving the Roth IRA to continue to grow for the benefit of your daughter.

With the combination of the Roth IRA and a reverse mortgage, you’ll be building your daughter’s inheritance from both directions.

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

With your third child now finished with college and all three seemingly firmly ensconced in the world of work, the two of you have begun to focus your attention on your own future financial security. In your early 40s with full-time careers, retirement is probably at least a couple of decades away. Up until now, your estate planning has been focused around guaranteeing that your daughter and sons would all be able to enter the professional workforce unencumbered by debt. You each had substantial term life insurance policies to be sure that plan was carried out no matter what. 

The emphasis moving forward is on maintaining your own financial independence for life, without you ever becoming a burden on your children. At this point, long term care insurance, you’ve realized, is more important than the life insurance, and you’ve begun exploring different policies. The costs are somewhat daunting, particularly since you have been offered a policy rider that increases the coverage to keep up with inflation. When you expressed concerns about keeping up with the premiums once you’ve both retired, you learned that some policies would allow you to achieve “paid up” status, which f course would increase the financial commitment substantially. A related aspect of your planning is your home, where you plan to remain in retirement. Your mortgage should be fully retired by that time, which would free up some dollars towards continuing to fund the long term care policies.

As you shift your attention away from helping your children towards your own future living needs and protection, you are right in realizing that your home is an asset that should be considered along with your retirement accounts. One possible course of action would be to set up your Long Term Care policies now (while you have greater probability of qualifying), but with longer “elimination periods” (meaning benefits might begin months following a claim rather than immediately), leaving off the “inflation riders”, thereby keeping the premium costs in a much more affordable range. Then, at your age 62, you can set up a reverse mortgage, using your housing wealth, on an as-needed basis, to fund any long term care needs that exceed the policies’ coverage.

In this now-and-later plan, you set long term care protection in place now, but allow the equity you’re building in your own home to replace the costly policy “riders” – later.

A reverse mortgage can replace riders on long term care insurance.

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