In last week’s blog post, we talked with a 69-year old gentleman who had chosen to defer social security benefits to age 70 and who was hoping to continue deferring IRA withdrawals until age 73.  While he’d been able to offset some of his “gig” earnings with business expenses, thus mitigating the tax burden, his concern was that should that income decline, forcing him to begin IRA withdrawals early, the “tax haircut” on the combination of social security and IRA withdrawals was going to be dramatic. 

We suggested that, with a reverse mortgage on the home he shares with a life partner, he could arrange for non-taxable, to-be-accessed- as-needed – income to supplement the social security income, allowing him to continue deferring withdrawals from IRA over the next four years. In a sense, he’d be using the equity in his home as both a safety net and a tax deferral tool. 

In a recent article in Financial Advisor, Ed Slott actually advises people with high income and/or high net work to do the exact opposite. The tax deductions offered by IRAs and 401(k)s are merely loans from the government that will have to be paid back at the worst possible time, he says. Worse yet, he warns, “the payback may come from the accounts’ beneficiaries, who could inherit in their worst earning (and peak tax bracket) years”.

Post the final SECURE regulations, Slott advises, RMD are to be ignored. Think “maximum”, not minimum – How much can be withdrawn now, and in the near future, at relatively modest tax rates?  It’s time for un-required distributions. Use the money to buy insurance payable to descendents or to up charitable contributions, and convert traditional IRAs to Roths.

For such high net worth individuals, we add, housing wealth can also be part of a “think now” plan to accumulate wealth that can be passed on to beneficiaries with little or no tax consequences. Not only are reverse mortgages unfortunately often considered as an option of last resort, as Emile Hallez quoting Dr Wade Pfau points out in Investment News, but used strategically, they can be part of financial planning in retirement. When used strategically by high net worth homeowners, the reverse mortgage can end up leaving heirs with more than they otherwise might have.

With a reverse mortgage, the un-borrowed portion of the equity is guaranteed to grow, tax-free, at the same growth rate as the interest being charged on the mortgage balance. Unlike the case with traditional IRA accounts, that “growth” is not a “loan from the federal government”, and generates no tax liability. When the second of the two homeowners dies, heirs may refinance the home and keep it, or choose to sell it. (Whatever step up in basis tax rules in effect at that future time would apply.)

For high net worth home owners, housing wealth can play an important role in post SECURE Act planning.

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. 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

Officially retired three years ago from your corporate position, you chose to defer social security benefits to age 70, allowing the amount to increase. You’ve been able to earn part time income, avoiding the need to tap your IRA rollover account. In fact, you’re hoping to defer IRA withdrawals until age 73. 

Just turned 69, you share your home with a life partner (same age, also retired), and the two of you split both regular expenses and repair costs. Long ago, you made the decision together to keep living at home just as long as health and vigor allow. In looking ahead, though, you realize there’d be little point in continuing to defer social security benefits past age 70. Meanwhile, you’re concerned that, should your part time income decline, forcing you to begin IRA withdrawals early, when combined with the social security benefits, the tax “haircut” is going to be dramatic.

Sounds as if you’ve been proactive when it comes to both income and tax planning, but haven’t considered housing wealth as an income source. With a reverse mortgage, you can arrange for non-taxable, to-be -accessed- as-needed – draws for your line of credit to supplement the social security income. thus, allowing you to continue deferring withdrawals from IRA over the next four years. The equity you’ve built up in your home will serve as the sole collateral needed for the mortgage, and there will be no mandatory mortgage payments. 

Yes, eventually, the tax will need to be paid on both social security and on the mandatory IRA withdrawals. In the meanwhile, though, the equity in your home can serve as a safety net – and a tax deferral tool. 

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).

This is not tax advice. 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. 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

Several of your neighbors have sold their homes, with one moving to live with her daughter in another state, the other relocating to a suburban retirement community. But, for your part, you’ve made the firm decision to continue living in your own modest-size Indianapolis home. With all your favorite volunteer and social activities within short driving distance, you are reluctant to ‘start over”. The long-time relationships with various maintenance service providers are also reassuring, and for bigger jobs, your one son has always found good contractors. 

Widowed nine years ago, your income includes Social Security survivor benefits, an annuity from your late husband’s company, and a systematic withdrawal from each of two investment accounts. While you share everyone’s concern about the rise in costs for groceries, gas, and insurance, you feel prepared to cope moving forward.  

What does have you worried is the possibility of needing assistance at home later on.  Even though you’ve kept up with the premiums on a long term care insurance policy, you realize that in the future, even if still “in good health for your age”, you might get to the point of needing more help with household tasks and even with self-care, leading to an unsustainable financial strain.   

Tapping your housing wealth might be the answer to your very legitimate concern about needing help managing your own household tasks and personal care at some future point as you “age in place”, with your home equity becoming a revolving line of credit you can use to fund those future possible needs. In the interim, there will be no need to make monthly mortgage payments. By taking such good care of your home, you’ve actually created a guaranteed to grow “rainy day” fund for later years, allowing peace-of-mind about “caring in place” even as you enjoy “aging in place”.

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. 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 attending three different seminars, plus listening to umpteen radio ads about leaving six figures on the table when claiming Social Security benefits the “wrong way”, you’re still in a quandary as to the best route to take. With your planned retirement date (career curtain time”?) only six months away (you will have turned 68), you are weighing alternatives. 

You lead an active social life, but have never married or even lived with anyone. While you offer occasional financial assistance to a sister, on an ongoing basis, you have only your own future needs to consider. You’ve owned your home outright for decades, taking pride in keeping both house and grounds in tip-top shape. As an avid vegetable gardener and amateur “gourmet chef”, you find this location to be a perfect fit for your solo lifestyle, offering ample space to entertain. 

With no mortgage to pay, you believe you can support yourself using a combination of regular withdrawals from your investment account and from your 403(b) plan, with some income from the handyman jobs you do on a regular basis for a select group of neighbors. On the other hand, insurance premiums, on both your homeowners and your long term care policies, keep rising. You’re still not sure whether it makes sense to wait the two years before applying for Social Security benefits. Will the value of your 403(b) accounts not be more likely to outpace the increased Social Security benefits?? 

In considering different courses of action, one you have not mentioned is using your housing asset as an income source, converting your home equity into a source of spendable funds through a reverse mortgage. With no monthly payments due, the line of credit would be there as needed, allowing you to avoid tapping your 403(b) and also to allow your Social Security to earn delayed retirement credits.

You would continue to own and maintain your home. In fact, if future appreciation occurs, you might later choose to refinance the reverse mortgage, increasing your available resources even further.

Your lovingly maintained property itself might itself offer “ample space” to “entertain” the idea of capturing those delayed retirement credits.

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. 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 56, you’ve just received the very unwelcome news that you, along with several co-workers in your department, are being “downsized” (aka let go) just weeks from now (with pay continuing for six months). While you began immediately to put out job feelers, the horizon does not appear rosy in terms of coming anywhere near to replacing that level of income. In terms of insurance, you qualify for COBRA, but that appears to be a very expensive option; you are looking for an Affordable plan. Your husband, although eight years your senior, is still employed, but the one income will hardly support your needs, and he is reluctant to borrow against his own 401K if that can be avoided. The HR department counselor suggested looking into a Rule of 55 withdrawal plan on your 401K (which your company makes available), explaining that, even should you fail to find a suitable position quickly, those tax free withdrawals would help tide you over. Meanwhile, the two of you have discussed taking out a home equity line of credit on your home, which has appreciated nicely in recent years. 

Alas, your story is all too typical nowadays, but it appears you’re investigating different options moving forward. As an alternative to a home equity loan or the Rule of 55 withdrawal from 401K, you might consider using your housing wealth in the form of a reverse mortgage line of credit. While you are under the age to qualify as the borrower, your husband would be the primary borrower, with you as the eligible non-borrowing spouse.  Unlike the case with a home equity line of credit, there will be no need to make regular installment payments. Once you’ve gone back to work, you can stop withdrawals (and perhaps even start voluntary repayments). In the meanwhile, both your 401K funds – and your husband’s – can continue growing on a tax-deferred basis.

In terms of a post-downsizing transition plan, tapping your housing wealth may prove the most flexible plan for adjusting to the new realities without the need to either impact your retirement savings or to take on new monthly payments.

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. 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

Years ago, having a big back yard with an in-ground pool meant keeping your kids and their friends “in sight”. At your present stage in life (widowed and retired, age 67), these amenities have become more burden than boon. You continue to prize owning property over being a tenant, but you’re ready to downsize to more manageable living quarters.

Admittedly, your initial explorations were somewhat of a shock price-wise, since you’re looking for a property much smaller than the one you now own. Still, you have discovered several neighborhoods within 30-60 minutes’ drive from your present location that are very appealing, and have alerted a realtor friend to be on the watch for listings there. While you don’t expect to “stage” your own property for a sale, the realtor agreed that you’ve taken pride in keeping it well-maintained both inside and out and that it has “curb appeal”. From a financial standpoint, you do have cash reserves, but are obviously reluctant to cash in portfolio assets for the down payment on a new home before completing the sale of the present one. You also do not want to make monthly payments going forward.

Once you’ve pinpointed a home that requires less maintenance and that suits your needs at your current stage of life, you might consider using a Home Equity Conversion Mortgage for Purchase as the means of purchasing a new principal residence.

In applying for a HECM For Purchase, you’d be telling the mortgage lender that you’re buying a new home. The lender would then calculate the amount of money you qualify to receive as though you already owned the property. You will never have to make any payments for so long as you are living in the property, and none of the money your borrow with the reverse mortgage has to be paid back until such time as you are no longer occupying that property. 

It’s possible, given your description of how well-maintained your present property is (and the timing of the sale), that you might be able to generate enough money from the sale to easily pay the larger down payment required for a HECM for Purchase transaction on a smaller property, possibly even enough to cover the costs of moving. However, as you mentioned, the timing must be coordinated carefully, and you may in fact need to liquefy some of your portfolio assets.

Most important, because smaller has begun to seem better, a reverse mortgage for purchase can help you transition into the next best phase of your life.

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).

If your heirs want to keep the home after your death, they will have to repay either the full loan balance or 95% of the home’s appraised value, whichever is less. 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

Even before retiring just a year ago at age 69, you had decided against moving to a retirement community in favor of remaining in your own home (where you have the space to host a child or grandchild when they are in town to visit you).While far from handy, you’ve formed long term relationships with various repair, yard care, and handyman services, keeping your home updated and in good shape.

Of your many years working in the field of hospital nursing, your highest earnings came during the five years following your husband’s death, when you worked as a traveling nurse. Those extra dollars, along with the death benefit from your spouse’s corporate life insurance, enabled you to cover all the final expenses for him plus remodel the house.

Years ago, you had each taken out long term care insurance; you’ve just received notice that the premium on your policy is yet again due to increase substantially. Through a friend, you heard about “hybrid life insurance”, where the benefit can be used to cover long term care costs; you are considering switching to that type of coverage while you are still healthy enough to qualify. Realizing that you’ll now be paying for a death benefit along with long term care coverage, you nevertheless are attracted by the fact that the premiums will not be increasing once the policy is put in force. 

You’re certainly talking about a concern shared by many retirees. According to the American Association for Long Term Care Insurance, a Forbes Advisor Article reveals that in recent years, 84% of long term care protection was linked-benefit (hybrid) coverage.

But, whatever your final choice is on the insurance coverage, consider using your own “housing wealth” to fund the premiums in the form of a reverse mortgage. Once your HECM (Home Equity Conversion Mortgage) has been set up, you can arrange for a regular “draw” to pay the insurance premiums. If you select a hybrid life insurance/ long term care policy, the death benefit portion could go towards paying off any balance remaining on the reverse mortgage loan (this would be relevant only if the children decide to keep the home).

As a now-retired widow whose children live far away (and who are in no position to help you financially), you need to be concerned with budgeting your resources both today and in the years to come. In considering the various insurance options, you’ve made one important and essential life choice –  through sickness and health, you’re planning to “stay 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).

If your heirs want to keep the home after your death, they will have to repay either the full loan balance or 95% of the home’s appraised value, whichever is less. 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 

Following a round of visiting friends who have sold their homes and moved into various luxury retirement communities, you’ve decided that lifestyle is not for you. After an extended period of mourning your wife’s passing, you have become very involved in community and cultural activities, making the decision to “stay put” in the home you’ve owned for many years. A do-it-yourself-er, you feel easily capable of overseeing the maintenance of the house and yard, valuing the very independence you feel some of those former neighbors have given up by moving.

Far from wealthy, you have nevertheless been able to support your needs through a combination of Social Security, pension income, and investments. Despite having maintained long term care insurance on each of you, in the course of your wife’s extended illness and later death, there were substantial costs; those have all now been paid in full, leaving you debt free.

Now, at age 72, having made the decision to “age in place”, you’ve been looking into taking out a reverse mortgage on the home, as a financial “back-up” plan going forward.  You want your two sons to have the choice of owning the home, either renting it out or choosing to live there once you no longer can. You are reluctant to take additional money out of current cash flow, so your plan is to use a small portion of the reverse mortgage line of credit to purchase a life insurance policy payable equally to them, that they could use to convert the home to a rental or to remodel it for their own needs. 

You understand that, as your heirs, your sons will have no responsibility for the deficit should the value of the home be less than the debt at the time of your death. Conversely, should they decide to sell the property, any excess profit would be theirs to keep. 

As someone who prizes independence, you feel staying in your home is the right choice. And, while you are not in need of additional income for yourself right now, the reverse mortgage line of credit will allow you convenient access to funds for the if-and-when.

Having decided to “stay put” in the home you own, you’re thinking ahead for the benefit of owners-to-be.

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. 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