PLANNERS: IN THE RETIREMENT PLANNING PROCESS ==
INCLUDE HOUSING WEALTH AND SOCIAL SECURITY BENEFITS
In our last blog post “case study”, we introduced a couple who had calculated that, in order to maintain their desired income level in retirement, it was going to take both Social Security benefit checks to augment the annuity and investment income they were going to have coming in.
In a Kiplinger article we cited, the author noted that noted that that “the timing of the decision to start taking Social Security benefits is highly personal, and important factors such as financial assets, life expectancy, and marital status must be considered”. Personal health conditions, major health concerns with any immediate family members need also considered.
An alternative for the couple would have been to consider tapping the equity in their home through a reverse mortgage, which would serve to cover the income shortfall at least until the older of the two has qualified for the maximum social security benefit.
As a wealth planning professional, you’ve no doubt found that many of your clients are also unaware of the tax planning issues relating to their Social Security benefits. Kiplinger discusses IRMAA, an income-related monthly adjustment amount, the surcharge on Medicare when taxable income exceeds certain thresholds, potentially increasing costs to the client by 3-9% annually. Your tax planning for your clients no doubt involves working with their tax advisors to strategically manage income, deductions, and credits. Since tax planning significantly influences estate planning. (“Understanding how different assets are taxed upon inheritance can guide you in deciding which assets to convert, gift, or leave as donations,” Milestone Financial Planning points out), you’re no doubt coordinating with clients’ estate planning attorneys in exploring retirement planning options.
Just as many estate planning and tax planning decisions are interwoven with retirement planning, housing wealth needs to be discussed whenever clients plan to “age in place”. A reverse mortgage line of credit, for example, can allow clients to delay taking Social Security benefits, and withdrawals can help fund long term care needs. The equity built up in a home can be used to improve the home environment itself, making it safer and more convenient for senior living.
As an advisor, you’re wise to be cautious about recommending any strategy or product outside of your own training and expertise (or not included in your broker-dealer’s approved product line, as we discussed in post #174, housing wealth considerations help clarify – and complement – retirement planning and social security planning decisions.
https://mutualreverse.com/david-garrison
For professional use only. 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