Monthly Archives: April 2018

Lots of seniors will run out of money in retirement. HECM helps.

By Mike Brown, LendEDU · 6,599 views · More stats

Loose management of finances, such as taking on too much debt or not saving enough, could lead to irreversible damage when it comes to retirement.

What’s more, you often don’t find out if you’ve made a financial mistake until much later in life. That’s why we decided to survey senior citizens to see what they would change about their financial planning if they could go back to their youth when they first started working. It might be too late for them to make changes, but others certainly can benefit from their advice and benefit of hindsight.

In our latest survey of 1,000 senior citizens, LendEDU sought to uncover how older Americans are faring financially and if they made the right decisions throughout life to live comfortably in their later years.

Are today’s senior citizens sufficiently prepared for retirement or have past financial mistakes impeded their progress? What did older Americans wish they knew about managing finances when they were younger?

Here were a few key takeaways from the study:

55% of senior citizens said they have not saved enough for retirement, 18% were not sure if they had enough saved, and 27% felt as if they did

21% of older Americans, the plurality, indicated that their biggest financial regret from their twenties was not saving enough for retirement

69% of respondents stated that Social Security benefits are a critical part of their financial strategy while 47% said the same regarding life insurance

More Than Half of Senior Citizens Underprepared for Retirement, Most Wish They Started Saving Sooner

To gather the data for LendEDU’s story, we surveyed 1,000 Americans, all of whom were at least 65 years of age.

One of the first questions we asked the respondent pool was the following: “What is the biggest financial regret you have from your twenties?”

Data source: LendEDU. Chart created with Onomics.

The plurality of the respondents, 21.4 percent, indicated that the biggest financial regret from their twenties was not saving enough for retirement. Other popular answer choices included spending too much money on nonessential things (17 percent), not investing (12.3 percent), and getting into too much debt (10 percent).

Circling back, it was quite telling that senior citizens regret not saving enough for retirement in their twenties. Getting a jumpstart on retirement is essential to living a comfortable life in one’s later years. Due to compound interest, the earliest possible start to retirement saving will be the most beneficial as your money will have more time to grow.

Professor Timothy Wiedman of Doane University, 66, agreed with most senior citizens who took this survey in that his biggest regret was not getting a jump on retirement while in his twenties.

“I put off starting to save for retirement and didn’t open my first IRA until I was a bit over 31 years old. I justified this by telling myself that I could always “catch up” later on my long-term financial plans after establishing a solid career and seeing my income increase,” said Wiedman.

Wiedman soon realized the delay had a substantial impact on his ability to save and earn.

“But the earning power of compound interest is based on time, so an initial delay can have severe consequences. Thus, for young folks these days, opening a Roth IRA as early as possible is vital,” he said. “For example, if a 23-year-old fresh out of college puts $3,000 per year into a Roth IRA that earns a 7.8 percent average annual return, 44 years later at retirement, that $132,000 of invested funds will have grown to $1,009,275. On the other hand, starting the same Roth IRA 20 years later will yield very different results.”

So we know that many older Americans seriously regret not saving for retirement early enough. But were they able to salvage that lost time? Are they prepared for retirement?

The following question was proposed to all 1,000 senior citizen respondents: “As of today, do you believe that you have saved enough for retirement?

The strong majority of older Americans, 54.6 percent, admitted that they do not believe they have saved enough for retirement, while only 26.6 percent think they are on the right track, and 18.8 percent are still unsure.

It came as quite a surprise that so many senior citizens believe they are not aptly prepared for life after work when they should be enjoying warm weather and leisure activities.

But once again, it goes to show the potentially crippling effects of not saving enough for retirement at a younger age. Quite a few senior citizen respondents wished they had saved more in their twenties and that sentiment transferred over to this more black-and-white question.

For reference of what is to come, a LendEDU study found that of 500 millennials who consider themselves to be saving for retirement, 41 percent are using a savings account to save for retirement. A savings account – even a high interest savings account – likely won’t produce anywhere near the growth delivered by a 401(k) or individual brokerage account, which 59.4 percent of respondents used.

If those millennials wish to find themselves in a better position than more than half of the baby boomers at the age of retirement, they should probably switch from a savings account to a robo-advisor401(k), or brokerage account.

Additionally, when we asked our senior citizen respondents to answer what they know about personal finance today that they had not known at 25, 15.68 percent of the answers were: “I know how to save for retirement.”

The plurality of answers, 28.68 percent, pertained to learning how to live within one’s means, while 25.95 percent of answers were: “I know how to budget.”

Dr. John Story, a 60-year-old college professor at the University of St. Thomas, Houston, summed up this question quite well and further reinforced the importance of getting a jump start on retirement.

“I wish I had known the true cost of debt, and the flipside, the real value of long-term saving.”

With a Lack of Retirement Funds, Many Seniors Relying on Social Security and Life Insurance

As one gets older, there are two components that are thought to be key to achieving a sustained financial comfort. One is life insurance, a product, while the other is Social Security, a benefit.

Life insurance and Social Security benefits become all the more crucial for senior citizens when they have not saved enough for retirement, which is the case for over half of our respondents.

Not surprisingly, many poll participants indicated that they are relying heavily on both things to live their later years comfortably due to a lack of sufficient retirement savings.

In comparison to life insurance, older Americans were more likely to list Social Security benefits as important to their financial strategy. A majority, 69.1 percent, stated that Social Security benefits are a critical component, while 18.7 percent said the opposite, and 12.2 percent were still undecided.

Whereas life insurance must be purchased, Social Security is a benefit that can be qualified for by being of age and by working for a certain number of years (usually 10).

Life insurance is purchased by many senior citizens because it can solidify the financial security of loved ones should the buyer pass away.

While a majority was not achieved, 46.9 percent of senior citizens indicated that life insurance was an important part of their financial strategy. 34.1 percent said that the insurance product does not hold much weight for their financial plan, while 19 percent were unsure.

Considering many of LendEDU’s respondents are not sufficiently prepared for retirement, having life insurance or access to Social Security benefits could become quite pivotal for living comfortably in their later years. Note: Complete survey data and methodology available here.

“Here at Gofinancial, we have prepared for this event. Lots of seniors will run of money in retirement. The HECM insured program ushers in the use of home equity to support shortgages for seniors beginning at age 62.

Yes, you will get to open your home equity “bank”.

Open “information” tab on the home page to access contacts for Patriot Lending, a leading HECM lender where mortgage payments are eliminated and cashflow restored,” says veteran HECM loan officer, Warren Strycker.

Turned down for a loan? Let us get you approved when other banks say NO!

 

FIRST STEP: Home equity belongs to you; SECOND: Dream some; THIRD: Take ADVICE while you can.

Posted by Free Kindle Books on April 4, 2018

Common misconceptions, assumptions, and behavioral biases often prevent people from building robust and flexible retirement plans—and this is an enormous problem. If you don’t know your decisions are based on false assumptions, how can you avoid making serious mistakes?

Rewirement: Rewiring the Way You Think about Retirement! offers a solution. Under the expert guidance of Jamie P. Hopkins, Esq., CFP®, RICP®, you’ll learn to identify problems that might sabotage your savings while learning how to build and implement the retirement plan you need.

Considered one of the top forty financial services professionals under the age of forty by InvestmentNews, Hopkins provides an accessible and actionable ten-step process for building your retirement income plan. You’ll discover the basics of retirement planning, how to tap into home equity, and how best to use employer-sponsored plans. At the same time, you’ll learn how to prepare for long-term care while protecting yourself against market risks.

Essential reading for anyone who needs to make quality financial decisions, Rewirement lays out the process needed to develop a retirement income plan in easily understood steps. Do you need to rewire your retirement thinking? Would you know if you did?

Download From Amazon: DOWNLOAD LINK 

Good input on HECM mortgages, get a free kindle book if it’s your first. Then, come back here for your questions. See “Information” tab to get started. Contact information.

 

Perilous Debt Levels Put Half of Elderly Households at Risk

Study: Perilous Debt Levels Put Half of Elderly Households at Risk

New research from the Employee Benefit Research Institute shows that the percentage of households headed by someone 75 and older carrying debt in retirement grew by 60 percent over the past decade from 31.2 percent of households to 49.8 percent.

Another troubling statistic contained in the report, Debt of the Elderly and Near Elderly, 1992–2016, is that 75+ households with debt payments exceeding 40 percent of annual income increased by 25 percent over the same period.

“The percentage of the oldest families whose debt payments are excessive relative to their incomes is near its highest levels since 1992,” according to the study’s author Craig Copeland, Ph.D. “Consequently, more families that have elderly heads are placing themselves at risk of running short of money in retirement due to their increased likelihood of holding debt while in retirement.”

Housing debt has been driving the trend of increased debt in the last decade. The amount of money people are borrowing for first and even second mortgages seems to be where people are getting into trouble, Copeland told Forbes.com writer Ashlea Ebeling, in her article The New Reason to Pay Off Your Mortgage Now.

Our take here at Gofinancial is a simple — get a HECM mortgage which uses home equity without payments for the rest of your life. Scale down your debt while you can. See information on Information tab on the home page for details.

Consider reading How large is your mortgage “bite” in the household “apple” on this page about mortgage debt in retirement. See https://gofinancial.net/2016/12/payments/

 

What if social security disappeared tomorrow and Medicare was shared by all who want it

What if American citizens’ pessimistic concerns about Social Security and its viability for the future turned out to be accurate?

And given the current noise about everyone drawing Medicare, what do you think will happen to your health coverage if you are on a dwindling brand of Social Security/Medicare?

What if tomorrow Congress got together and came to a fateful compromise? Rather than trying to increase taxes or allow private investment accounts with the currently collected FICA taxes, they dissolved the program instead.

Surely, you have already heard about these discussions because they are already being held downstairs in the capitol building behind locked doors. You think not?

If you are following the conversations in Washington DC today, this might all seem a little less far fetched. If the current rush to share and share alike with these two bulwark programs, how would you fare in retirement budgeting?

It is a drastic scenario but one believed possible by a high percentage of future recipients, and a majority of millennials. As recently as last year, 81 percent of this demographic stated they were concerned Social Security would not be there in the future, according to a study by Transamerica’s Center for Retirement Studies.

Perhaps ironically that same study concluded that generation was taking steps to save far more proactively than prior generations. They are going to need to, for sure.

Retirement planning – with no assumed income from any source or accumulated savings – is tough for the average household, even those closer to retirement. Consider a household without work, rental income or pensions but $250,000 saved. The family would have just $10,000 a year of income assuming the 4 percent rule for how much they would withdraw in the first year of retirement.

And considering the average household doesn’t have near that figure saved, there would be millions of families with no real hope of stepping away from work.

On the other hand, under this hypothetical scenario practically every worker in America would see a substantial increase in cash flow overnight. If there is no future benefit to receive, there would be no FICA tax to pay on either the employee or employer side. This represents 6.2 percent of income up to $117,000 or a maximum of $7,254 per year, per person and also up to that amount of savings for the employer.

Not everyone earns $117,000, but what would people do with an instant several hundred dollars a month after tax? Some would spend it, leaving them nothing for their old age. But others would pay down debt and save the rest to recreate the safety net Social Security provides.

And what would employers do? Would they forward on that money to employees or keep it as profit causing the stock market to explode, or reinvest it for growth, possibly creating more jobs?

No one knows what the future holds, or what possible adjustments to the system future leaders will make. A more gradual shift to a later retirement date seems likely, just as was done in 1983. When that amendment was passed, it didn’t affect a single person’s benefit for 17 years, and increased the retirement age over a 22- year period.

Simply repeating this step would lead to Social Security’s viability for decades to come.

Keep in mind people’s natural inclination to “not believe it until I see it” as well. In a survey done in 1979, only 32 percent of workers believed Social Security would be able to fund its future benefits, according to the Social Security Bulletin.

That’s 36 years ago (and more based on the publishing date of this article in 2015) and counting. Those same survey takers are, thankfully, today’s recipients.

Brian Kuhn is a certified financial planner at PSG Clarity, a division of Planning Solutions Group, who lives in Odenton with his wife and two daughters. You can reach him at 301-543-6035 or www.psgclarity.com. He offers securities through Triad Advisors, Member FINRA/SIPC. Advisory Services offered through Planning Solutions Group, LLC. Planning Solutions Group, LLC is not affiliated with Triad Advisors. PSG Clarity is a division of Planning Solutions Group, LLC.

Editor’s Note: Now consider if money became a serious problem for our government, in the state of confusion it appears to be in today, how might you survive if not with a Home Equity Conversion Mortgage to harvest your own wealth through HECM? Some countries have already scouted the suitability of forcing elders to get a Reverse Mortgage to support themselves in retirement mode to qualify for Social Security/Medicare.

Or consider this: Who really owns your home equity in such a turn of events? (It’s where the real money is stored).

It’s not too big a stretch to imagine this scenario in a wholesale battle for funds to support the government.

Say it isn’t so.