The days are getting longer, and the air is getting warmer. Summer is here, and you deserve to enjoy the season in your golden years. Whether you are in the final days of your career or your budget is stretched too thin, you are not alone with retirement financing and money concerns. Fortunately, there are steps you can take to start living a more fulfilling retirement today.
Many of today’s retirees are living in financially shaky situations. Some could have been better at saving and planning, while others could have done everything right and still find themselves facing a savings shortfall. When today’s retirees started their working careers decades ago, the retirement landscape was quite different and many assumptions about retirement funding have since changed. Traditional defined benefit plans have all but disappeared amid the proliferation of self-funded 401(k) and similar plans. Life expectancies have increased, and now people have the potential of living longer than in any other time in history. Although inflation rates have been low, housing and healthcare-related costs have sky-rocketed.
Retirement is Highly Personal
People retire at different ages and for different reasons. For some, retirement is the culmination of careful planning and preparation. For many others, retirement happens because of unforeseen circumstances such as health issues or job loss. Even for those who planned ahead and did everything right, some still find themselves unprepared because of changes in underlying assumptions such as life span, housing costs, government benefits, etc.
The unfortunate reality of the situation is that 44% of unmarried seniors that rely on Social Security for 90% or more of their retirement income. Even with the Social Security increase of 2.8% in 2019 for the cost of living adjustment, this is still not enough to cover rising expenses.
There are several key areas of vulnerability for seniors including low income, household debt, and poor retirement savings. Many retirees are living within limited means and risk outliving their savings. The shock of long-term care expenses may be more than they can cope with.
Many people mistakenly believe that Medicare will fully cover long-term care expenses. Some seniors also hope that their children will take care of them as they age, but this can put their employment situation and future retirement at risk by taking on this responsibility.
Creating a Financially Secure Retirement Plan
Cutting costs is essential when living in retirement, especially for those on a fixed income. One way to cut retirement living expenses is moving to a tax-friendly location if possible – ranks Alaska, Wyoming, South Dakota, Mississippi, and Florida as the top five tax-friendly states for retirees.
If you have equity in your home, a reverse mortgage can be your saving grace. The reverse mortgage can be an ideal program for seniors looking to access their home equity to supplement retirement income, while removing monthly mortgage payments. This is especially true for people that want to spend the rest of their lives in their home and would not consider moving, even to a tax friendly state. There is also a reverse mortgage tool for people looking to change their living situation, the reverse mortgage for purchase.
Older homeowners often find themselves wanting (or needing) to relocate to be closer to family members, downsize to a more manageable home. With a traditional reverse mortgage, the lender offers a homeowner a percentage of the home’s value that can be used as needed. With a reverse mortgage for purchase, however, those reverse mortgage funds are applied to a new home’s sales price. Depending on the age of the youngest participant, the lender is generally able to contribute 40% to 65% of the purchase price.
As always, no monthly principal and interest payments are required, and the homeowner gets to retain title and ownership of the home.
Most ideal purchase candidates are selling their current homes and relocating. If they use the reverse for purchase to finance a large portion of the sales price, the homeowners can retain more cash reserves. This is a great opportunity to supplement retirement savings.
If you have equity in your home, a reverse mortgage or a reverse mortgage for purchase may be good ways to supplement your retirement budget. A reverse mortgage specialist from FAR can help you find out if you meet the requirements and if a reverse mortgage is a good option for you.