Tag: Ashburn Virginia

NOW is the time

by middleburgreverselady, posted in Caring for Aging Parents; A Daughter's Story

My background is in teaching. Not sales.

Perhaps this explains why I freak when someone describes reverse mortgage lending in terms of a “sales position.” A reverse mortgage is either a fit or it’s not. It’s part of a long-term solution to financial challenges of increasing longevity – not a product that creates dreamy strolls down sandy beaches.

I seem to have a pretty standard response to salesmen – namely “yuck.” I associate pushiness, perhaps a poor match between the need of the client and the item being sold, and scare tactics – or at least a sense of urgency: “AND…if you order before midnight tonight….” Like I said, “yuck.”

THIS BEING SAID…

Tuesday HUD announced changes to the FHA Reverse Mortgage Program. There will be many changes, with perhaps more yet to come. But basically, it boils down to this: if you, or someone you know – or someone you’re working with – has been considering a reverse mortgage, now is the time to move forward.

WHY?

Because on September 30, 2013 the program is going to change dramatically.

And before that deadline, the prospective borrower must get their mandatory counseling, fill out an application, and have an FHA case number assigned. Under normal conditions this takes about ten days. With a last minute rush, there is going to be a shortage of available counselors.

Let me be clear: reverse mortgage is not going away. In fact, both Congress and the FHA have reasserted their support for reverse mortgages. However, the amount the homeowner can receive is being cut back significantly.

SOOO…As weird as this sounds coming from me, now is the time. If your client, colleague, neighbor, your relative or your friend has ever considered a reverse mortgage, the window on the Standard reverse mortgage – the product that creates the largest cash reserve – is rapidly closing.

Give me a call and let’s talk.

Laurie

703-477-1183 Direct

Laurie MacNaughton [NMLS# 506562] · Reverse Mortgage Consultant, President’s Club · Middleburg Mortgage, a Division of Middleburg Bank · 20937 Ashburn Road, Suite 115 ·Ashburn, Virginia 20147 · 703-477-1183 Direct · LMacNaughton@MiddleburgBank.com

 
Licensed in: Maryland (MD), Washington, DC, Virginia (VA), Pennsylvania (PA), Delaware (DE), North Carolina (NC), South Carolina (SC), Georgia (GA), Tennessee (TN).
Visit my Informational blog at

55+ Housing Market Posts Strong Gains

by middleburgreverselady, posted in Caring for Aging Parents; A Daughter's Story

The National Association of Home Builders (NAHB) reported Thursday that the 55+ single-family Housing Market Index (HMI) showed the strongest gains since 2008, the first year numbers for this specific market were tracked. This represents the sixth consecutive quarter of improvement in this sector.

According to Robert Karen, Chairman of the National Association of Home Builders, the strong upward trend demonstrates continuing demand for homes that meet the needs of the senior homebuyer.

David Crowe, chief economist with NAHB, says builders’ confidence in the 55+ market corresponds with an overall recovery in the housing market. He goes on to say, however, “While demand for new 55+ housing has improved due to a reduced inventory of homes on the market and low interest rates, builders’ ability to respond to the demand is being limited by a shortage of labor with basic construction skills and rising prices for some building materials.”

Read more about builder confidence in 55+ communities at  http://www.homechannelnews.com/article/builder-confidence-55-housing-market-grows-q1.

Laurie

Laurie Denker MacNaughton [NMLS# 506562] · Reverse Mortgage Consultant, President’s Club · Middleburg Mortgage, a Division of Middleburg Bank · 20937 Ashburn Road, Suite 115 ·Ashburn, Virginia 20147 · 703-477-1183 Direct · LMacNaughton@MiddleburgBank.com · www.middleburgmortgage.com/lauriem

Visit my Informational Blog at https://middleburgreverselady.wordpress.com/

So What is the “Fiscal Cliff,” Anyway?

by middleburgreverselady, posted in Caring for Aging Parents; A Daughter's Story, FHA HECM, Retirement Planning, Reverse Mortgage

You’re wondering what the Fiscal Cliff is all about? Here are the main issues:

In 2013, tax cuts for individuals will expire, along with long-standing tax breaks for businesses. Taxes for President Obama’s health care law will kick in, as will spending cuts enacted by Congress as part of the debt-ceiling deal. Long-term jobless benefits will also expire.

So What?

Here’s what: The Congressional Budget Office (CBO) estimates that if all these items occur, an estimated $600 billion will disappear from the U.S. economy in 2013, and push the country into a double-dip recession. Given that Europe is officially in a recession for the second time in four years, if our leaders don’t act now our economy is going to fall headlong over the same cliff.

And keep your head on a swivel regarding inflation. While the latest Producer Price Index and Consumer Price Index reports show inflation remained tame at the wholesale and consumer levels in October, inflation can quickly get out of hand.

What does this mean for home loan rates?

Inflation is the arch enemy of mortgage rates. However, home loan rates should continue to benefit from the uncertainty in Europe. This is because investors will likely continue to see our bond market – including mortgage bonds – as a safe haven for their money. But inflation is a very real threat to home loan rates: if inflation hits, look for mortgage rates to go up.

The bottom line is this:

Home loan rates remain near historic lows, making now the best time ever to talk with the seniors in your life about extinguishing their “forward” mortgage with a HECM Refinance. Also, there has never been a better time to use a HECM for Purchase to get into a home appropriate for aging in place. It’s hard to say how much longer rates will stay this low.

Call me with questions you or your clients might have – I always love hearing from you.

Laurie

Laurie Denker MacNaughton [NMLS# 506562] · Reverse Mortgage Consultant · Middleburg Mortgage, a Division of Middleburg Bank · 20937 Ashburn Road, Suite 115 · Ashburn, Virginia 20147 · 703-477-1183 Direct · LMacNaughton@MiddleburgBank.com · www.middleburgmortgage.com/lauriem

Visit my Informational Blog at https://middleburgreverselady.wordpress.com/

America’s Self-Designed Anti-Poverty Program

by middleburgreverselady, posted in Caring for Aging Parents; A Daughter's Story, FHA HECM, Retirement Planning, Reverse Mortgage

During the Arab Spring we learned the term “waithood,” and following the prolonged economic stagnation in Japan, “parasaito shinguru.” In the US we have long heard much about baby-boomerangs. But from the ever-droll UK comes my personal favorite: “KIPPERS,” or “Kids in Parents’ Pockets Eroding Retirement Savings.”

As you’ve doubtless guessed, these are terms for adult children who have moved in with older parents due to economic pressures and a poor job market. And though many groan at the very thought, data suggest in many cases the trend is anything but toxic.

World-Wide Trends

Around the world pressures are much the same: too many job seekers, too few jobs, and a rising cost of living. In the United States, adult kids are moving home in huge numbers – numbers so large, in fact, that they are setting all-time records. Add to this a rapid rise in life expectancy, and you get dynamics that begin to actually change social order and long-term behavior.

Though this trend presents a big, fat target for negative press, there are interesting things to note:

  •  When two adult generations of the same family live under the same roof, the older adult is the head of the household in about three-quarters of all cases (ibid);

And despite the derogatory – but admittedly funny – term “KIPPERS,” evidence points in a largely different financial direction.

Self-Designed Anti-Poverty Program

In their study entitled Fighting Poverty in a Bad Economy, Americans Move in with Relatives, Rakesh Kochhar and D’Vera Cohn write, “Without public debate or fanfare, large numbers of Americans enacted their own anti-poverty program in the depths of the Great Recession: They moved in with relatives.” The authors go on to say, “…the rise of multi-generational households in the recession could be viewed as the American public’s self-designed anti-poverty program.”

This combined-household trend is not lost on the nation’s builders. In a PulteGroup study released October 2012, Deborah Wahl Meyer, Pulte chief marketing officer, says many new homes now offer an upstairs and a downstairs master suite to accommodate multi-generational families (http://www.prnewswire.com/news-releases/pultegroup-survey-mom-and-dad-anticipate-future-roommates-174552451.html).

At some point, however, there are only so many ways to cut costs and combine expenses.

We’re Not Getting Younger – And Things Aren’t Getting Cheaper

In Six Major Drains On Boomers’ Bank Accounts, Pamela Villarreal of the National Center for Policy Analysis says, “Housing…is typically the largest monthly consumer expenditure” (Financial Planning online journal (http://alturl.com/ionsj).

Villarreal goes on to say that for homeowners between the ages of 55 and 64, “…expenditures on principal, mortgage interest, taxes, maintenance and insurance rose 25%. The portion of income they spend on mortgage interest increased 47%, from 4.3% to 6.3%” over the past two decades (ibid).

The FHA-Insured HECM

With 10,000 baby boomers a day turning 62, and the cost of managed care skyrocketing, the trend toward multigenerational living arrangements is not likely to change in the foreseeable future. Costs are going up, wages are not, and as in other times of uncertainty, families rally together to meet needs.

Many issues surrounding aging do not go away over time. However, for the senior homeowner aged 62 or older, the concern surrounding meeting a monthly mortgage payment is one issue that can be addressed through the FHA-insured HECM. And, if there is sufficient equity in the home, the homeowner can improve cash flow by establishing a non-cancellable – and non-taxable – line of credit.

Incidentally, rates have never been lower. So if you, or someone you know, would like to look into the potential benefits of a reverse mortgage, give me a call. I always love hearing from you.

Laurie

Laurie Denker MacNaughton [NMLS# 506562] · Reverse Mortgage Consultant · Middleburg Mortgage, a Division of Middleburg Bank · 20937 Ashburn Road, Suite 115 ·Ashburn, Virginia 20147 · 703-477-1183 Direct · LMacNaughton@MiddleburgBank.com · www.middleburgmortgage.com/lauriem

Visit my Informational Blog at https://middleburgreverselady.wordpress.com/

Potato Skins and Emerging Trends: Aging In America

by middleburgreverselady, posted in Caring for Aging Parents; A Daughter's Story, FHA HECM, Retirement Planning, Reverse Mortgage

Charles, Jr., always preferred the name Chuck. But in his years as a scrappy street-fighter in Providence, Rhode Island, he was simply called “Bull Dog.” The aptness of that description I will leave unaddressed.

Chuck was the only son of Charles, Sr. and Elizabeth, New England socialites who came into fast money when Charles, Sr., a chemist, patented a durable fabric blend for Pullman sleeper cars. Wanting nothing to do with his parents’ new-found wealth, Chuck dropped out of high school to run bets for an off-track gambling ring. Not yet out of his teens, he was a heavy drinker, ruthless fighter, and on several occasions narrowly escaped police sweeps.

Around 2:30 Sunday afternoon, December 7th, Chuck and a friend were walking to join a game of nine-pin. One street over they heard yelling, and thinking a fight had broken out, ran to join the fray. What they found changed their lives, their nation, and indeed the whole world. What they found, of course, was news of Pearl Harbor.

Chuck’s particular journey led him into the U.S. Eighth Army Air Corps, proudly referred to as “The Mighty Eighth.” On its twenty-second mission his B-24 was shot down, and Chuck and the one other surviving crew member spent the remainder of the war in Stammlager Luftwaffe #17b, otherwise known as the infamous Stalag 17.

Hunger, cold, vermin, illness, and despair defined life for the 4000 men in the camp. Chuck, wanting documentation of the men’s lives, worked alongside two other corpsmen to create photosensitive paper, done by coating scraps of paper with a potato skin emulsion. The paper was then placed into a light-tight box, with only the smallest of holes carefully punched in one end. These photos exist to this day in a book called Kriege Memories, self-published after the war by Chuck and one of his fellow corpsmen.

Chuck, now gone, told me his story several years ago. As the daughter of an aerospace engineer, I gathered details of his story the way others collect baseball memorabilia, Indian head nickels, or teacups. I have Chuck’s photos, several Western Union telegrams, Red Cross communications, and his letters home that were never posted.

For me in some ways this account has grown richer over the years. Some of the power comes from the photos themselves, arrestingly clear despite their fundamentally unstable original medium, and their having been stored for years before being preserved.

But part of the elemental power is simply this: this was a generation that did what it took, with what was at hand, to get the job done. And though we are losing this generation, these qualities still persist.

This week past I met with…a “family.” My client, the homeowner, is well past 80, widowed, and in need of companionship, light housekeeping, transportation, and help with medications. Living with her is a male companion, a long-time friend, who is several years her junior. Also in the home is a pre-teen boy and his mother, who lost her own home when she was laid off from her HR job. She is now back to work, and well on her way toward regaining financial stability.

Messy, right?

Oddly, no.

In fact, I have been in households composed of blood relatives that were far less functional, far less kind, and in far greater distress.

Life is really just stitched-together stories, so I asked my client to tell me the story of her household. The simplicity, elegance, and bald-faced honesty were arresting: she said, in effect, “I have a house, they needed a home. I need help, they have youth.”

Even now this is a generation that does what it takes, with what is at hand, to get the job done.

And, as it turns out, my client and her new, blended family are far from being an isolated phenomenon. In fact, it is one of the fastest-growing household trends…

And more on that in my next post.

Let me know what you’re seeing – I always love hearing from you.

Laurie

Laurie Denker MacNaughton [NMLS# 506562] · Reverse Mortgage Consultant · Middleburg Mortgage, a Division of Middleburg Bank · 20937 Ashburn Road, Suite 115 ·Ashburn, Virginia 20147 · 703-477-1183 Direct · LMacNaughton@MiddleburgBank.com · www.middleburgmortgage.com/lauriem

Visit my Informational Blog at https://middleburgreverselady.wordpress.com/

You Can’t BUY a Home With A Reverse Mortgage…You Dummy

by middleburgreverselady, posted in Caring for Aging Parents; A Daughter's Story

Every once in a while something so odd happens that you spend the next few days…or weeks…or MONTHS – if it’s odd enough – processing the details.

Exactly a year ago I was in the middle of a complex HECM for Purchase transaction. It involved a knotty situation in which a builder had declared bankruptcy before completing construction on a condo, and another builder had finished the project. However, the new guy had never put some of the completed phases to record. I will sum up the details of the situation simply by saying Uncle Sam does not smile upon this business model.

After a couple weeks mucking about for resolution utilizing the obvious channels, such as the homeowners association attorney – whose job description, incidentally, does include this type of thing – I decided to go to the top of the food chain and contact my client’s US Congressman.

Imagine my surprise when I received a mini-lecture from a congressional aide, who stated with great conviction, “You can’t BUY a home with a reverse mortgage. Reverse mortgage is a refi product. So put that in your pipe and smoke it, you dumb Reverse Mortgage Specialist.”

Ok, so maybe he didn’t say this last part. But it was implied.

Well, well, well, Mr. Aide, thank you for THAT helpful input.

So, is that to say you CAN you buy a home with a reverse mortgage?

In a word, yes!

So how does Reverse for Purchase – also known as HECM for Purchase – work? And why do so few people know about it?

The concept of HECM for Purchase could not be more straightforward: the home buyer provides a down payment, the size of which is determined by the home buyer’s age. The HECM loan provides the rest.

That’s it. End of story. You are in your home for the rest of your life – or as long as you want to live in the home as your primary residence – and never make a monthly mortgage payment.

This smells fishy. How can I live in a home and not make payments?

Answer: Not making payments is very different from saying the loan is never repaid. The loan is always repaid – it’s just that you don’t repay it. When you are finished with the home, the home itself repays the debt.

But when is the loan repaid?

Answer: The loan is repaid when the last person on title moves, sells, or dies. In other words, the loan is repaid BY THE HOME once the senior no longer needs the home.

But where does the money come from to repay the loan?

Answer: The home is either sold, and the proceeds from the sale repay the loan, or the family secures new financing and buys the home.

But what if the home has gone down in value and the proceeds from the sale can’t repay the loan?

Answer: The home repays what it can. Any shortfall is made up by the mandatory Mortgage Insurance Premium (MIP).

But what if I want to leave the house to the kids?

Answer: You can still leave the house to the kids: it’s still your house. The kids will need to: 1) line up their own financing, and buy the home, or 2) sell the house. However, they would have to do this anyway if you had a “forward” mortgage…AND they would have to make your mortgage payment every month after you were gone, or risk losing the house.

How long can I stay in my home?

Answer: As long as you want to. As long as you pay your property taxes, keep current on your homeowner’s insurance, and maintain the home, you never have to move. You can, however, move whenever you wish.

Ok, So Let’s Be Blunt: If this program is so great, why don’t more people know about it?

Answer: First, it has not been around all that long: FHA rolled it out just over three years ago. Second, despite a lot of money spent on financial education for seniors, there are still far too many people – like the congressional aide mentioned above – who are very bold in speaking very forcefully about topics they know very little about. And that is very unfortunate.

If you or someone you know needs to move into a home better suited to aging in place, the FHA-insured HECM for Purchase may very well make this possible.

I love answering questions about the financial health and the long-term well-being of our seniors. Give me a call – I always love hearing from you.

Laurie

Laurie Denker MacNaughton [NMLS# 506562] · Reverse Mortgage Consultant · Middleburg Mortgage, a Division of Middleburg Bank · 20937 Ashburn Road, Suite 115 ·Ashburn, Virginia 20147 · 703-477-1183 Direct · LMacNaughton@MiddleburgBank.com · www.middleburgmortgage.com/lauriem

Visit my Informational Blog at https://middleburgreverselady.wordpress.com/

The Pickle and the Pickle Jar

by middleburgreverselady, posted in Caring for Aging Parents; A Daughter's Story, FHA HECM, Retirement Planning, Reverse Mortgage

Today I met with two typical Washington, D.C. couples: well-educated, highly-sophisticated, both have traveled broadly and lived internationally. Both live in charming, high-end D.C. neighborhoods. And in what I can only call a rapidly emerging scenario, though well past the traditional age of retirement, both couples still work – and both have one advanced-elderly parent living with them.

What has transpired that the HECM now finds itself squarely within the retirement plans of a demographic who heretofore would not so much as have entertained the idea.

The answer?

Life expectancy.

The Pickle

We have prolonged life to a remarkable degree – but we cannot stop aging. We’re in a pickle: the old go on for decades, until the children of the advanced elderly are themselves deep into their own retirement years.

Many adult children will eventually be called upon to support their parents. The parents, no matter how independent they wish to be, cannot be left unsupervised. They need, at very least, an in-home companion, but as needs go up, costs go up. And here’s the tough part: the adult kids themselves need every penny they have to make it through retirement.

The Pickle Jar 

The graphic I often use when speaking on the HECM is one of an old fashioned pickle jar. Not the little kind where you can reach bottom with an iced tea spoon – no, the jar I’m talking about is one of the BIG ones, the kind you had to reach your whole arm down into to grab the big, fat pickle at the bottom. So that big jar, into which for 30 years homeowners have been piling pennies, is the home. Now the mortgage is paid off, the jar is full – or mostly so – but the jar lid is screwed on.

The FHA-insured HECM, when set up as a line of credit, allows seniors to reach into the jar and take out pennies – one at a time, ten at a time, or a fistful at a time – according to their need. It is a non-cancellable line of credit, waiting in reserve to be used as needs arise.

How does this help in the case of the families I met today.

As they labor to meet the needs of their advanced elderly family member, the “burn-through” rate of their income and savings is too rapid. They have done the math: if expenditures continue apace, there will be nothing left for them when they are that age.

In today’s Journal of Financial Planning, authors Dr. John Salter and Harold Evensky write, “…[t]he FHA HECM Saver offers unique and attractive features,” and then go on to say:

We find this risk management strategy improves portfolio survival rates by a significant amount. The improvement in survival rates is attributable to the mitigation of the volatility drain – the risk of having to sell investments when depreciated.

The Journal article is spot-on. Current trends suggest that within a few years, rare indeed will be the person whose older relative does not depend upon a reverse mortgage for income, for a financial safety net – and for the very preservation of dignity itself.

Give me a call. I always love hearing from you.

Laurie

Laurie Denker MacNaughton [NMLS# 506562] · Reverse Mortgage Consultant · Middleburg Mortgage, a Division of Middleburg Bank · 20937 Ashburn Road, Suite 115 ·Ashburn, Virginia 20147 · 703-477-1183 Direct · LMacNaughton@MiddleburgBank.com · www.middleburgmortgage.com/lauriem

Visit my Informational Blog at https://middleburgreverselady.wordpress.com/

Thickness, Congestion, Repugnance…And the Preservation of Dignity

by middleburgreverselady, posted in Caring for Aging Parents; A Daughter's Story

This week past my friend Jean and I took a road trip from sweltering Washington, D.C. to almost as sweltering Gloucester, Massachusetts. On the way we stopped in Boston to visit Jean’s parents, where she introduced me as the “geekiest friend” she knows.

I thought this unfair: she must have at least one geekier friend.

In any event, on the trip I listened with rapt attention to a lecture by Harvard professor Alvin E. Roth, the George Gund Professor of Economics at Harvard Business School.

The lecture carries the remarkably boring title, “What We Have Learned From Market Design,” and discusses three elements that trip up markets, whether we’re talking about kidney transplants, adoption…or, presumably, the hottest new iPhone.

Basically, the three elements are as follows:

Thickness: do enough people need what you offer?

Congestion: can enough be produced to make it widely available?

Repugnance: is what you offer socially acceptable?

Now, I’m a Reverse Mortgage Specialist, a mortgage banker. Seniors – or their adult children – come to me for money. So why did Dr. Roth’s lecture captivate me? And why do you care?

One of the biggest challenges facing us is how, as a nation, we are going to keep our seniors – our parents, friends, neighbors, the older members of our communities – safe, sound, and secure as they retire, relocate, and move ever deeper into old age. And much of this revolves around their housing.

And that’s where Dr. Roth’s lecture comes in:

Thickness: In America, 10,000 – TEN THOUSAND – boomers a day turn 62. The U.S. Census Bureau defines a mid-sized town as one having 250,000 people. That means every 25 days enough people in America turn 62 to fill a city – an entire mid-sized city. We are talking about lots and lots and lots of people – 76 million, to be precise – who over the next 18 years are going retire, move…and in many cases, need additional funds to make it through retirement. People, lots of people, need, or will need, an FHA HECM, also known as a reverse mortgage.

Congestion: Under current guidelines, to qualify for a reverse mortgage a person must be at least 62 and have sufficient home equity to pay off any existing loans on the home. The reason credit score, employment, or income doesn’t matter is because the borrower does not pay back the loan; the home pays back the loan once the borrower no longer needs the home. As long as we have homeowners, we have what we need to keep those homeowners in their own home.

Repugnance: I’ll be blunt – the old, pre-FHA reverse mortgage had a wretched history. However, the new FHA HECM is federally insured, federally regulated, and very closely monitored. This is as it should be – after all, we’re talking about your parents and mine, your neighbors and mine, and, eventually, you and me. Nonetheless, despite all the meticulous oversight, addressing fear of my loan product is a big part of what I do. With the huge educational programs and advertising campaigns over the past few years, the perception has begun to change, but misunderstandings still abound.

We’re all in the same boat: day by day we get older, our parents get older, and the nation’s financial situation gets a little more strained. The fear of running out of money in retirement dogs many of our seniors. Ask seniors and they’ll tell you: reduced circumstances and the attendant loss of dignity is not far from their thoughts. Fortunately, there are options.

If you or someone you know would like to talk, give me a call. I always love hearing from you.

Laurie

Laurie MacNaughton [NMLS# 506562] · Reverse Mortgage Consultant · Middleburg Mortgage, a Division of Middleburg Bank · 20937 Ashburn Road, Suite 115 ·Ashburn, Virginia 20147 · 703-477-1183 Direct · LMacNaughton@MiddleburgBank.com · www.middleburgmortgage.com/lauriem

Visit my Informational Blog at https://middleburgreverselady.wordpress.com/

To watch Dr. Alvin E. Roth’s lecture go to:   http://www.youtube.com/watch?v=7qrYC0Ojf-o

Reversing Years’ Worth of Skepticism

by middleburgreverselady, posted in FHA HECM, Retirement Planning, Reverse Mortgage

Even if they don’t adhere to it, most people have at least heard of the “bucket” strategy of saving for retirement. Basically, it’s a method of asset allocation, a way to diversify investments and save for the day you’re no longer working full time.

But here’s a question you might not know the answer to: for most people, what is the biggest – and best funded – bucket?  Cash equivalents? Fixed-income securities? Pension?

Answer: No, no, and no. For most people, the single biggest “investment bucket” is their home.

You can think about it this way: you might have designated several buckets. But if you didn’t put sufficient money into them during the working years, those buckets are not going to get you through retirement. However, most Americans paid into their home, even during the past few years when times were tough.

But here’s the problem: after spending years pouring the first fruits of one’s income into the home, that money is frozen, tied up in an illiquid asset. It’s an investment, certainly. But it’s not one easily converted into an income stream for retirement.

Increasingly, however, drawing upon that bucket by means of an FHA reverse mortgage is being recommended as a way to meet seniors’ financial needs during retirement.

FHA reverse mortgages have been around since 1988. But until recently, the financial planning community viewed them as the dirty underbelly of financial products.  It was the rare financial planner who saw any legitimate use for them whatsoever, let alone who used them in a strategic way.

However, within the past few years scores of scholarly studies have shown both the near-term and long-term positive impact of reverse on standard of living, financial portfolios, and estates.

In “How Important Is Asset Allocation To Financial Security in Retirement?” authors Munnell, Orlova, and Webb with Center for Retirement Research at Boston College state:

…[F]inancial advice…tends to focus on financial assets, applying tools that give prominence to the asset allocation decision. But most people have little financial wealth, and financial tools are often silent on the levers that will have a much larger effect on retirement security for the majority of Americans. These levers include delaying retirement, tapping housing equity through a reverse mortgage, and controlling spending [emphasis added].

Of particular interest to many financial planners is that, when set up as a monthly payment option, a reverse mortgage basically annuitizes the home – and it’s a considerably bigger annuity than most people would have been able to establish in the years they were supporting their family, helping with college tuitions…and paying their mortgage.

Rick Gow, wealth manager with the independent investment firm Lara, Shull, and May in Falls Church, Virginia, cites the example of a 66-year-old with a house valued at $400,000.

After subtracting closing costs, the retiree could receive a tax-free, monthly check of $1,252 for as long as the home remains the primary residence. By the time the homeowner turns 85, disbursements would total more than $289,100; by age 95, the total payouts would be over $435,600.

If the homeowner were to take a onetime, lump sum payout, he or she would receive approximately $256,800.  A third option would set aside that amount in a line of credit, the balance of which grows over time, tax free.

There is also a newer, reduced fee FHA reverse mortgage, called the HECM Saver. The over-all payout is less with this option, but Gow points out the lower closing costs make it a good option for some.

The majority of Americans fear running out of money in retirement more than they fear death, according to a May, 2012 AARP bulletin. In an America where 10,000 boomers a day turn 62, the FHA reverse mortgage has an increasingly pivotal role to play in retirement planning.

I always love hearing from you. Call me at any time with questions.

Laurie

Laurie MacNaughton [NMLS# 506562] · Reverse Mortgage Consultant · Middleburg Mortgage, a Division of Middleburg Bank · 20937 Ashburn Road, Suite 115 ·Ashburn, Virginia 20147 · 703-477-1183 Direct · LMacNaughton@MiddleburgBank.com · www.middleburgmortgage.com/lauriem

Visit my Informational Blog at https://middleburgreverselady.wordpress.com/

Babies Don’t Have Dumb Ideas

by middleburgreverselady, posted in Caring for Aging Parents; A Daughter's Story

When my daughters were teenagers I often said the biggest difference between teens and babies is that babies don’t have dumb ideas yet.

But both teens and babies have this in common: just a couple years later, both are more capable, more independent, and better able to care for themselves.

It’s tough to acknowledge, but I now have to add my mother to the comparison.

My mother is probably the most gifted person I know: brilliant, beautiful, funny, well read, extensively traveled, graceful and poised.

But she is getting old, and her proficiency in daily tasks is falling away at a relentless pace. And, unlike either babies or teens, a couple more years is not going to make the issue any better.

NPR Morning Edition’s Jessica Smith, in “Baby Boomer Money Squeeze Worsens, Multi-Gen Households Rise” (June 6, 2012), writes,

Roughly 78 million baby boomers are moving into their retirement years now. At first, they will be the “young” old. Legions of retired boomers soon will be walking around the mall, volunteering with community groups and taking grandchildren on trips.

At first, that can be good for the economy. But this immense generation, born between 1946 and 1964, will keep aging. Based on current medical outcomes, most of the people who live beyond age 85 will end up with dementia or other disabilities that require costly care.

Here’s how fast the numbers will ratchet up: In 1990, only about 3 million Americans were over the age of 85. Today, the figure is 6 million. By 2050, the United States will be home to about 19 million people older than 85, according to U.S. Census projections.(http://www.npr.org/2012/06/05/154001412/baby-boom-money-squeeze-is-set-to-get-tighter)

Almost 20 percent of advanced elderly Americans now live with their aging adult children, putting tremendous pressure on “leading edge” boomers who are hitting traditional retirement age. Boomers tended to have fewer children, later in life, which in some cases has resulted in their still having dependents at home at a time previous generations would have been saving intensively for retirement. Additionally, many middle-aged parents find themselves helping grown children who have lost jobs, homes, and businesses – the classic “sandwich generation” squeeze, made more intense by a prolonged recession.

We are a becoming a nation of the old and the older, the squeezed and the very squeezed.

Writes Ms. Smith, “For individuals, families, local government officials and federal taxpayers, this demographic shift will drain dollars and attention, and force extremely difficult decisions about living arrangements, as well as end-of-life care.”

When we have these talks about taxes and government, what kind of numbers are we talking about?  The primary number to watch is the national debt: in 1970, when boomers were young, the national debt ran about 28 percent of gross domestic product. It now stands at 70 percent.

And, as in the case of my mother, a couple more years is not going to make this issue any better.

According to Centers for Medicare and Medicaid Services, Medicare will remain solvent until 2024. Starting last year, Social Security already began paying out more than it takes in.

As former U.S. Comptroller General David Walker, a federal spending expert says, “Government has grown too big, promised too much and waited too long to restructure. It is going to spend less over time … which means that individuals will have to plan, save and invest for the future.”

Plan, save, invest…and take out a reverse mortgage, according to research put out by Boston College in May, 2012.

….but more in my next piece about several watershed reverse mortgage articles published this spring by major research institutions.

Laurie

         Laurie MacNaughton [NMLS# 506562] · Reverse Mortgage Consultant · Middleburg Mortgage, a Division of Middleburg Bank ·                   20937 Ashburn Road, Suite 115 ·Ashburn, Virginia 20147 · 703-477-1183 Direct · LMacNaughton@MiddleburgBank.com www.middleburgmortgage.com/lauriem

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