Retirement Resources

Although most retirees expressed the desire to age in place, less than half had really considered any strategies to leverage their home equity as a retirement income source. Since most retirees were not set on leaving the home to their heirs, they may be open to the possibilities of using home equity as a retirement income tool to support the goal of aging in place. However, only 49 percent of the respondents had a comprehensive written retirement plan in place and many of the respondents who had financial advisors, 40 percent, did not have a comprehensive written retirement plan. A good comprehensive retirement income plan should take into account where the retiree wants to live in retirement and should also discuss home equity as either an income or legacy tool, depending on the individual client’s goals, desires, and needs. Doing some homework on the potential advantages of using home equity in retirement would benefit retirees and their advisors, especially if aging in place is the desired outcome.

Source: Net Worth Data from U.S. Census Bureau, Survey of Income and Program Participation, 2008 Panel, Wave 10; Present value of Social Security benefits based on a worker with $60,000 of wages, and a same aged nonworking spouse. The worker's PIA is estimated at $1,557 (calculated using the Social Security Quick Calculator). Benefits are claimed at 66 and the worker dies at 84 and the spouse at 89. Present value was based on a 0% real rate of return (a current approximation of the risk free rate of return)

Ideas for Retirees

New research from The American College of Financial Services, The Home Equity and Retirement Income Planning Survey, found that the overwhelming majority, 83 percent of Americans nearing or in retirement, want to remain in their current home for as long as possible. Additionally, the desire to remain in one’s home increased with age. Perhaps somewhat surprisingly, not only did the desire to remain in one’s home increase with age, but the number of years the respondent expected to remain in the home also increased with age. Even if the homeowner needed to relocate later in retirement, almost none of the respondents expressed a desire to rent.

Most retirees expressed the desire to age in place, less than half had really considered any strategies to leverage their home equity as a retirement income source. Since most retirees were not set on leaving the home to their heirs, they may be open to the possibilities of using home equity as a retirement income tool to support the goal of aging in place. However, only 49 percent of the respondents had a comprehensive written retirement plan in place and many of the respondents who had financial advisors, 40 percent, did not have a comprehensive written retirement plan. A good comprehensive retirement income plan should take into account where the retiree wants to live in retirement and should also discuss home equity as either an income or legacy tool, depending on the individual client’s goals, desires, and needs. Doing some homework on the potential advantages of using home equity in retirement would benefit retirees and their advisors, especially if aging in place is the desired outcome.

 

Source: Net Worth Data from U.S. Census Bureau, Survey of Income and Program Participation, 2008 Panel, Wave 10; Present value of Social Security benefits based on a worker with $60,000 of wages, and a same aged nonworking spouse. The worker's PIA is estimated at $1,557 (calculated using the Social Security Quick Calculator). Benefits are claimed at 66 and the worker dies at 84 and the spouse at 89. Present value was based on a 0% real rate of return (a current approximation of the risk free rate of return)

Facts & Myths of Social Secuity

Social Security remains a confusing topic, and misconceptions could multiply as the presidential campaign swings into high gear. Though the leading candidates haven’t yet turned this into a prominent campaign issue, it’s bound to gain more visibility. Here’s a look at a few myths and misunderstandings, and a couple accurate claims, you might hear on the election trail or elsewhere:

• Social Security is heading toward bankruptcy.

False, though the answer somewhat depends on how you define bankruptcy. Social Security will have money to pay retirement benefits for decades to come, even if needed reforms are not made. It’s just that the program won’t have the means to meet all its scheduled obligations. Social Security’s trustees estimate the program, in the absence of reforms, will be able to pay only about 75 cents on the dollar by 2034.

Reforms still can be made to strengthen Social Security, and the sooner they’re made, the better. “The program is getting close to the point of no return,” said Marc Goldwein, senior policy director at the Committee for a Responsible Federal Budget.

• Everyone has Social Security assets held in a personal investment account.

False.  Social Security isn’t an investment fund but, rather, a pay-as-you-go system that transfers money from workers to retirees. “The taxes paid by today’s workers and their employers don’t go into dedicated individual accounts,” noted Pew Research in a report. “Nor do Social  Security checks represent a return on invested capital.” Yet nearly one-third of Americans believe they have dedicated Social Security accounts, according to a 2014 Pew survey.

• Social Security will be around for today’s young adults.

True. Despite skepticism felt by many young adults that they’ll ever see any money from Social Security, and despite the well-known funding problems that could result in benefit cuts, the program will keep going unless Congress dismantles it, which isn’t likely. “Saying Social Security won’t exist isn’t true and won’t help the debate,” said Goldwein.

• Social Security would have remained solvent if Congress hadn’t raided the trust fund.

False. The trust fund refers to a surplus of $2.8 trillion that has been building for the past three decades, from payroll-tax revenue exceeding benefit payments over that period. The surplus is stored in special Treasury bonds, but so what? It’s largely an “accounting fiction,” not money stashed away for future generations, wrote Paul Solman, co-author of Get What’s Yours, a book explaining Social Security benefits. These surpluses will start to shrink in coming years.

The money has been used to fund other government programs, so in a sense it could be argued that Congress and various administrations raided the trust fund, said Goldwein. However, the full $2.8 trillion still is owed by the government to Social Security and most projections assume it will be repaid through some combination of reduced government spending, tax increases or federal borrowings.

• Taking a big IRA withdrawal can make your Social Security benefits taxable.

True. So can other sources of taxable income.

If Social Security is your only source of income, your benefits probably won’t be taxable. But if you have other income, some of your benefits might be taxable. For example, many people who diligently saved using a traditional IRA could get hurt by mandatory withdrawals, which start after investors reach age 70½.

• If you’re working while receiving Social Security, you will lose benefits.

Mostly false. Some benefits will be reduced, assuming you’re still below full retirement age (between 66 or 67 for most people now employed).

How much gets deducted depends on your age and how much you earn. For 2016, if you remain below FRA throughout the year, the Social Security Administration will deduct $1 in benefits for each $2 earned above $15,720. If you reach FRA during 2016, it will deduct $1 for every $3 earned above $41,880.

However, these benefits aren’t lost but delayed. After reaching full retirement age, your benefits will increase to account for amounts withheld earlier. And once you reach full retirement age, you get to keep all your benefits, even if you’re still working.

Provided by Reach Wiles at russ.wiles@arizonarepublic.com or 602-444-8616.

Is Your First Home Within Reach?

20160607-Within-Grasp-STMThere are many people sitting on the sidelines trying to decide if they should purchase a home or sign a rental lease. Some might wonder if it makes sense to purchase a house before they are married and have a family. Others may think they are too young. And still others might think their current income would never enable them to qualify for a mortgage.

We want to share what the typical first-time homebuyer actually looks like based on the National Association of REALTORS most recent Profile of Home Buyers & Sellers. Here are some interesting revelations on the first time buyer:

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Bottom Line

You may not be much different than many people who have already purchased their first home. Let’s get together to see if your dream of homeownership can become a reality!

10 Rules for Children and Cell Phones

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Last night my son preferred to use his mobile phone(no service just wifi – another story) than go to the movies or watch the Stanley Cup game(granted not a Penguins fan – I give him that)

The entire world has moved to the cell phone. It’s no longer a convenient tool to speak to someone when you are mobile. Now it is the town square. It’s the place to socialize, it’s the library, the arcade, the TV, the shopping mall, the remote control, etc. Kids know it and feel left out of the world when they don’t have one. So they will tell you that they need one and that everyone has one except them. A kid getting a smart phone today is similar to our generation getting a drivers license. [Tweet This] It is releasing them into a whole new world.

Unlike many other parenting topics, you cannot think back to how your parent handled the situation when you were a kid because cell phones were not around yet. Regardless of how old your child is when you decide it is time to give them one, here are 10 rules for kids and cell phones.

1. The Plan

Discuss with your child what their cell phone plan entails. Let them know how many minutes and text messages they have a month. Determine consequences for running over. One idea is to charge them for the price difference.

2. Picture/Video Messages

Let your child know if picture and video messaging is part of your plan. Tell them what is and isn’t appropriate. Discuss and forbid behavior such as sexting and let them know how inappropriate pictures can spread and ruin reputations.

3. Downloads

Set rules on downloads. Require your kids to talk to you before downloading something. Use your discretion. There is no rating system for video games for cell phones.

4. Numbers to Avoid

Give your child a list of relatives to call or text sparingly. Also, warn them of incoming calls from unknown numbers who may be trying to get their information.

5. Driving and Cell Phones

Be familiar with the state laws to know if a headset is required for talking on the phone while driving and to know if texting while driving is illegal. Make your own rules for using the cell phone while driving.

6. Cell Phone Etiquette

Share with your child when it is not appropriate to use their cell phone. Examples include, in school, at the movies, on dates, during meals with people (especially family), during tests, at appointments, etc.

7. Cyber Bullying

Stop cyber bullying before it starts. Discuss with your child how painful it is for the victim and how there is no escape from cyber bullying once it starts.

8. Internet Usage

Tell your child if your phone plan covers internet usage or not. If it does, inform your child of any websites or applications you do not want them on.

9. Communicate Clearly

Explain to your child to write clearly over text messaging or if it is an important conversation to use the phone or even better, have it in person. Many conflicts are created using texting through miscommunication.

10. Attachment

Today, everyone has their cell phone attached to their ear or to their thumbs. Warn your child of becoming dependent on their cell phone and of becoming so attached they miss what is happening in front of them.

All Pro Dad

Retirement Timing

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A lot of discussion about “sequencing of distributions” has been taking place recently in financial planning circles.  “Sequencing of Distributions” looks at the order in which you take distributions from your retirement account.  This matters because the order in which you take distributions has a very significant impact on how long your retirement assets will last.

Consider the two examples illustrated in the chart.  Column 1 has the same amount of distributions scheduled for the next five years, regardless of how the market performs.  Column 2 changes the amount of distributions in years 2, 3 and 4, based on the performance of the market.

A reverse mortgage line of credit can be used to supplement your income in the years where you take a reduced distribution from your retirement account.  This could preserve your assets for a longer period of time, and give you more flexibility as the market fluctuates.

Please see a financial advisor for more details on how to evaluate a better distribution sequencing strategy for your situation.  Please contact me for more details on how a reverse mortgage could help.

Your Fico Score!

How my FICO Scores are calculated

FICO® Scores are calculated from many different pieces of credit data in your credit report. This data is grouped into five categories as outlined below. The percentages in the chart reflect how important each of the categories is in determining how your FICO Scores are calculated.

Your FICO Scores consider both positive and negative information in your credit report. Late payments will lower your FICO Scores, but establishing or re-establishing a good track record of making payments on time will raise your score.

How a FICO Score breaks down

These percentages are based on the importance of the five categories for the general population. For particular groups—for example, people who have not been using credit long—the relative importance of these categories may be different.

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How much will credit inquiries affect my score?

The impact from applying for credit will vary from person to person based on their unique credit histories. In general, credit inquiries have a small impact on one’s FICO Scores. For most people, one additional credit inquiry will take less than five points off their FICO Scores. For perspective, the full range for FICO Scores is 300-850. Inquiries can have a greater impact if you have few accounts or a short credit history. Large numbers of inquiries also mean greater risk. Statistically, people with six inquiries or more on their credit reports can be up to eight times more likely to declare bankruptcy than people with no inquiries on their reports. While inquiries often can play a part in assessing risk, they play a minor part. Much more important factors for your scores are how timely you pay your bills and your overall debt burden as indicated on your credit report.