RetirementHomes.com - financial

Growing number of elderly struggle to get mortgages

aadmin — Thu, 15 Jan 2015 19:19:44 +0000

Older people in the US are increasingly taking more mortgage debt into retirement than ever before, but applying for a new mortgage can prove troublesome for seniors. This is also the case in the United Kingdom, where new rules that were introduced earlier in the year have meant a greater struggle to gain finance for home buying in later life.

For homeowners in America aged 65 and over, the percentage carrying mortgage debt increased by almost 10% to 30% from 2001 to 2011. Among those aged 75 and older, the rate more than doubled during the same period, from 8.4% to more than 21%.

Types Of Mortgages Available In America

There are many different types of housing purchase loans available to older people in America, but the problem comes from proving that you can pay, even if you are still working later in life. There is a lot of advice and services available to senior borrowers, and many options are available.

Range Of Mortgages In The US

There are a range of mortgages available to US senior citizens, from the standard mortgage, which depends on your income and credit rating, to a second mortgage, but these are riskier for lenders. Other options include a refinanced mortgage and a reverse mortgage.

Reverse Mortgages

With a reverse mortgage, which is available to those aged 62 and over, instead of getting a lump sum that is used to pay for a home, a lender gives the borrower monthly payments for your existing home for a fixed amount of time. At the end of that period, the bank owns the home, and the property is then either sold by the lender or refinanced by a family member.

However, these types of mortgages have a bad reputation as a last resort for seniors who can’t keep up with medical bills or the upkeep of their home, but used properly by someone who totally understands what they are getting in to, it can be a useful option. Some analysts have warned that with the growing deficit in America, this type of product may not continue to be available for too much longer.

Getting a Mortgage In The UK

Tough new restrictions introduced by the Financial Conduct Authority in the UK in the spring have forced lenders to prove their customers will be able to afford to pay off loans. The rules are said to ensure both responsible lending by banks and building societies and sensible borrowing by loan applicants, but the so-called mortgage market review has attracted widespread criticism.

Borrowers’ expenditure has been under the microscope like never before, resulting in some not getting the mortgage they applied for. Even people in their 40s have been told they cannot have loans that end after their expected retirement. Due to a fear of breaking the rules, banks are turning down applicants who would more than likely be making repayments in retirement when incomes are lower.

A report released recently by a body representing 24 big lenders in Britain – including Santander, Nationwide, Lloyds and Barclays – warns that even borrowers in their 40s are falling victim to the new regime, and even those in their late 30s seeking increasingly popular longer-term deals risk being turned down. The rules are also a problem for those forced by soaring house prices to take on longer-term loans that have lower monthly repayments.

Uncertainty Over Pensions

Uncertainty over pensions is also making it difficult for lenders to asses mortgage affordability in later life, and this could become increasingly so when new pension freedoms take effect in 2015, with fears that regulation could bring about the extinction of mortgage terms that stretch into retirement.

The new pension freedoms are said to make it difficult for lenders to know if someone will have a steady income in retirement or if they will have blown it on a big ticket purchase. There is no reason that banks cannot lend to someone in their 70s but they are seeking assurances from the borrower that they will be working until the loan ends

Proving Your Income

Problems can arise when taking a mortgage beyond normal retirement age. Lenders will then start asking about levels of income after retirement to demonstrate that the mortgage will remain affordable, and proving that income could be where the difficulty lies.

In all circumstances it pays for older borrowers to research thoroughly all of the options, shop around with different lenders and know the type of mortgage you need and what the best way of finding it is that will suit you and your family for the future.

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Top Boomer Job Trends for 2014

aadmin — Thu, 02 Jan 2014 08:39:30 +0000

The work landscape for boomers promises to be unconventional in 2014. Employment trends have transformed, leaving middle-aged people with more alternatives and difficult choices. Change leads to challenges. Boomers face the spectre of ageism as younger wage earners enter the job market.

Boomer Entrepreneurship as a Necessity

Sarah Baldwin, from Highland Park, IL, is a creative freelancer and blogger in support of struggling boomers at Kool-aid Rehab for Bright-eyed Entrepreneurs. “There’s a perception that experienced people are too expensive to hire,” she said. “So the price of great talent is going down.”

To escape the inevitable onslaught of younger cheaper talent, Baldwin decided to work for herself. “I became an entrepreneur by necessity,” she said. “There are no opportunities for boomers.” She has partnered her talents with a company specializing in recovery wear, Goodnighties.com. The freelance marketer liked its product so much, she arranged to become its exclusive marketing and sales rep.

It was a deal made in the trenches. But Baldwin had special reasons to align with the online company offering recovery night wear for women with body temperature issues – over 40-years-olds or those undergoing chemotherapy.

Baldwin had suffered from sleeplessness and found the company’s product line beneficial for her. Goodnighties.com is still a work-in-progress, but Baldwin is working hard to promote a product of personal interest. “It’s make your own way,” she said. “Boy is it hard.”

Sabbaticals for Successful Boomers

Bill Van Eron – CMO of Headwaters Marketing – was born in 1946 in the first wave of boomers. He works out of Fort Collins, CO, in strategic PR and integrated research and communications for high-profile clients like Hewlett-Packard.

Over the past year, he has transformed his work and personal goals by capping recruitment with new clients. At 67, he has taken a partial sabbatical or GAP year. Similar to Baldwin, he advocates personal business values.

“People need to depend on a special sense of trust,” he said. On a practical level, Van Eron feels the pressure of a new, upcoming generation. “I don’t want to compete with young college grads and their cool design firms when I can re-envision my personal purpose.”

For Van Eron, a looming issue facing Boomers is to go beyond traditional retirement. “Retirement has taken on negative connotations. We almost need to invent another word.”

Telecommuting – The Flexible Alternative

Flexible work – telecommuting – has become a growing trend for boomers and will continue into 2014.

In 2006, Sara Sutton Fell was seven months pregnant and laid off. She began looking for flexible home-based work. “I was really astonished by all the scams in the niche,” she said. She came up with the idea for FlexJobs, a place where qualified workers could find flexible professional online work. She hatched FlexJobs in 2007; a company she said has helped over 650,000 job seekers in their search for adaptable work hours.

FlexJobs attracts boomers who need to remain in the work force, and others who want to stay active and involved. “The nature of how, when, and where we work has changed so much in the last decade,” said the FlexJobs CEO. “Many professionals are opting for telecommuting.”

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These are sample work situations that boomers will create of find available in 2014. The trick is to discover the right fit.

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The biggest inheritance mistakes seniors make

aadmin — Wed, 14 Aug 2013 07:00:05 +0000

The rapid population growth of Baby Boomers across North America is a well-documented phenomenon, but it’s not just demographics that will change as a result of the aging population: economics will also be significantly impacted.

In the next 40 years, more than 40 trillion dollars of intergenerational wealth transfer will occur in the United States alone in the form of inheritances and estates as millions of Baby Boomers and Generation X’ers retire and pass money on to their children.

If you are a Baby Boomer looking to wind down your career in the coming months or years, it’s not just retirement you should start thinking about, but also the financial assistance or legacy you plan to leave to your children or favorite organizations and charities.

Ruth Nemzoff, a resident scholar with the Brandeis Women's Studies Research Center, told RetirementHomes.com the most important step for retirees is to speak to their children about what their intentions are with their estate planning.

“If children are to be responsible adults they need to plan, not only for their future, but for that of their parents and their children,” Nemzoff said. “Children need to know in advance what money to count on or not count on.”

There are also tax and legal issues to consider when planning for one’s estate.

Ozeme Bonnette, owner of Tri-Quest Investment Advisors, based in Fresno, California, told RetirementHomes.com that estate planning requires careful consideration and legal preparation.

“Loved ones who are not blood relatives can be left out of the estate division if they are not identified in the will,” Bonnette said. “Blood relatives will get priority in court if there is no will to state that these individuals are intended beneficiaries of a portion of the estate.”

She added that some individuals can also be excluded from the will, but the legal documents have to be specific.

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Finances and Work

Financial Planning

How to build the perfect retirement budget

aadmin — Wed, 17 Jul 2013 10:53:27 +0000

Creating and sticking to a budget in retirement is a lot like sticking to a weight loss plan. A strict diet that requires unsustainable habits and leaves you feeling deprived will not be successful in the long run.

Your budget needs to give you an overall healthier financial lifestyle that is sustainable for your savings and income, but also allows you to enjoy the retirement you have worked for. There are a few things you can do to help make your budget a positive step to the lifestyle you want and not a stressful:

Be Honest

Start with a realistic analysis of what you are spending now and where you are spending it. Use a few bills and credit card statements from different points in the last year to give you an idea of seasonal changes in your spending. The more exact you are with your starting numbers, the better you will be able to predict what you need and what you can change. Simply estimating the percentage of your pre-retirement income you will need in retirement will not give you the whole picture.

Get Help

There are many budget guides and tools available on the Internet. Most banks insurance companies have free budget calculators and downloadable charts available. These resources will also help you make sure you have taken all of your expenses into account. Your budget should be part of your overall retirement plan, and your financial advisor can be a resource for you.

Expect the Unexpected

Include some form of saving in your budget. Whether that is all going to an emergency fund or some of it is going towards a big trip, make sure you have built in some flexibility to your budget. If you need to access money unexpectedly, being able to use what had been part of your retirement budget is preferable to dipping into your larger retirement savings. Between inflation, rising health care costs and volatile financial markets, you want to feel as prepared as possible.

Simplify and streamline

When you have the option to pay monthly without being penalized, take it. It is much easier to plan for predictable monthly expenses than for large or fluctuating bills. Paying monthly for property taxes or choosing a monthly plan for utility bills takes some of the guess work out of your budget. As well, try and keep your bill payments coming from one account or one bank account and one credit card. The more places the money is taken out of, the harder it is to track.

Stick with it

Here is that diet analogy again. While dieting, you track your progress, whether it’s by checking yourself in the mirror or getting on the scale. Stay accountable with your budget also. Try, especially at the beginning, to keep all of your receipts to see how your spending compared with your budget. Making necessary changes to the budget and to your spending will keep you on the right path.

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Retirement in Canada vs. the USA: A comparative look

aadmin — Tue, 02 Jul 2013 14:10:00 +0000

This is a big week for North America. This past Monday, July 1, was Canada Day, commemorating the 146th birthday of Canada, and this Thursday, July 4, is Independence Day, recognizing the 237th birthday of the United States.

These two countries, joined by history, geography, language and culture, are allies and friends, but some differences remain. In commemoration of the national birthdays of both Canada and the United States, RetirementHomes.com has prepared a statistical report comparing the state of retirement in both countries.

Canada, with a population of about 35 million, has an estimated 5 million citizens aged 65 and older, representing about 14 per cent of the population. The United States, with an overall population about nine time greater at 315 million, has about 42 million people aged 65 and older, representing slightly less, or around 13 per cent of the overall United States population.

In terms of life expectancy, a Canadian can expect to live to just under 81 years old, while their American counterpart is likely to live slightly less, to about 79.5 years old.

When it comes to pensions, Canada has received high grades for its government-sponsored retirement funds, being ranked sixth in the world, and the United States was slightly behind, ranked in ninth place overall.

On the health front, while the passage of the Affordable Care Act – popularly known as Obamacare – has stoked an internal debate in the United States about the nature of the health care system in that country, and its comparison to Canada.

However, data from the World Health Organization (WHO) shows neither Canada nor the United States as being first-class health care providers. The WHO ranks Canada’s health care system 30th in the world, compared to the United States, which ranks 37th globally.

But comparing retirement in Canada and the United States is more than just a matter of numbers and spreadsheets. The biggest question any Baby Boomer and prospective retiree must ask themselves is where they want to retire.

Many retirement rankings have claimed Central American countries are the best spots to spend the golden years, but the lifestyle of an expatriate is not for everyone, so a discussion with a retirement advisor and family members is the most appropriate first step.

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Which countries have the best pension plans?

aadmin — Wed, 19 Jun 2013 12:11:15 +0000

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Who is most at risk of elderly abuse?

aadmin — Tue, 11 Jun 2013 17:25:20 +0000

This coming Saturday, June 15, is World Elder Abuse Awareness Day. To recognize this serious issue, RetirementHomes.com is producing a series of articles this week to discussing the phenomenon of elder abuse, its causes, warning signs, and its solutions.

Elder abuse is any act which causes harm or distress to an older person, whether it is a regular occurrence or a single act, according to the World Health Organization (WHO). It can also be, according to the WHO, the absence of action, namely neglect and abandonment.

Although there are no hard statistics on the extent of elder abuse, in part because many seniors who suffer never report their experiences, most estimates say between four and six per cent of seniors have been victims of elder abuse at some point in their lives.

But elder abuse is not a monolithic term. In fact, elder abuse takes many forms, including financial abuse, physical abuse, psychological abuse, or sexual abuse.

Dr. Carole Lieberman, a Beverly Hills, California-based psychiatrist and expert witness, told RetirementHomes.com that the likely perpetrators of elder abuse varies depending on the type of elder abuse committed.

When adult children are the perpetrators of elder abuse, it is likely to be an example of pent-up anger against their parent, according to Lieberman.

“Adult children are more likely to be perpetrators of financial and emotional abuse, neglect and abandonment,” Lieberman said.

“Typically, these adult children are carrying resentments from childhood towards their parent and use the parent's vulnerability against them to get back at them for the love and attention they felt deprived of growing up.”

Both sexual and physical abuses, for example, are typically committed by professional caregivers and other medical professionals and institutions who have a more detached relationship to the senior, Lieberman said.

In all cases of elder abuse, there is a strong dynamic of power at play, according to Lieberman, where the abuser – whether it’s an adult child, spouse, or medical professional – takes advantage of the weakness, fear or vulnerability of the senior.

To help prevent the abuse of yourself, or an elderly loved one, Lieberman said there are steps that can be taken for protection before anything happens.

“Seniors need to arm themselves with a plan before they become the target of abuse,” Lieberman said. “This plan should include deciding which family members are most trustworthy and most likely to come to their aid, as well as assembling a cadre of attorneys, accountants and other professionals to work with.”

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The three questions every Boomer planning for retirement must ask themselves

aadmin — Fri, 07 Jun 2013 17:32:02 +0000

If you’re planning on retiring one day, you may be in for a rough surprise. According to management consulting company Aon Hewitt, the average North American worker, should they retire at the age of 65, likely requires about 11 years of their annual pay in order to pay for a retirement with an unchanged lifestyle.

In their 2012 study, ‘The Real Deal: 2012 Retirement Income Adequacy at Large Companies,’ Aon Hewitt also reported that for people hoping to retire a bit earlier – at age 62 – the amount of money saved should amount to 13.5 times annual pay.

And if that doesn’t yet sound intimidating, just plug in the numbers: if you live comfortably on a $75,000 total household income, and if you plan to retire at age 65, in order to maintain that standard of living in retirement, you would need to have about $825,000 in total retirement savings and investments. For a retirement age of 62, that number jumps dramatically to more than one million dollars.

Unfortunately, the average American doesn’t have enough money saved or invested for retirement; in fact, it’s not even close. A study from the Employee Benefit Research Institute this past March found 57% of Americans – up from 49% in 2008 – said they had less than $25,000 saved and investment for retirement.

With so many people facing a significant shortfall in their retirement savings, what is a Baby Boomer to do? What are the best and most effective ways to prepare a financial plan for the golden years?

Here are some handy tips which will help you better prepare for retirement:

1. Know your lifestyle: Many online retirement calculators are based on a premise that retirees will maintain a certain lifestyle after they have stopped working. Each calculation is different, but before calculating how much money you will need in retirement, ask what kind of lifestyle you plan on having. For example, if your current lifestyle has you vacationing, eating at upscale restaurants on a regular basis, and you expect to maintain that lifestyle after work ends, then don’t assume your budgetary needs will decrease. In fact, they may even rise. Conversely, if you plan to scale back your travel and entertaining in retirement, then you don’t need to assume your financial needs will be the same as they are now.

2. Know when you plan to retire: The longer you delay retirement, the less money you will have to save and invest for retirement, but it also means more time working. Every person’s priorities and professional goals are different, so consider when you would like to ideally retire.

3. Don’t count on government assistance: Although Canadians and Americans are offered government pension plans, many studies have shown these to be unsustainable, and many workers today may see the funds run out before they retire. So although it’s tempting to include this money in your retirement calculation, only count on your own money.

Although saving for retirement is one of the most challenging financial goals of Baby Boomers, it doesn’t have to be a struggle. Through self-discipline and planning, even the most ambitious retirement plans can be realized.

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What comes to mind when you think of life insurance?

aadmin — Wed, 29 May 2013 14:11:44 +0000

What comes to mind when you think of life insurance? You are likely thinking of paying final expenses and funeral costs and not what you can do with your insurance policy while you are living. A whole life insurance policy, either a universal life or participating policy, can also benefit you and your family while you are alive.

Many permanent life insurance policies have a cash value that can grow tax deferred over time, taxed only when withdrawn from the policy. Here are three things you can do with a whole life insurance policy, whether you are looking to access the values of a policy you already have or want to make a new policy part of your retirement or estate planning.

1. Supplement your retirement income

You can combine planning for your retirement income and your insurance needs with a whole life policy. In retirement you can assign the policy to a lending institution as collateral on a line of credit and withdraw values from the policy as needed. The death benefit still remains in place and upon the death of the insured any outstanding balance and interest is paid to the lender and the remaining goes to the beneficiaries.

2. Take out a loan

Access the cash values through a policy loan. Interest is then charged on the loan within the policy, but the policy cash values (and death benefit for applicable policies) continue to grow as if no money was withdrawn. The loan can be repaid at any time without penalty. If the insured dies while a policy loan is outstanding the loan and interest outstanding are taken from the death benefit and the rest is paid to the beneficiaries.

3. Help fund a child’s or grandchild’s education

If you have saving for college or university for a child or grandchild in mind, there is an opportunity for several years of tax advantaged growth in the cash value of a policy, by owning a policy where a child is the life insured. When it is time to pay for post-secondary education, ownership of the policy can be transferred to the insured and, similar to a Canadian RESP, taxes are paid at the student’s tax rate when money is withdrawn.

If the child does not want to use the money for school it can instead go to a down payment on a home, the purchase of a car, the start of a business or continue to grow untouched in the policy. Funding a policy in this way can be a tax advantaged strategy for wealth transfer whether or not there is a specific savings goal in mind, while insuring the child for the future at comparatively low premiums.

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Owning or renting: What's the best real estate move for Boomers and seniors?

aadmin — Fri, 24 May 2013 11:55:48 +0000

The residential housing market in the United States is finally starting to pick up steam after five years of decline. In many parts of the U.S., housing prices are still well below where they were in 2006 and 2007. The median national home value in April 2013 was $184,300, a far cry from their peak of $230,400 in 2006.

For Baby Boomers looking forward to retirement in the near future, financial considerations are of paramount importance, and for the majority of middle-class Americans, their primary residence represents more than two-thirds of their total net worth, according to Christian Weller, a professor at the University of Massachusetts.

For these people, that means a change in the real estate market puts them at risk of losing significant money. In fact, Weller found that is exactly what happened to middle-income Americans between 2001 and 2010, when their average total assets fell from $90,500 to $57,000.

So in an era of economic and financial uncertainty, what are Baby Boomers to do? Should they become (or stay) home owners, and enjoy the equity and stability that comes with it, or opt to become renters, and enjoy the lower costs that are associated with renting?

The first step a soon-to-be retiree needs to take is evaluating what their needs and goals are. In addition to financial considerations and questions, a prospective retiree needs to ask how much space they need in their home and how many people are living there, whether they see themselves moving in the near future, and what their needs are in a home.

From a financial perspective, ownership offers the potential for long-term appreciation, but also comes at a high initial cost, with land transfer fees, property taxes, maintenance, as well as mortgage and other borrowing costs.

Renting, conversely, typically is cheaper on a regular basis, with no property taxes or large-scale maintenance and renovation costs, and that lower cost offers renters the flexibility to take their saved funds and invest them, thus providing a high potential return.

However, volatility in the stock market exists, just as it does in the real estate market.

Although many financial experts say renting offers a potential for higher investment return compared to home ownership, statistics from the financial services market research firm DALBAR reports that the average individual investor only saw a 3.83% return on their stock market returns, primarily because many investors lack the self-discipline to wait out tough economic periods.

In other words, it’s often tempting to buy when a stock is high, and making headlines, and tempting to sell when it’s fallen out of favor.

One downside of home ownership, however, is that it lacks the flexibility of renting. Whereas a renter can, in most instances, simply give their landlord a 60-day notice that they wish to leave their home, selling one’s home is a significant investment in both time and money.

As a result, with all the uncertainty surrounding both real estate and stocks, the careful Boomer should consult their financial advisor and see what works best for them.

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