Silence of the “Silent Generation” extends to finances

Laurie MacNaughton © 2017

Yesterday I met with two couples, one in their 60’s and another in their early 80’s. The younger couple was discussing a reverse mortgage as part of their pre-retirement financial planning. The older couple, retired for years, has encountered serious health issues and is drawing down retirement funds at an unsustainable rate. They’ve also been late on their past few mortgage payments, which is likely to complicate their reverse mortgage qualification process.

Couples in their 60’s, couples in their 80’s – this is a pattern so common I had to reflect for perhaps the hundredth time: where are the couples in their 70’s, members of the so-called “Silent Generation”?

I can only conclude the following: 60 may well be the new 40 – but 80 is still 80. However, when you’re in your 70’s and still in the workforce, long past the age at which your parents retired, it can be hard to fathom that within a decade your finances may be stressed and your health may be less than stellar. A strong work-ethic and an uncomplaining acceptance of circumstances served the Silent Generation well…right up until it didn’t.

And here’s the real rub: if the couple I met who now are in their early 80’s had sought financial help five years ago, odds are they would not be in the straights they’re now in.

A reverse mortgage can help in several ways with financial survivability in retirement: it can pay off financing currently on the property. It can establish a line-of-credit safety net that grows over time. Or, reverse mortgage proceeds can be structured as a monthly stipend that arrives each month for as long as at least one homeowner resides in the home.

Reverse mortgages are not a fit for everyone – no one financial product is. But a reverse mortgage is going to play an important role in many homeowners’ financial health in retirement, particularly when used as part of a sound, informed, long-term retirement plan.

If you would like to explore how an FHA-insured reverse mortgage might help with your retirement plans or with the plans of those you love, give me a call. I always love hearing from you.






And…It’s Good News!

Laurie MacNaughton © 2016

So, first the technical mumbo-jumbo (and it’s good news): FHA just announced the Reverse Mortgage loan limit will go up to $636,150, effective January 1, 2017.

Why You Care

Starting January 1, homeowners aged 62 or older who have higher-value homes (i.e. homes that appraise for $636,150 or more) will have access to more equity – potentially meaning a bigger line of credit or a larger monthly stipend.

Reverse for Purchase

For those looking to purchase a home using Reverse for Purchase, this new lending limit means homebuyers may be able to consider extra aging-in-place amenities or other upgrades.

Rates Are Low, Housing Values Are Strong

If you are considering a Reverse Mortgage, now is a really great time to move forward, as you may qualify for more than ever before. So give me a call – I always love hearing from you!



A profound paradox

Laurie MacNaughton [506562] © 2016

I don’t usually spend much time reading statistics on aging. Truth is, I don’t really feel the need: I see retirement-related issues every day.

But recently I spent 10 days touring Ireland, and in a sort of by-the-by fashion the tour guide mentioned Ireland has an astounding 8% growth rate, easily the highest in Europe. Everywhere I looked I saw signs of young life: strollers, bikes, schools, sports fields.

We were in a remote area where I couldn’t google numbers for the U.S., but the comment wildly piqued my interest.

So how fast, according to the U.S. Census Bureau, is our population growing? In 2016, a projected .77%. That’s not a big increase.

Some other data points: by 2040 Americans 65 and older will represent a tad under 25% of the population. In that same timeframe, the number of Americans aged 85 and older will triple. Triple. That is a big increase.

Herein lies a profound paradox: dramatically improved longevity, widely recognized as one of mankind’s greatest triumphs, may well prove one of its greatest challenges.

For most workers, pensions are a luxury of previous generations. Social Security, already strained, is going to need big overhauls if it’s going to be there for upcoming retirees. Savings and investment dollars are going to have to last longer – much longer.

But many homeowners are also going to need to look to other assets as part of their retirement funding.

And this is where reverse mortgage can play a role.

A reverse mortgage is fundamentally a home equity line of credit. The difference between the credit lines we’re more acquainted with and a reverse mortgage line of credit is that there is no monthly repayment requirement with a reverse mortgage line of credit.

Instead, when the last person on title permanently leaves the home, the loan is repaid. The remaining equity goes to the homeowner, heirs or estate.

Reverse mortgages are not a fit for everyone – no one financial product is.

But a reverse mortgage is going to play an important role in many homeowners’ financial health in retirement, particularly when used as part of a sound, long-term retirement plan.

If you would like to explore how an FHA-insured reverse mortgage might help with your retirement plans, give me a call. I always love hearing from you.



It’s only obvious if you know your options

Laurie Denker MacNaughton ©2016

I read a great term recently: retrospectively obvious.

Maybe it struck me because over the years I have done many things that were retrospectively obvious – from trying to take off my jeans while still wearing my tennis shoes to asking a vegan for a restaurant recommendation. Not good, not good.

But some of life’s avoidable difficulties are not retrospectively obvious, only because there is no known alternative.

Yesterday I met with a husband and wife who could have been neighbors, friends, or colleagues: both hold graduate degrees and have pension plans, they own a lovely home, they change their oil every 5,000 miles. Ok, so I’m not sure about that last one. But you get the point.

But here’s what they also have: retirement accounts that are almost tapped out – and they haven’t yet retired though they’re both approaching 70.

How did this happen? Profligate spending? Extravagant lifestyle? That’s what most of us would assume if given the bare bones of the scenario.

But the answer is far more common, far more relatable, far more touching: for 17 years they bankrolled the wife’s incapacitated father, until he died this spring at the age of 92.

First they used the father’s long-term care – until it ran out. Then they used the father’s savings, until those ran out. Then they sold the father’s home and moved him in with them. Then they continued to care for him, draining their own saving to cover what Medicare did not.

Now they’re looking to retire. They’ve done the math. If they live to age 90, their own adult kids are going to have to bankroll them – which means the adult kids won’t be able to save appropriately. You can see the dominos lined up far into the future.

Let me interject here on a personal level: my own parents both died within the past few years. I will be the first say it was a blessing to journey with them through their final chapter – and I can testify to the fact the financial cost was not inconsequential. Ignoring aging parents’ needs is not what I’m talking about here.

What I am talking about is that, as a parent myself, I would do anything possible to prevent my adult daughters from having to bankroll me as I age.

“Self-pay through the end of life” is a term I heard years ago while attending a conference on aging. And this is where reverse mortgage plays a role.

A reverse mortgage is a home equity loan. End of story. However, it’s a home equity loan that does not have a monthly repayment obligation. Rather, the loan is repaid when the last person on title permanently leaves the home.

But there’s another element – a lesser-known element – of a reverse mortgage line of credit that makes it a valuable long-term financial planning tool: the line of credit grows over time, not unlike an annuity. However, unlike an annuity, the funds from a reverse mortgage are non-taxable.

Rarely is a reverse mortgage going to be the full solution to funding retirement. But here’s what a reverse mortgage is: a home equity loan for the years when having a monthly mortgage payment can be a back-breaker. It can be a miracle for adult children struggling to bankroll their parents’ longevity, and make aging in place possible.

A reverse mortgage is not a fit for everyone. But as I’ve said many times, no one is going to get by on just their Social Security. No one is going to make it on their 401-K. Few are going to survive on their pension, their annuity, their IRA, their bank account – or their reverse mortgage. But when added together, all these combine to create a long-term means of maintaining dignity and independence in retirement.

In retrospect it seems so obvious that a reverse mortgage can help fund a parent’s longevity. But it’s only obvious if you know your options.

If you would like to explore how an FHA-insured reverse mortgage might help you or your loved ones in retirement, give me a call. I always love hearing from you.


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Silver Divorce – How Reverse Mortgage Can Make a Way Forward

When Ill-Conceived Rules Go Bad

Laurie MacNaughton ©2016

For nearly thirty years FHA’s reverse mortgage program has enjoyed tremendous success in making a way forward for aging homeowners to remain in their own homes. But just like any other loan program, over time guidelines needed to change to reflect evolving realties. In the case of reverse mortgages this included cutting back on available funds to accommodate ever-lengthening life expectancies.

After the housing crisis additional major changes were made to the program, including requiring that every reverse mortgage applicant pass a federal “financial assessment.” This was done to protect the FHA mortgage insurance fund, and to ensure the program’s long-term viability.

Nationally, numbers reflect the fact that some borrowers have indeed failed to qualify under the assessment guidelines – and that may have been necessary.

But now another round of changes is being considered. In addition to raising the bar yet higher, the proposed rules appear plain ill-conceived.

The most problematic of the proposed new rules may be including utilities in the financial assessment, “if failure to pay…utilities would result in a lien on the property.”

A couple things here.

First, what unpaid bill doesn’t run the risk of becoming a lien? I have seen hospital liens. I have seen homeowner association liens. I have seen eye-doctor liens. Why doesn’t FHA just say, “If you’re an aging homeowner and could potentially fall behind on future bills, start packing now”?

Second, there are many, many housing-assistance programs. A quick Google search returns references to hundreds of programs, some federal, some state-run, some private, and many which combine several funding sources.

But most of them have maximum income restrictions, and many, including some of HUD’s own affordable housing programs, don’t kick in until income is 60% below the regional average.

By contrast, as guidelines currently stand, to qualify for a reverse mortgage that enables homeowners to remain in their own home, combined homeowner’s insurance and property taxes are not supposed to exceed 10% of the homeowners’ income (HECM Financial Assessment and Property Charge Guide, §3.98).

So what happens if utilities are now included in that 10%?

Here’s what could happen: fewer homeowners could qualify. And here’s the thing: there is a really big gap between 10% of one’s income going to property taxes and insurance, and financially being in the bottom 30% of one’s region. So where are our aging who fall into the donut hole supposed to go?

I honestly don’t think HUD is trying to turn homeownership into a perk available just to the “welderly,” the wealthiest of our aging homeowners.

But advertently or inadvertently, that certainly looks like what they’re proposing.

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What to do about Mom?

Laurie Denker MacNaughton [506562]

The respirator’s soft “chhhh…pffff” sounded in the background as Susan and I sat at the kitchen table. “Years ago,” Susan told me, “I promised Mom, come hell or high-water, I would let her die at home – and I plan to do whatever it takes to keep my promise.”

It’s one thing to say that. But what do you do when you’re overseeing care and medical needs outpace your ability to foot the bill?

Susan’s parents had not gone into retirement financially unprepared: they retired with federal pensions, Social Security and Medicare, substantial savings, little debt and no mortgage. But four years back, on Thanksgiving, Susan’s mother had a massive hemorrhagic stroke. She spent 3 weeks in the hospital, and another 30 days in rehab. But when she failed to progress in her recovery, she was discharged – and Susan, true to her word, brought her mother home.

First they utilized their long-term care benefits until the benefits ran out. Then they used their savings. When those were gone, Susan began tapping her own retirement savings to help cover her mother’s in-home medical care. This was clearly unsustainable, so Susan made an appointment with an elder law attorney, who suggested she look into a reverse mortgage for her mother.

In this case, due to the value of the home and the homeowners’ ages, the reverse mortgage will provide funds enough to cover another 4½ years of care, and the attorney is working to put in place additional benefits that will further stretch the reverse mortgage funds.

Increasingly, boomers face this same challenge: helping mom and dad finance care, even as they themselves labor to save for retirement. Reverse mortgage can play a significant role in helping balance this equation.

Is a reverse mortgage a fit for everyone? Of course not. No one financial product is.

But as we Americans age, nearly all of us will need every financial tool available, either as we fund our own retirement, or help mom and dad fund theirs.

If you have questions, give me a call. I always love hearing from you.

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