No Crystal Ball

Laurie MacNaughton © 2018

“My mother’s home was paid off, and at the time we thought a home equity line was going to be the best way for her to pay medical bills. But at this point she’s 87 and the monthly payment is crushing her. Looking back, what we really needed was a crystal ball.”

If you have an older adult in your life, you’ve heard a similar story a hundred times.

No honest lender is ever going to tell you a reverse mortgage is a universally good fit: there are older homeowners for whom the time has come to sell their home and transition into other housing. Some are better served by doing a traditional home equity line of credit (also called a “forward” line of credit). And there are those who benefit from drawing down their investments.

But for homeowners who wish to stay at home and plan to leave their managed retirement accounts untouched as long as possible, or for those with Medicaid considerations, a reverse mortgage may be the perfect fit.

If you would like more information on how a reverse mortgage might help your loved one with financial needs in the retirement years, give me a call. I always love hearing from you.

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No one can whistle a symphony

Laurie Denker MacNaughton © 2018

Put a bunch of experience in a room and you’re going to get a good result, right?

Not even close.

This morning I read an interesting study: when surgeons are with a familiar team, outcomes are good. When the same surgeons are with an unfamiliar team, outcomes are…not so good.

The same holds true in sports – some teams with great players cannot get it together, while others achieve magical results with less stellar athletes.

And another sector studied? Financial services. Yup – financial services.

Turns out, team dynamics are hugely important. No amount of experience can replace the “magic” of an established, well-functioning team.

A few days ago I had a closing with a client whose reverse mortgage application had very big issues. In fact, he had been told by another lender he did not qualify. How did our team get him across the finish line?

It wasn’t just experience, though we have lots. Much of our success lay in knowing whom to turn to for what.

Reverse mortgage is a unique product designed to help meet financial needs in retirement. But there can be difficulties: homeowners may have several goals to consider. Extended family often has detailed questions. Online information can be outdated, uninformed, or outright wrong.

I would love to talk with you about how our reverse mortgage team may help you meet your retirement goals. Because as the saying goes, “No one can whistle a symphony. It takes a whole orchestra.”

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Did you know?

Did you know the average reverse mortgage borrower is not in financial distress?

Rather, the typical person doing a reverse mortgage is the retiring boomer who watched a parent’s financial situation later in life and is determined to avoid a financial crunch down the road.

And did you know there are two “flavors” of reverse mortgage, a refinance and a purchase?

Typically, the homeowner doing a reverse mortgage refinance is the baby boomer putting together a long-range financial plan.  The homebuyer using a reverse for purchase is looking to buy a home without pinning down a huge chunk of cash or taking on a new 30-year mortgage during retirement.

A reverse mortgage is not mysterious, nor exotic, nor any more complex than any other loan. It is simply a home loan repaid when the last title-holder permanently vacates the property.

So if this looks like it fits your retirement goals, or the goals of someone you love, give me a call. I always love hearing from you.

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Can a reverse mortgage create a financial safety net?

Laurie MacNaughton © 2018

Can a reverse mortgage create a financial safety net in retirement?

In a word, yes.

This morning I received a call from a wealth manager who led off by saying he wasn’t “that familiar with reverse mortgages.” He specifically wanted to know whether a reverse mortgage could offer retirement-aged clients a measure of security during market fluctuations.

Here was my answer: the most familiar “flavor” of reverse mortgage is the line of credit. It’s an equity line that is repaid when the last person on title permanently vacates the home. Once the home is no longer the primary residence, typically it is sold and the loan is repaid; the homeowner, heirs, or estate get the remaining equity. End of story. No mystery here, nothing “too good to be true.”

Many wealth managers routinely recommend traditional equity lines. However, with a traditional line of credit, once homeowners draw funds they then have a monthly mortgage payment due. Because the retirement years can be a time when access to liquidity is crucially important, a monthly mortgage payment can create an increasingly unstable financial environment.

A reverse mortgage line of credit does not have a monthly repayment obligation. This means that if homeowners need a cash infusion, they do not pick up a monthly mortgage payment. Furthermore, the unused portion of a reverse mortgage line of credit grows larger over time, making more funds available for future use.

As is the case with other homeownership, property taxes, homeowner’s insurance, and home repairs must be kept current, and if there are condo dues or a homeowner’s association, fees must be paid on time.

The FHA-insured reverse mortgage is not exotic, mysterious, nor even particularly complex. It can be, however, a helpful financial safety net when life becomes unpredictable.

For more information on reverse mortgage, give me a call. I always love hearing from you.

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Market volatility and reverse mortgage

Laurie MacNaughton © 2018

If you’re even a casual market observer, Monday’s financial news grabbed your attention as the Dow plunged 1175 points, the biggest point drop in history.

As a result of the market turbulence, the first call I took Tuesday went like this: “In light of the market crash, should I do a reverse mortgage?”

So…a couple things here.

First, and perhaps most importantly, a loan officer is not the same thing as a financial planner, wealth manager, nor accountant; most loan officers are neither estate attorneys nor CPAs. Even if your particular loan officer does carry one or more of these designations, he or she should not be dispensing advice across disciplines, as conflicts of interest might quickly become an issue.

Second, even though 1175 is an uncomfortably large number, percentage-wise it’s not anywhere near a big enough drop to qualify as a market “crash” by any reasonable definition.

Third – and I want to emphasize this – if a reverse mortgage was a good fit before a market plunge, it’s a good fit following a market plunge. If it was a poor fit before a drop, it may well continue to be a poor fit. And for those urgent reverse mortgage sales pitches? It’s always a good idea to listen to a “sky-is-falling” message with a healthy measure of skepticism.

But this topic does suggest a very real question, namely what are some factors that make a reverse mortgage a good fit?

Optimally, a reverse mortgage is one part of a long-range financial plan in retirement.

Here’s what I mean: as life expectancies continue to increase, retirement is going to take more than just Social Security. It’s going to take more than a well-funded 401-K. In fact, it’s going to take more than a pension, an annuity, an IRA, or a bank account – or a reverse mortgage. But when added together, these can combine to create a long-term means of maintaining dignity and independence in retirement.

So, don’t panic. And certainly don’t get caught up in catchy sales pitches. But do understand your options – and how a reverse mortgage can fit into your long-range financial plans.

If you would like more information on reverse mortgage, give me a call. I always love hearing from you.

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No crystal ball

Laurie MacNaughton © 2018

“My mother’s home was paid off, and at the time we thought a home equity line was going to be the best way for her to pay medical bills. But at this point the payment is crushing her – and she has new medical bills coming in. Looking back, what we really needed was a crystal ball.”

Truth is, a crystal ball would come in handy in much of life. It’s just that more is at stake when we’re dealing with our aging parents.

No honest lender is ever going to tell you a reverse mortgage is a universally good fit: there are older homeowners for whom the time has come to sell their home and transition into other housing. Some are better served by doing a traditional home equity line of credit (also called a “forward” line of credit). And there are those who benefit from drawing down monies under management.

But for homeowners who wish to stay at home and need to leave managed retirement accounts untouched as long as possible, or for those with Medicaid considerations, a reverse mortgage may be the perfect fit.

If you would like more information on how a reverse mortgage might help you or your loved one with retirement plans, give me a call. I always love hearing from you.

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Or…you can just strike oil

Laurie MacNaughton [506562] © 2017

When I was little I played house. I played school. I played orphan, pilgrim, mommy, fairy, and – as we called it then – Indian. In another nod to the political incorrectness of the time, my sister and I once played Siamese twins by tying ourselves together using my father’s neckties. Notice…”once.”

But never among the roles my siblings and I played did we include “adult child of an aging parent.” I didn’t see this role in the families I knew nor did I read about it in the books I read. In fact, the role wasn’t really much of a “thing” back then – and by “back then” I mean the 1970’s.

Fast forward: today most of us are either dealing with aging-related issues as they impact ones we love, or we have friends who are. And, typically, chief among the issues is the financial cost of care.

This Saturday past I met with an impressive couple in their lovely home. Both retired medical doctors, they did everything right – saved, lived within their means, engaged in a healthy lifestyle. But now, though only in their late-seventies, they’re beginning to worry their retirement savings may not be sufficient.

So what’s the deal here? How could a solidly upper-middleclass couple have made a significant dent in their savings ahead of schedule?

Easy: they’re bankrolling the wife’s 96-year-old mother. And in this case, though Mom is advanced-elderly, she’s by no means at death’s door. From all appearances, she could live another five years, maybe more. She’s not going back to work, however, and she long ago exhausted her own retirement savings. That means her daughter and son-in-law are probably looking at several more years of providing for Mom – and Mom’s care costs are unlikely to decrease over time.

Scarcely does a week go by that I don’t see some variation on this same theme: a couple who indeed planned appropriately for retirement, but was thrown a curve ball in the form of financing a relative’s longevity. Good health insurance is not a cure, as insurance doesn’t pay for many goods and services attendant with aging, and family typically foots the bill for non-medical sundries.

We hear a lot about a sustainable drawdown of retirement savings. But the not-uncommon situation I’m describing is a double drawdown, meaning the retired couple is funding their own retirement and a parent’s longevity. If the couple also goes on to enjoy a long life, they are likely to need someone to step in to help finance them. You can see a multigenerational impact in the making.

I hasten to add I was privileged to assist in the care of my parents, both of whom died of cancer a few years back. However, I am still in the workforce, and consequently did not experience a drawdown of my retirement funds, let alone a double drawdown. At least not on the surface.

Look a little closer, however, and there was a very real long-term financial cost: every dollar I spent flying to Arizona to spend weekends with my parents was a dollar I was not putting into retirement savings – and transit costs barely scratched the surface of my expenditures. Don’t get me wrong: I wouldn’t have traded those months with my parents for all the 401(k)’s in the world. But the point remains: the financial reality of caring for aging parents carries a long-range impact.

So what’s the cure here? Well, one is what J. Paul Getty said, namely, “Rise early, work hard, strike oil.” Sign me up.

For the rest of us, there are several things financial professionals recommend, including  becoming a lifelong saver – meaning continuing to save even once you’re receiving Social Security or other retirement benefits. Increasingly I hear financial advisors say they’re incorporating aging-parent care-costs into discussions even with younger clients.

But here’s also where a discussion of reverse mortgage comes in. Along with many others, when I first heard the term I assumed reverse mortgages were some shady mess cooked up in the back alley – and there’s a historical reason most of us think that. However, the modern reverse mortgage is an FHA-insured home equity line of credit designed to give homeowners access to some of their home’s equity, while not creating a monthly repayment obligation.

Reverse mortgage is going to play a role in the long-term financial well-being of many boomers as they age. Furthermore, if boomers’ parents are homeowners themselves, the parents’ reverse mortgage can help fund their care, taking some of the financial burden off adult children. Indeed, over the years I have done several “twin” reverse mortgages – one for the adult children and one for the advanced-elderly parent.

With longevity increasing, none of us is likely to get by on just our Social Security. Few will survive just on an IRA, a 401(k), or pension – or, for that matter, on a reverse mortgage. But when added together, all these contribute to becoming “self-pay” through the end of life.

A reverse mortgage is 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.

Or…you can just strike oil.

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