No more Social Security at 62?

By Jennie L. Phipps · Bankrate.com

Sunday, June 2, 2013

Posted: 7 am ET

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The Social Security Board of Trustees released its annual report Friday on the financial health of both the retirement and the disability trust funds.
The report projected that the retirement trust fund will be depleted in 2033 -- unchanged from last year's projection. It said that unless Congress acts, at that point the program will be able to pay only 77 percent of promised benefits from ongoing contributions. The disability trust fund will be depleted much sooner -- in 2016 -- when the program will be able to pay only 80 percent of promised benefits.
Other statistics from the report that you might find interesting include:

• More than 57 million people were receiving Social Security by the end of 2012.
• In 2012, approximately 161 million people paid payroll taxes on earnings covered by Social Security.
• The total money held in reserve by the program rose by $54 billion in 2012 to $2.73 trillion.
• The cost to administer the program in 2012 was 0.8 percent of total expenditures, a total of $6.3 billion.

A few days prior to this announcement, Donald Fuerst, senior pension fellow at the American Academy of Actuaries, testified before the U.S. Congress about Social Security's pending shortfalls. He said that in 1940, when the new Social Security Administration began paying monthly retired-worker benefits, the retirement age was 65. At that time, workers who survived to age 65 had a remaining life expectancy of 12.7 years for men and 14.7 years for women. By 2011, life expectancy at age 65 was 18.7 years for men and 20.7 years for women, an increase of six full years for both.
In 20 more years, life expectancy at age 65 for men is expected to be more than 20 years and more than 22 years for women, Fuerst pointed out.
The bottom line: If something doesn't change, we won't have enough money to pay the Social Security that is promised, a retirement planning disaster.
Fuerst offered Congress several suggestions for fixing this problem. His most controversial idea is probably raising the minimum age for collecting Social Security from 62 to at least 64.
Here's what he'd also do to make an increase in retirement ages less painful for workers:

• Gradually phase in any change over an extended period of years, even decades, to allow for more time for society to adapt to the new work-life reality. "Give people time to plan and prepare. You wouldn't want to change it for someone who was planning to retire the next year. None of us would consider that fair," Fuerst says.
• Reduce benefits for higher-paid workers. "Wealthier socioeconomic groups recently show more longevity improvements than poorer socioeconomic groups," Fuerst points out.
• Revise the Social Security disability program. Make the requirements more lenient for people between ages 62 and full retirement age, so those in occupations that involve physical labor wouldn't have to continue to work at jobs they couldn't physically do.
• Cut or eliminate the wage tax for both employers and employees for people between ages 62 and full retirement age. It would give an incentive to both groups to keep older workers on the job.

Will a plan this complex and drastic ever wend its way through Congress? Fuerst thinks it should, but he isn't optimistic. "It isn't going to be easy; there are too many competing interests," he says.

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Are reverse Mortgages the Answer for the Elderly?

Is a reverse mortgage the answer for elderly homeowners

Sunday, August 25, 2013 10:13 PM EDT

By Daniel O. Tully

Dear Attorney Tully: I am a widow and I see a lot of ads on TV regarding reverse mortgagees. It sounds great, but I am not sure. I would like to stay in my own home and am not interested in selling, but my health is failing. I could use extra money to help with my health care costs. What do you think?

ANSWER: With any financial and legal transaction you should take your time and consider the pros and cons. Do your homework and don’t let anyone put the hard sell on you. The reverse mortgage program is becoming more popular and accepted by seniors. In a nutshell, a reverse mortgage is a way to use the equity in your home and not have to make a monthly payment as long as you live in your home. Under our “system” of paying for a long term care, you may be able to qualify for Medicaid to pay for nursing home care, but in most states there’s little public assistance for home care. Most people want to stay home as long as possible, but few can afford the high cost of home care for very long. One solution is to tap into the equity built up in your home.

If you own a home and are least 62 years old, you may be able to quickly get money to pay for long term care (or anything else) by taking out a reverse mortgage.

Reverse mortgages, financial arrangements designed specifically for older homeowners, are a way of borrowing that transforms the equity in a home into liquid cash without having to either move or make regular loan payments. They permit house-rich but cash-poor elders to use their housing equity to, for example, pay for home care while they remain in the home or nursing home care if it becomes necessary. The loans do not have to be repaid until the last surviving borrower dies, sells the home or permanently moves out.
In a reverse mortgage, the homeowner receives a sum of money from the lender, usually a bank, based largely on the value of the house, the age of the borrower and current interest rates.

For most loans you need to qualify with your income and assets. This is not the case with reverse mortgages.  Homeowners can get money in one of three ways (or in any combination of the three): in a lump sum, as a line of credit that can be drawn at the borrower’s option or in a series of regular payments, called a reverse annuity mortgage.

Although it is often assumed that seniors would want to use the funds from a reverse mortgage loan on health care, there are no restrictions — the funds can be used in any way. For instance, the loan could be used to pay back taxes, for house repairs or to retro-fit a home to make it handicapped accessible.

Borrowers who take a reverse mortgage still own their home. What is owed to the lender — and usually paid by the borrower’s estate — is the money ultimately received over the course of the loan, plus interest. In addition, the repayment amount cannot exceed the value of the borrower’s home at the time the loan is repaid.  All borrowers must be at least 62 years of age to qualify for most reverse mortgages.

In addition, a reverse mortgage can be taken out if there is prior debt against the home. Either the old mortgage must be paid off before taking out a reverse mortgage or some of the proceeds from the reverse mortgage used to retire the old debt.

Attorney Daniel O. Tully is a partner in the law firm of Kilbourne & Tully, P.C., members of the National Academy of Elder Law Attorneys Inc., with offices at 120 Laurel St., Bristol, (860) 583-1341. If you have a questions for attorney Tully, send it to him at Kilbourne & Tully, P.C., 120 Laurel St., Bristol, CT 06010. He’ll filter through the questions and may use some as the basis for future columns.

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Handling a mortgage AFter a relative's Death

DebtAdviser: Handling mortgage after relative's death

By STEVE BUCCI bankrate.com (AP)

Monday, August 26, 2013

Dear Debt Adviser: My husband died and left a house with a mortgage payment. My name is not on the paperwork as a co-signer, but I do live in the house. This was on purpose. I was kept out of the mortgage so I wouldn't be held responsible if something happened to my husband. Now something's happened, and I'm not sure what I need to do to keep the house. I have not told the mortgage company of my husband's death, though I have been trying to keep paying the bill. What should I do? Do you have any advice for paying a mortgage after the death of a loved one? -- Linda
Dear Linda: I'm sorry to hear that your husband passed away. I'm doubly sorry that you're now stuck in a financial bind. You're not alone, unfortunately. Women tend to outlive men, yet many fail to plan for this eventuality.
Here are some suggestions for people in your situation.
In the best of worlds, your husband would have had mortgage insurance or a life insurance policy that would allow you to pay off or pay down the home loan. From the tone of your question, I gather this is not the case. Because of the potential complexity of your remaining options, I want you to speak with an experienced real estate attorney to help you decide how to proceed.
Here are some options to consider.
If your name is on the deed or if you are left the house in your husband's will, you may be eligible to assume the mortgage under the Garn-St. Germain Depository Institutions Act of 1982. This law limits a lender's ability to foreclose on an up-to-date mortgage when the owner of the property changes. It doesn't mean that the lender won't try to tack on a fee when it shouldn't. If you are a surviving joint tenant, or if the title was transferred by inheritance to a related owner-occupant, the Garn-St. Germain law bars the lender from enforcing the due-on-sale clause. Your attorney will help you sort out all these possibilities. This option would only work for you if you can afford to continue making the payments.
You may want or need to refinance the mortgage to get a better rate, extend the term and lower the monthly payment. This would allow you to stay in the house if it was left to you. If your credit is damaged, or if for some other reason you can't qualify for a mortgage on your own, you have a couple of other options. If you can afford the payments, consider asking a family member to co-sign with you.
A reverse mortgage might work. There is no credit or income criteria needed to qualify, though you must be at least 62 years old. Also, you'd need to have a mortgage balance of around half of the home's value or less. With a reverse mortgage, you could stay in the home without worrying about paying additional mortgage payments. A reverse mortgage may even allow you to take some equity out of the home while you are living there. Learn more about reverse mortgages at the U.S. Department of Housing and Urban Development's website, www.hud.gov.
If none of these options work for you, you may need to sell. You could use any proceeds to find a suitable new property or rental. If your name is not on the deed and the home was not willed to you, then the sale's proceeds would go to your husband's estate. What happens from there would be up to the laws of your state.

Seniors Rank Finances and not health as a concern

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Seniors Rank Finances, Not Health, as Top Retirement Concern

August 12th, 2013  |  by Alyssa Gerace Published in News, Reverse Mortgage

Americans aged 60 and older are more likely to be concerned about the sufficiency of their finances rather than a deterioration in health, according to a recent national survey.
More than half of respondents (53%) say they are concerned about whether their savings and income will be sufficient to last them for the rest of their lives, while another 33% were not concerned, according to the 2013 United States of Aging Survey, conducted by the National Council on Aging, UnitedHealthcare, and USA Today.

Among retired seniors, 43% relied on Social Security as their primary source of retirement income. More than four in ten (41%) of non retired seniors planned to rely on Social Security in retirement.
Despite future fears, most respondents reported no difficulty in affording current expenses.
For 66% of respondents, it’s “easy” to pay monthly living expenses, and only 18% reported the need to reduce regular spending in 2012 in order to pay a monthly regular bill.
However, nearly two in ten (19%) said it was “difficult” to afford monthly living expenses, based on current income and savings.
Six in ten seniors believe their health will stay the same in the next 5-10 years, the survey said. Another 13% think their health will improve, while less than a quarter (23%) predict their health will worsen during that timeframe.
While seniors believed their health wouldn’t change much in the upcoming decade, many aren’t doing anything to manage existing conditions or maintain good health.
Nearly two in ten (18%) seniors reported having five or more chronic health conditions, while 65% reported having two or more. However, more than half (51%) haven’t set any specific goals to manage health in the past year, while 43% have taken no steps toward preventing falls.
Access The United States of Aging Survey.

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