Retire at 62????? Monte Carlo Scenario explains HOW

GOAL:  Retire at age 62

Profile:  US Citizen - Age 61.5 - Marital Status: Single -

Social Security Benefit: Earning Basis

Scenario 1: without reverse mortgage         Scenario 2:  with a reverse mortgage

Income total:                         $75,000             Income total:                  $75,000

1.  Salary (100% taxable)              75,000   1. Salary  (100% taxable)   $75,000

Begins at 61, ends at 62                                      Begins at 61, ends at 62

2. Social Security Monthly          1,222     2.  Social security amount    $2,141

FV 85% taxable                                                 FV 85% taxable

Annual increase                                   2%        Annual increase                      2%

Begins at 62, ends at 90                                   Beings at age 70, ends at 90

                                                                      3. Reverse Mortgage Monthy Amount

                                                                          (PV, 0% taxable)                       $1,223

                                                                           Annual increase                              2%

                                                                The income begins at age 62,ends at age 70

Expenses                               Annual Total            Assets

Housing                                             $7,800          Home value

Transportation                                     5,400         Mortgage or liens

Food, beverage, clothing,

personal care, cash                           9,900            Home equity  $0

Medical                                               7,200          Bank Accounts $0

Entertainment                                      5,900          Qualified Retirement Accounts   $300,000

Other                                                  1,300          Investment acounts                    $200,000

                                                                                  Total Market Value                 $500,000

                                                                              Liabilities: $0 Life insurance: NONE

                           Description            Required need      Desired Need             Total Need

RETIREMENT

Needs               Housing                       $8,034                       $0                           $8,034

                           Transportation              5,562                                                         5,562

                           Food, clothing etc     $10,197                                                    $10,197

                           Medical                           7,416                                                      7,416

                           Entertainment                     $0                  $6,077                        $6,077

                           Other                               2,575                                                     2,575

                           tax on prior yr returns   4,375                                                        4,375

                  TOTAL                                $38,159                  $6,077                      $44,236

Has objective been met?                            Has objective been met?

Scenario 1:  Without a Reverse                  Scenario 2:  With a Reverse

Based on the analysis of your retire          Based on the analysis of your retirement

ment income needs, expected                    income needs, expected income sources

income sources and available                    and available assets, your retirement

assets, your objective will be                      income objectives will be completely

will be satisfied until age until                    satisfied.

age 86.  At retirement, additional

funds of $50,386 will be needed.

Scenario 1 (without reverse mortgage): Has Objective been met?

Age     Total      Social        Additional    Needed        Required        Asset   (Shortgage)

             Needs   Security    Income       fm Assets    Distributions   WD      Unmet Needs

61     $47,100       $0          $47,100           $0                       $0                 $0            $0

62       42,738    12,321               0          $30,307                  0         $30,307             0

63       41,456    12,679               0            28,776                  0            28,776            0

64       45,502    12,933               0            29,569                  0            29,569            0

65       43,572    13,191               0            30,380                  0            30,380            0

66       44,665    13,455               0            31,210                  0            31,210            0

67       45,784    13,724               0            32,059                  0            32,059            0

68       46,927    13,999               0            32,928                  0            32,928            0

69       48,096    14,279               0            33,817                  0            33,817            0

70       49,290    14,564               0            34,725         17,801           16,924             0

71       50,645    14,856               0            35,789         18,479           17,310             0

72       52,036    15,153               0            36,884         19,180           17,704             0

73       53,466    15,456               0            38,010         19,900           18,111             0

74       55,070    15,765               0            39,305         19,855           19,450             0

75       56,722    16,080               0            40,642         19,714           20,928             0

76       58,424    16,402               0            42,022         19,457           22,565             0

77       60,176    16,730               0            43,447         18,974           24,473             0

78       61,982    17,065               0            44,917         18,417           26,500             0

79       63,841    17.406               0            46,435         17,578           28,857             0

80       65,756    17,754               0            48,003         16,512           31,490             0

81       67,729    18,109               0            49,620         15,181           34,440             0

82       69,761    18,471               0            51,290         13,535           37,755             0

83       71,854    18,841               0            53,013         11,516           41,497             0

84       74,009    19,217               0            54,792           9,056            45,736            0

85       76,230     19,602              0            56,628           9,025            50,603            0

86       78,517     19,994              0            58,523           6,025            31,499           0

87       80,872     20,394              0            60,479               0                     0          (24,620)

88       83,298     20,802              0            62,497               0                     0          (60,479)

89       85,797     21,218              0            64,580               0                     0          (62,497)

Scenario 2 (with reverse mortgage) Has Objective met?

Based on the analysis of your retirement income needs, expected income sources and available assets, your retirement income objective will be completely satisfied.

Age     Total      Social        Additional    Needed        Required        Asset    (Shortage)        

             Needs   Security    Income       fm Assets    Distributions   WD      Unmet Needs

61     $47,100       $0          $47,100           $0                       $0                 $0          $0

62       42,738         0             12,431       $30,307                  0         $30,307            0

63       41,456         0             12,679        28,776                  0            28,776            0

64       42,502         0             12,933        29,569                  0            29,569            0

65       43,572         0             13,191        30,381                  0            30,381            0

66       44,665         0             13,455        31,210                  0            31,210            0

67       45,784         0             13,724        32,059                  0            32,059            0

68       46,927         0             13,999        32,928                  0            32,928            0

69       48,096         0             14,279        33,817                  0            33,817            0

70       49,290    21,761               0           27,529         17,801             9,728             0

71       50,699    22,196               0           28,503         18,479           10,024             0

72       52,148    22,640               0           29,508         19,180           10,328             0

73       53,638    23,093               0           30,544         19,904           10,640             0

74       55,168    23,555               0           31,613         20,653           10,960             0

75       56,742    24,026               0           32,716         21,427           11,289             0

76       58,424    24,507               0           33,917         21,818           12,099             0

77       60,176    24,997               0           35,180         21,925           13,254             0

78       61,982    25,497               0           36,485         22,053           14,432             0

79       63,841    26,007               0           37,835         21,973           15,862             0

80       65,756    26,527               0           39,230         21,767           17,463             0

81       67,729    27,057               0           40,672         21,411           19,261             0

82       69,761    27,598               0           42,163         20,876           21,287             0

83       71,854    28,150               0           43,704         20,125           23,579             0

84       74,009    28,713               0           45,296         19,114           26,182             0

85       76,230    29,713               0           46,942         17,670           29,272             0

86       78,517    29,873               0           48,643         15,857           32,786             0

87       80,872    30,471               0           50,401         13,604           36,798             0

88       83,298    31,080               0           52,215         10,821           41,397             0

89       85,797    31,702               0           54,095           7,399           46,696    

Call Diane         0

Move Forward in Reverse - lock in home values

What if home values continue to decline? Reverse mortgages have helped people capture the value of their home during a declining market. People that took out a reverse mortgage three or more years ago received equity from their homes that has now evaporated. So if a reverse mortgage makes sense for someone today it might be time to move forward to lock in the value.
While several large banks have left the reverse mortgage industry and many people are misinformed about the product now might be a good time to investigate how this program can be a valuable tool.
Often times the most valuable asset people have are their homes. For people over 62 the reverse mortgage allows them to tap into this asset. Home equity has been falling since its peak in 2007. Despite this decline the National Reverse Mortgage Lenders Association estimates there is $3.2 trillion in equity sitting out there that is untapped.

The Time is RIGHT
While reverse mortgages continue to be used by a tiny percentage of eligible homeowners it might be a good idea to talk to your financial planners or family members and lock into the program.
1. If you have a home that's worth more than $417,500 the temporary loan limit of $625,000 is set to expire at the end of 2011.
2. The future of the program is uncertain, all government programs are subject to deletion.
3. The reverse mortgage can provide funds necessary for anyone who is laid off or having financial difficulty in this weak economy.
4. Look at the reverse mortgage as a way to lock in the home's current value and protect the equity

Earlier this year Ginnie Mae, which purchases reverse mortgage-backed securities, tightened the standards for these loans. Loan volume has continued to fall since it's peak in 2008.

With the introduction of the new financial assessment due out in the coming weeks it is going to become more difficult for those "in need" seniors to receive a reverse mortgage. This assessment will try to evaluate whether or not the borrower will be able to continue to pay their property taxes, homeowners insurance and maintenance on their homes before they grant the loan.

Who Qualifies?

The homeowner(s) must be at least 62 or better and the home must be their primary residence. They can not be delinquent on any federal debts but can have a small mortgage on the home that will be paid at closing. All the criteria for the loan is based on home value so the guidelines for this loan are not the same as a conventional loan. However, HUD counseling or reverse mortgage education is a mandatory requirement for the loan. This helps the borrower understand the loan and avoid being taken advantage of by an unethical lender.

There are two types of loans to choose from. The fixed rate provides the largest amount of equity you can receive from the reverse mortgage but all the proceeds must be taken at closing. Thus you begin paying interest on that amount as soon as the loan funds. This loan makes sense if you have a large mortgage or other debts that need to be paid. The second is the adjustable rate loan that provides you with many options such as tenure (a dollar amount for the rest of your lift) term (a set amount for a number of years) a line of credit that actually grows in value or a combination of any of the programs. The line of credit is a great way to have money accessible to pay taxes, medical bills etc. without having to pay it back. It also grows by 4% which is the opposite of the market value of the home. All the proceeds from the reverse mortgage are TAX FREE!!!!

As long as one of the homeowners remain in the home the loan is not due and payable. Not until the last borrower leaves the home by death or disability does the family need to start looking into selling or refinancing the home. Once that event occurs the loan must be repaid, with interest. Any money remaining after the loan is satisfied goes to the borrowers or their heirs.

An example of the application of this product was a 77 year old lady in Arizona that took out a reverse mortgage to purchase a home for her daughter down the street from her so that she could help take care of her. The daughter now had a mortgage -free home and lives near enough to care for her mother.

Recently FHA introduced the Saver Loan. The good news is that the upfront costs of the loan are greatly reduced but so is the amount you can borrow. In some cases you will also pay a slightly higher interest rate. The volume of these Saver products has more than doubled since January. They are now about 10% of all new reverse mortgages according to John Lunde, president of Reverse Market Insight. It seems borrowers are getting younger and utilizing the product for retirement planning.

While home equity may have declined from it's peak, smart planning can allow people to fund their retirement by tapping into it.

Medicaid Asset Recovey - Important Information

MEDICAID ESTATE RECOVERY
What Seniors Should Know
What is Estate Recovery?

Not many people are aware of the 2009 Estate Recovery act enacted by the Federal Government that places the largest asset the family owns (their home) in jeopardy of a Medicaid lien. When I tell people about this law they are unaware of it. So I did some research and found this information on the West Virginia Attorney Generals website. This validates the information I've been giving seniors for several years.
"Estate Recovery is a collection program required by a Federal law (42 U.S.C.
§ 1396p). This law requires all States to “recover” money spent by Medicaid on
“long-term care” (nursing-home or home and community-based care) by collecting
it from the estates of people who received such care after reaching age 55. Most of
the money collected goes to the Federal government, not the States. States that fail
to implement Estate Recovery collections can be cut-off from Federal Medicaid
funding, but no State has yet been penalized for failure to properly implement the
Estate Recovery requirements.
% Estate Recovery does NOT create a debt owed by the deceased Medicaid recipient’s
heirs, but rather creates a claim or lien only against the assets in the
deceased’s estate. The State Medicaid agency (called the “Bureau of Medical
Services”) files a claim against the estate and can enforce it in the same manner
as any other creditor of the estate.
% Many assets that were exempt for purposes of determining Medicaid
eligibility (such as the home) are no longer exempt after the Medicaid-recipient
dies, and are subject to Estate Recovery.
% The maximum amount of an Estate Recovery claim is the value of the estate,
or the amount spent by Medicaid on long-term care after the deceased recipient
reached age 55, whichever is less. If the assets in the estate are insufficient to
pay the claim, the remainder of the claim is extinguished and does not
constitute a debt".
As a reverse mortgage specialist I help people "Age in Place". I have worked as a clinician in hospitals and nursing homes. So my personal agenda is to help people stay there by providing the financial means to do so. The Estate recovery act allows state to attach a lien to the property of individuals who receive Medicaid benefits. If a person secures a reverse mortgage they protect at least 60% of that asset against this Medicaid lien. The state can only attach whatever remains after the reverse mortgage is paid. I always ask seniors and family members if they have long term care insurance. Most people do not because it is cost prohibitive. So the only way to protect the asset is with a reverse mortgage.
While I'm not an attorney it seems the message is clear. If someone is unable to pay the $7,000 nursing home fees and goes on Medicaid they are going to allow the government to place a lien on their property. It usually doesn't take long for the equity to evaporate that took a lifetime to build.

New Reverse Mortgage Product Saves Seniors Money

I've been doing reverse mortgage for over five years and one of the largest drawbacks of the loan was the upfront origination and servicing fees. This has made this a very expensive loan. I'm very proud to say I work for the first lender to listen to the concerns of seniors and eliminate those fees. Origination fees were 2% of the appraised value or a minimum of $2,500. While the servicing fees could be as much as $5,300 based on the borrowers age. So the savings could amount to $8,000 or more. The interest rate is 5.56% and is a fixed rate.
This loan is a great product for someone who wants to eliminate their mortgage payments, help out their children, remodel their home, make their home accessible, pay for medical expenses and/or homecare, travel, purchase a new home or diversify their assets.
This is the loan of the future and with the new product making it more affordable I can see reverse mortgages become part of the mainstream mortgage industry.
http://www.dianequitmeyer.com/