Tag Archives for " retirement "

No Wonder People Are Working Longer

people working longer

Results from recent studies by Northwestern Mutual and the Federal Reserve indicate that people are relying on home equity to carry them through retirement:

  • One-in-five Americans (20%) have NO retirement savings (another 10% have less than $5,000)
  • Almost 50% of adults have taken no steps to prepare for the likelihood of outliving their savings
  • 10,000 Baby Boomers turn 62 every day (the generation closest to retirement age born between 1946-64, representing almost one third of the U.S. population)
  • One in three Baby Boomers have between $0-$25,000 in retirement savings
  • 50% of Baby Boomers have no retirement savings

These are scary statistics, especially given the continuance of rising healthcare costs and the U.S. National Debt now over $22 Trillion (renewing concerns about the adequacy of and reliance on Social Security funds). And 65% and 36% of retirees receive at least 50% and 90% of their income from Social Security, respectively.

The saving grace is that 80% of seniors have substantial equity in their homes (an all-time high).

However, with people living longer (85+ is the fastest growing demographic in America) coupled with nominal income and insufficient savings, many retirees will have difficulty refinancing their homes or qualifying for a purchase mortgage.

One alternative is to sell their home and pay cash for a downsized home – however, the change is not always economical or welcomed, and the new location may carry high homeowner’s association fees. The other alternative to seriously consider is a Home Equity Conversion Mortgage (aka Reverse Mortgage).

Here’s the Point: Retirees with nominal savings and income but decent home equity have the FHA-Insured Reverse Mortgage as a commendable solution.

Just Retired and Can’t Get A Mortgage

retired mortgage

The plane tickets are booked for golfing and walking on a Florida beach for three months. Upon settling into retirement, you realize how nice it would be to own a home in your favorite vacation spot. With family back home, the perfect scenario would be to keep your primary residence – and buy a vacation property.

But do you really want to spend a good chunk of your retirement savings by paying cash for your Florida home? Most people would rather finance their vacation home – to save their funds and capitalize on low interest rates.

However, getting pre-qualified for a mortgage may be problematic if you do not have a monthly pension. You need to show the lender sufficient ongoing annual income to prove you can continue to make monthly mortgage payments.

There are two programs available that allow you to create an earnings stream without having to spend all your retirement funds:

  1. Structured Annuity: Establish a monthly draw from your 401k or IRA funds, and show you are able to continue this income stream for 36 months;
  2. Assets-For-Income: Create a hypothetical income stream without liquidating your brokerage account (equal to 70% of your assets divided by the number of months in your loan);

If you aren’t worried because you expect to continue earning commissions from your prior business while retired, be careful because you may be deemed a Self-Employed borrower after retiring from your W-2 job (conventional lenders require two years of tax returns from Self-Employed borrowers).

Here’s the Point: You can retire without a stable income stream and still qualify for a mortgage.

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