Reverse Mortgage? – 2020

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What is a reverse mortgage? There are many myths and misconceptions on just what a reverse mortgage is, so let’s first talk about what it is not.

The reverse mortgage of old, the one you hear about from your neighbors, your best friends, or a family member, is not what the reverse mortgage is today!

It used to be that the bank would not only charge interest on the loan amount but also took a large percentage (often up to 50%) of the remaining equity in your home after the loan was paid off. That meant your heirs would receive a lot less than expected after the loan was paid off.

This was not fair, and so the Federal Government stepped in, and in 1989 changed the guidelines so the banks could not take more than the accumulated interest on the loan, and all the appreciation of the property would belong to the heirs.

So, what really is the reverse mortgage of today? A reverse mortgage is a loan for borrowers 62 years of age and older that converts some of their home’s equity into cash. The cash can be used for anything you like. Pay down debt, take a trip, or even invest the proceeds to create a higher income. The unique benefit is the borrowers do not have to make monthly mortgage payments.

The new reverse mortgage program is called HECM; it stands for Home Equity Conversion Mortgage. Today, the seniors are completely protected from such practices by the Federal Government, and so are their heirs. When the last borrower moves out of the house, passes away, or sells the house, the loan is due, just like any other mortgage. What is due the bank is just the original loan balance plus the interest accrued over the time that the seniors have had the use of the reverse mortgage. All remaining equity belongs to the seniors’ estate and their heirs. The bank does not retain any equity in the home.

In fact, since the seniors own the home, they can sell it anytime they wish, and move to another home; if they financially qualify, they can purchase another home using the Reverse for Purchase Program.

One of the greatest benefits of the program, as I see it, is the security it offers married seniors because the loan is on both lives (unlike any other mortgage), and as long as one senior/owner occupies the property, the loan is in full effect. This means that should something happen to one spouse, nothing happens to the loan, and therefore, nothing happens to the remaining spouse!

I see this as a great feature because if a senior passes away or goes into an assisted living or nursing home, in many instances the other spouse loses an income but still must continue to pay the current mortgage, but now with only having the one income. In many cases, the remaining spouse cannot make the payment; eventually, they lose the home to foreclosure or are forced to sell it.

This cannot happen with a Reverse Mortgage since the loan is on both spouses’ lives. The only responsibility one has is to continue to pay the Real Estate taxes, homeowner insurance, any HOA fees, and maintain the property. That’s it. Stay in your home and live your life without the worry of having to make a monthly mortgage payment, and with the security of having a roof over your head.

Ask your American Retirement Advisor if this may be right for you. We may be able to refer you to a reputable Reverse Mortgage Specialist. There are a lot of mortgage brokers out there that do not specialize and know just enough to be dangerous.

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Toss it against the wall

[et_pb_section admin_label="Section" fullwidth="on" specialty="off"][et_pb_fullwidth_header admin_label="Fullwidth Header" title="Toss it against the wall" background_layout="light" text_orientation="left" header_fullscreen="off" header_scroll_down="off" parallax="off" parallax_method="off" content_orientation="center" image_orientation="center" custom_button_one="off" button_one_letter_spacing="0" button_one_use_icon="default" button_one_icon_placement="right" button_one_on_hover="on" button_one_letter_spacing_hover="0" custom_button_two="off" button_two_letter_spacing="0" button_two_use_icon="default" button_two_icon_placement="right" button_two_on_hover="on" button_two_letter_spacing_hover="0" subhead="March 2017"] [/et_pb_fullwidth_header][/et_pb_section][et_pb_section admin_label="section"][et_pb_row admin_label="row"][et_pb_column type="4_4"][et_pb_text admin_label="Text" background_layout="light" text_orientation="left" use_border_color="off" border_color="#ffffff" border_style="solid" saved_tabs="all"] By David Schaeffer [spacer height="05px"] We have all heard the phrase “throw every-thing against the wall and see what sticks.” Well, our new President made a bunch of promises in the campaign and got himself elected. Many promises sounded good to some; to others, not so much. Our clients’ emotions on the new President range from exuberant to completely freaked out and scared. [spacer height="03px"] We can all agree, there has been a frenzy of activity in the first weeks of the new administration. Every news cycle has Trump this and Trump that. So much attention, that it was almost like the Super Bowl (what a game!), the Phoenix Open, and our car shows didn’t even happen. [spacer height="03px"] The market is in a flurry. Up, Up, Up! By almost all accounts the optimism concerning the markets and consumer spending is very positive. Stories of large employers adding jobs in the good ole USA abound. [spacer height="03px"] Our President lets us know his feelings, unfiltered, immediately, via his twitter feed. If you don’t follow twitter, don’t worry… the television news folks will do it for you. [spacer height="03px"] More importantly, what is not being talked about is the Department of Labor’s fiduciary rule for financial services. It is scheduled to go into effect April 10, 2017. This law will impact every person in the United States with qualified accounts including, IRAs,401k, 403b, 457/TSA, and Roth IRAs. This rule was created in the spirit of improving the financial care of our citizen’s lifelong savings. [spacer height="03px"] Unfortunately, this law will force firms to charge more for their services and provide less choice of investment options. Completely the opposite of the intent of the legislation. Small investors with accounts less than $1,000,000 will find themselves moving to automated investment services because the cost of compliance is too great. We all have or had mutual funds, the autopilot investments of the past. What happens to your accounts when the market drops? What happens to your income if those accounts lose your money? [spacer height="03px"] The estimated cost to comply with the new law may be as much as 2% on a small account. Most folks don’t pay even 1% to manage their entire portfolios. Something will have to give; you will either have to pay more or use a robot. manage their entire portfolios. Something will have to give; you will either have to pay more or use a robot. [spacer height="03px"] We have never charged our clients for planning services, account reviews, phone calls, changes, account updates, balance inquiries, disbursement requests, mailing statements, going to social security office with you, or exceeding every fiduciary standard of care. [spacer height="03px"] If the law is not repealed, folks will experience far fewer savings and investment choices for their IRAs and incur new fees that may exceed earnings! [spacer height="03px"] I really don’t think that was what the past administration had in mind. The story goes, Mr. Obama’s neighbor had all of his lifelong savings in a variable annuity, the type that did not insure his principle and had fees in excess of 3.5% per year. When the market dropped in 2008, his neighbor lost nearly 50% of the value of his annuity. His broker was no longer in the business. He assumed the big-name brokerage firm had an eye on his account. The reality was no one was looking after his money. Mr. Obama looked into it and found that the broker was really a licensed salesman and did not violate any rules. He just did what the firm requested of him. In reality, he was not acting in his neighbor’s best interest, he acted in the best interest of the firm. Mr. Obama asked around and found that there was a type of financial advisor that was licensed to act in the client’s best interest. He then asked the SEC to do something. They did nothing. He asked his friends at the Department of Labor and they acted, creating a rule to protect the average investor. Unfortunately, they failed to ask about the cost of such financial care. Kind of like the “not so” Affordable Care Act. (Sorry. I could not help myself.) To affordably take on the legal responsibility of fiduciary care, most portfolios must exceed 5,000,000 dollars to avoid additional costs above the standard 1%. [spacer height="03px"] So here we sit, a rule created to care for LARGE portfolios, forced upon most Americans with a portfolio of less than $100,000, but being required to bear the cost of a portfolio 50 times larger. [/et_pb_text][et_pb_image admin_label="Image" src="https://americanretirementadvisors.com/wp-content/uploads/2017/02/FeatureStory_Mar2017.jpg" show_in_lightbox="off" url_new_window="off" use_overlay="off" animation="left" sticky="off" align="left" max_width="250px" force_fullwidth="off" always_center_on_mobile="on" use_border_color="off" border_color="#ffffff" border_style="solid"] [/et_pb_image][/et_pb_column][/et_pb_row][/et_pb_section]

Success story of the month February 2017

[et_pb_section admin_label="Section" fullwidth="on" specialty="off"][et_pb_fullwidth_header admin_label="Fullwidth Header" title="He said She Said..." background_layout="light" text_orientation="left" header_fullscreen="off" header_scroll_down="off" parallax="off" parallax_method="off" content_orientation="center" image_orientation="center" custom_button_one="off" button_one_letter_spacing="0" button_one_use_icon="default" button_one_icon_placement="right" button_one_on_hover="on" button_one_letter_spacing_hover="0" custom_button_two="off" button_two_letter_spacing="0" button_two_use_icon="default" button_two_icon_placement="right" button_two_on_hover="on" button_two_letter_spacing_hover="0" subhead="Success Story of the Month - February 2017"] [/et_pb_fullwidth_header][/et_pb_section][et_pb_section admin_label="section"][et_pb_row admin_label="row"][et_pb_column type="4_4"][et_pb_text admin_label="Text" background_layout="light" text_orientation="left" use_border_color="off" border_color="#ffffff" border_style="solid" saved_tabs="all"] By David S Edge [spacer height="04px"] [spacer height="03px"] While assisting many folks and couples with their selections of retirement planning options, we often run into pre-conceived notions about retirement, especially misinformation about Medicare. We will hear things like, “Well, my neighbor told me that her mother…. Or my cousin’s sister told us…” [spacer height="03px"] At times we just have to shake our heads! [spacer height="03px"] Marge and George were just such folks. We spent the first thirty minutes of their appointment dispelling all the things they thought they knew about retirement. Here is a short list of items we discussed. [spacer height="03px"] Marge stated they could get full Social Security retirement benefits at age 62. [spacer height="03px"] Correct answer: Full retirement age for Social Security is age 66. The benefit amount will be approximately 8% less for each year taken earlier. But you can take the discounted amount as early as age 62. [spacer height="03px"] George thought that he didn’t have to get a Part D Prescription Drug Plan along with his Medigap plan because his HR department stated that Part D was voluntary. [spacer height="03px"] Correct answer: While Part D is voluntary, what his HR department rep didn’t explain was that for each month he didn’t have a Part D, he would be penalized later when he did add Part D. The penalty grows each month he doesn’t have his Part D, and this penalty never goes away! [spacer height="03px"] George’s HR department told him he had to turn on his Part A of Medicare when he turns age 65. [spacer height="03px"] Correct answer: If you continue to work with an employer coverage plan, you do not need to do anything. [spacer height="03px"] George also thought he could continue to contribute to his HSA [/et_pb_text][et_pb_image admin_label="Image" src="https://americanretirementadvisors.com/wp-content/uploads/2017/01/SuccessStory_Feb2017.png" show_in_lightbox="off" url_new_window="off" use_overlay="off" animation="left" sticky="off" align="left" max_width="250px" force_fullwidth="off" always_center_on_mobile="on" use_border_color="off" border_color="#ffffff" border_style="solid"] [/et_pb_image][/et_pb_column][/et_pb_row][/et_pb_section]

Financial Tip February 2017

[et_pb_section admin_label="Section" fullwidth="on" specialty="off"][et_pb_fullwidth_header admin_label="Fullwidth Header" title="Financial Tip" background_layout="light" text_orientation="left" header_fullscreen="off" header_scroll_down="off" parallax="off" parallax_method="off" content_orientation="center" image_orientation="center" custom_button_one="off" button_one_letter_spacing="0" button_one_use_icon="default" button_one_icon_placement="right" button_one_on_hover="on" button_one_letter_spacing_hover="0" custom_button_two="off" button_two_letter_spacing="0" button_two_use_icon="default" button_two_icon_placement="right" button_two_on_hover="on" button_two_letter_spacing_hover="0" subhead="February 2017"] [/et_pb_fullwidth_header][/et_pb_section][et_pb_section admin_label="section"][et_pb_row admin_label="row"][et_pb_column type="4_4"][et_pb_text admin_label="Text" background_layout="light" text_orientation="left" use_border_color="off" border_color="#ffffff" border_style="solid" saved_tabs="all"] By David S Edge [spacer height="03px"] How to invest or save has more to do with where you are in life than you may think. [spacer height="02px"] Let’s begin with definitions. [spacer height="02px"] Invest. (verb) According to Investopia: to put (money) to use, by purchase or expenditure, in something offering potential profitable returns, as interest, income, or appreciation in value. [spacer height="02px"] Save. (verb) According to Google: 1. Keep safe or rescue (something or someone) from harm or danger. 2. Keep and store up (something, especially money) for future use. [spacer height="02px"] By definition, investors accept risk in exchange for a potential return. Savers conversely protect their long-term savings from harm. [spacer height="02px"] In our working years, we are supposed to accumulate money for our future needs in retirement. Typically, it is acceptable to take on risk while working which is supposed to be mitigated or reduced by time. This process has served us well up until 2000. 15-year average returns on the markets averaged less than a compounded 3% for that period. You may have fared better in long-term CDs. [spacer height="02px"] The next phase of our investment life is a transitional period we call preservation. This phase should begin 5 years prior to retirement and continue about a year after. This period allows plenty of time to tax efficiently, migrate your long-term holdings, into vehicles designed for income in the next phase. [spacer height="02px"] The final phase we call distribution. This is where the new purpose of your life-long savings is now income. Depending on your needs, wants, and desires, your money now needs to replace income from work, adjust for inflation, and take care of surprises. [spacer height="02px"] Most folks have their investments do things they were not designed to do. For example, how are you supposed to plan for a steady stream of income from a mutual fund that changes in value every minute, and its returns fluctuate with the wind? Even worse, when the market adjusts, what do you tell the mortgage company or the utility company when the value is 20%, 30% or 40% less than it was last week? How is that conversation supposed to sound? “Hi, sorry my investments adjusted a little bit so I’m going to pay you a little bit less this month.” Good luck! [spacer height="02px"] May I suggest a different approach? One that doesn’t lose money, one that may add certainties and guarantees that you can count on? Call the office to learn how a comprehensive retirement income plan may solve the concerns you have about running out of money! [/et_pb_text][et_pb_image admin_label="Image" src="https://americanretirementadvisors.com/wp-content/uploads/2017/01/FinancialTip_Feb2017.png" show_in_lightbox="off" url_new_window="off" use_overlay="off" animation="left" sticky="off" align="left" max_width="250px" force_fullwidth="off" always_center_on_mobile="on" use_border_color="off" border_color="#ffffff" border_style="solid"] [/et_pb_image][/et_pb_column][/et_pb_row][/et_pb_section]

Financial Tip of the Month Jan 2017

[et_pb_section admin_label="Section" fullwidth="on" specialty="off"][et_pb_fullwidth_header admin_label="Fullwidth Header" title="Financial Tip of the Month " background_layout="light" text_orientation="left" header_fullscreen="off" header_scroll_down="off" parallax="off" parallax_method="off" content_orientation="center" image_orientation="center" custom_button_one="off" button_one_letter_spacing="0" button_one_use_icon="default" button_one_icon_placement="right" button_one_on_hover="on" button_one_letter_spacing_hover="0" custom_button_two="off" button_two_letter_spacing="0" button_two_use_icon="default" button_two_icon_placement="right" button_two_on_hover="on" button_two_letter_spacing_hover="0" subhead="January 2017"] [/et_pb_fullwidth_header][/et_pb_section][et_pb_section admin_label="section"][et_pb_row admin_label="row"][et_pb_column type="4_4"][et_pb_text admin_label="Text" background_layout="light" text_orientation="left" use_border_color="off" border_color="#ffffff" border_style="solid"] By David S Edge [spacer height="04px"] Reason Not to Pay Off the Home Mortgage. [spacer height="04px"] In retirement… it’s all about cash flow. We see many folks who have decided to retire make the mistake of taking their retirement money, or 401K money out of income generating accounts, and pay off their mortgage in a lump sum. What they don’t realize is that they are now house rich and cash flow poor. They are also more likely to trigger a large income tax penalty for using a chunk of their taxable retirement cash for this lump-sum pay off. Bad dog! You just shot yourself in the foot twice! [spacer height="04px"] Keep your retirement money in play, making your income pay the monthly house payment so that when your house is eventually paid off, that same retirement money is now generating extra cash income for your household. In other words, saving for retirement is more important than paying off your house! [spacer height="04px"] You also have to keep in mind that during the last 10-15 years of your mortgage, most of the monthly payment is principal, not interest. So making extra payments during these years (if your income allows) is a better strategy. An extra payment at this point is reducing your principal and will pay off your home quicker. [spacer height="04px"] By paying off your house, you are also losing one of the last major deductions on your yearly income tax. Again, you lose. [spacer height="04px"] So taking retirement money to pay off your home, triggering a large tax bill, and losing a major tax deduction are the three stooges of paying off your home early! Make sure you get professional advice on your whole plan for retirement so you don’t hit one of these bumps in your road to a financially safe retirement! [spacer height="04px"] Call us! We are here to help! [/et_pb_text][et_pb_image admin_label="Image" src="https://americanretirementadvisors.com/wp-content/uploads/2017/01/Picture5.png" show_in_lightbox="off" url_new_window="off" use_overlay="off" animation="left" sticky="off" align="left" max_width="200px" force_fullwidth="off" always_center_on_mobile="on" use_border_color="off" border_color="#ffffff" border_style="solid"] [/et_pb_image][/et_pb_column][/et_pb_row][/et_pb_section]

Financial Tip of the Month – Dec 2016

[et_pb_section admin_label="Section" fullwidth="on" specialty="off"][et_pb_fullwidth_header admin_label="Fullwidth Header" title="Financial Tip - December 2016" background_layout="light" text_orientation="left" header_fullscreen="off" header_scroll_down="off" parallax="off" parallax_method="off" content_orientation="center" image_orientation="center" custom_button_one="off" button_one_letter_spacing="0" button_one_use_icon="default" button_one_icon_placement="right" button_one_on_hover="on" button_one_letter_spacing_hover="0" custom_button_two="off" button_two_letter_spacing="0" button_two_use_icon="default" button_two_icon_placement="right" button_two_on_hover="on" button_two_letter_spacing_hover="0"] [/et_pb_fullwidth_header][/et_pb_section][et_pb_section admin_label="section"][et_pb_row admin_label="row"][et_pb_column type="4_4"][et_pb_text admin_label="Text" background_layout="light" text_orientation="left" use_border_color="off" border_color="#ffffff" border_style="solid"] At the end of each year there are deadlines for giving, so that you can reduce your taxable income when you file your taxes. Here’s a short list of gift-giving to consider![spacer height="5px"] * Charity begins at home. Got that favorite group that you’ve got a soft spot for? As long as the group is a 501c 3, you can give up to $800 maximum for couples and $400 for single filers for a State of Arizona tax deduction using State Form # 321. Visit www.AZDOR.gov where you’ll find a list of forms for all sorts of donations! There are many options when you donate to organizations that offer assistance to working poor.[spacer height="5px"] * Donate to your favorite school![spacer height="5px"] * Are you employing National Guard members? There is a tax credit for you![spacer height="5px"] * When you make a donation do you all of a sudden get flooded with request from other organizations? These organizations often swap names and contact info, and sometimes they even charge each other as a way to increase income. If you are tired of getting these notices, make sure that you check the box on the donation form that you do not want your information shared. Otherwise, you will need to contact each charity and request they stop contacting you. Want additional help? There is an organization that can help to make your mail requests disappear or be greatly reduced. Contact www.DMAchoice.org.[spacer height="5px"] * Remember to itemize, you can’t just state that you made a donation to a particular organization. If you give cash, get a receipt![spacer height="5px"] * You can donate property! It’s a double win, in that you don’t have to pay capital gains and you get to discount the fair market value of the item. Remember, you have to own the property for at least one year.[spacer height="5px"] * These charitable donations must be made before the end of the year. If you donate by check, as long as it’s given before the end of the year, it can be cashed after the first of the year by the organization.[spacer height="5px"] * Many employers offer charitable giving via your paycheck at work. Keep an end-of-year paystub for proof of your deduction for your tax return.[spacer height="5px"] Keep in mind that you can’t donate your time for a deduction, nor can you exceed 20% of your Adjusted Gross income. There’s a lot of rules on this, so get advice from your tax preparer. [/et_pb_text][et_pb_image admin_label="Image" src="https://americanretirementadvisors.com/wp-content/uploads/2016/12/present.png" show_in_lightbox="off" url_new_window="off" use_overlay="off" animation="left" sticky="off" align="left" max_width="150px" force_fullwidth="off" always_center_on_mobile="on" use_border_color="off" border_color="#ffffff" border_style="solid"] [/et_pb_image][/et_pb_column][/et_pb_row][/et_pb_section]

ARA November Newsletter Now Available!

The November edition of the American Retirement Advisor newsletter is now available! For health tips, financial advice, and the latest retirement news make sure to get your copy of our monthly newsletter.

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It is available online here where you can also sign up to receive it every month in the mail.

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Dianna’s Corner

Autumn, the word conjures up images of trees with colored leaves, pumpkins, chrysanthemum, and the smell of burning leaves. It actually starts in September, but gets going full blast in October. Hot spiced cider, ducks flying south, and bon fires enlarge the mental image. All you need to add is marshmallows with graham crackers and chocolate bars, S’mores! Did you ever roast wieners over a pile of burning leaves? Great memories. [spacer height="20px"] Now we have new bits of information about Autumn that I didn’t know before; and maybe they will be new to you too. If you are born between September and November, you are more likely to live to be 100 than anyone born at other times of the year. You’re special! (per Random history.com) Oktoberfest in Munich, Germany takes place in the Autumn. Huge tents are set up that will accommodate 5,000 people each. What was once a prince’s wedding festival has turned into an annual celebration. About 1.3 million gallons of beer are consumed. We went there one year and it is something to see! We start thinking about outdoor activities as it cools off. More evening walks, sidewalk cafes, yard sales, local theatre productions, etc. There is so much to choose from as the weather cools. We also have more residents in our community as the part-time residents join us. It’s almost like a family reunion. [spacer height="20px"] Of course, our favorite holiday of the month is Halloween. People decorate for Halloween as much or more than they do for Christmas. Sadly, the number of “trick or treaters” seems to be dwindling. There must be more home parties going on. We used to go out on two nights, All Hallows Eve and on Halloween night. Really had a good time and raked in lots of treats. Back then, many were homemade cookies, popcorn balls, apples, etc..... You don’t see that anymore, either. Not everything new is better. [spacer height="20px"] One thing I do differently now is I paint faces on the pumpkins rather than cutting them. They last longer and don’t get all mushy. I let the little “Whimsy Elf” in me come out and have fun with the paint! [spacer height="20px"] Of course the most important autumn event is the starting of the football season!! Everyone rooting for their particular favorite, convinced no one else is nearly as good. LOL. [spacer height="20px"] We are a bit challenged now as one of our grandsons graduated from a different school from the one my husband attended, and they compete against each other. Friendly rivalry…. HeHeHe. It is all fun and adds a bit of spice to the weekends. [spacer height="20px"] For us, it is a time of preparation. We train and work to learn all the new plans and changes to plans that become available on October 15. If you have a prescription drug plan, or a Medicare Advantage plan, watch for the Annual Notice of Change letter you will receive to find out if your plan has made changes. If it has and you want to review it, give us a call and we will be happy to help; that’s what we do. Have a great Autumn, enjoy the cooler weather; we have survived another summer in style. [spacer height="20px"]

Click here for the full version of the October newsletter.

[spacer height="20px"] [spacer height="2px"] Dianna Harbaugh [spacer height="2px"] Healthcare & Retirement Planning Professional [spacer height="2px"] Taking Care of People is My Life Long Mission