The Complete Guide to Reverse Mortgages by Tammy Kraemer & Tyler Kraemer;

Author:Tammy Kraemer & Tyler Kraemer;
Language: eng
Format: epub
Tags: epub, ebook
Publisher: Tammy Kraemer and Tyler Kraemer
Published: 2007-07-15T00:00:00+00:00

Liberty

Americans value independence, but we also cherish our communities. It isn't surprising that as we age, many of our biggest concerns are related to financial independence and autonomous living. These are some questions to ask yourself to gauge your attitude toward independent living:

• What type of living arrangements do I prefer (alone, with another person, in a group)?

• If I develop a chronic illness or disability, does that change my living arrangement preference?

• Do I want to stay in my home, or move to a new home?

• How important is being in a community with family and friends?

• Do I prefer to set my own schedule, or do I like scheduled activities?

• Am I comfortable relying on government benefits?

• Am I comfortable with financial help from family and friends?

• Do I want to continue working in some capacity as I age?

It appears that most Americans prefer to remain in their existing homes as they age, even if that means living alone. According to the 2000 U.S. Census, only about 6 percent of people 65 and older lived in group quarters; the rest lived alone or with others in a household. Similarly, a 2004 study by the MetLife Mature Market Institute and AARP Health Care Options found that 86 percent of pre-retirees prefer to continue living in their own home during retirement if they are able to live without ongoing assistance, and 49 percent prefer to do so even if they need day-to-day assistance or ongoing health care.

In addition to living independently, we value financial independence. The reality, however, is that many Americans have not saved enough money to maintain that independence as they age. In surveys, baby-boomers (the generation born from 1943 to 1960) admit that they have not thought much about retirement and are not financially prepared for it. Many of them plan to work past the traditional retirement age, but they will likely live longer as well, so the additional years of earnings may not help that much once they do retire.

The U.S. Census Bureau reports that in 1999, the average annual Social Security income to the 90 percent of households with persons 65 and older who receive Social Security was $12,300. For those who had sources of income other than Social Security, that retirement income averaged $17,900 per year. While this may cover basic living expenses, it does not provide much cushion for unexpected expenses. A combination of Social Security and a reverse mortgage may be the only way to pay bills and extraordinary expenses without relying on financial assistance from family or other sources.

Legacy

A concern about whether there will be anything left for heirs is one of the main reasons people reject reverse mortgages. People want to leave something for their children, and for most of us, home equity represents one-half or more of the entire estate. A reverse mortgage does deplete that home equity, but it does not necessarily mean there will be no equity to pass on to children or heirs.

There are ways to use a reverse mortgage and preserve home equity for your estate.

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