Whether or not we are in a recession or just feeling the effects of inflation, the bottom line is things are more expensive then they used to be. And I’m not talking about nickle candy bars costing a dollar.
Gas is now over $4 per gallon and expected to keep going higher. This has affected almost everything we buy since it takes trucks to get most of our goods to market. One solutions seems to be to switch to ethanol. Many farmers have jumped onboard and are growing corn to sell for fuel. This has added to the rise in cost of food as less land is available for growing crops.
The end result is that most people are feeling squeezed by the economy and having problems making ends meet. Senior citizens are not immune to this either.
In a recent poll, AARP reports, in it’s June 08 Bulletin, that 69% of seniors age 50-64 indicated that they are finding it more difficult to pay for essential items like food, gas and medicine. 59% of seniors age 65 and older reported the same. The scary fact is that 26% of seniors age 50-64 and 19% age 65 and older have prematurely withdrawn funds from the retirement accounts. This is alarming!!
For those seniors who haven’t retired yet, this will drastically affect their ability to enjoy their retirement, or force them to work longer. For those already in retirement, pulling from the principle of their retirement accounts throws off track their retirement income. For many, the goal is to live off the interest and leave the principle alone.
Financial planners I speak with tell me that most of their clients have done a good job planning for retirement, but they couldn’t anticipate $4 per gallon gas and the trickle down impact of that. They are fearful for their clients future. For many, a Reverse Mortgage can provide a solution to this problem.
One of the benefits of the recent Real Estate boom was an unexpected increase in property values. For those who have owned their homes for more then 5 years, and didn’t pull the equity out, there has been an incredible increase in equity. This also wasn’t part of their retirement plans. The usual “expected” property value increase is 4-6%. Over the last few years we saw values increase in some markets by 25% or more per year for several years in a row.
I believe that many seniors can benefit from tapping into this unexpected gain to counter the impact of the current economic woes.
In Oregon, we are still seeing modest increases in most markets. More then anything, we are getting back to normal. Many of us however are sitting on a small fortune. The question is whether or not it can easily be accessed. Following are several ways:
Family Gifts or Loans - While this is probably the preferred method, many seniors will not ask their kids for money. Also, most of us are in the same situation. In order to help others we have to give up something ourselves. For many, helping their parents means delaying retirement themselves.
Home Equity Line of Credit- This is an inexpensive way to unlock the equity, but as you use it, you have to pay it back. The more you use, the larger your monthly payment will be. If you stop making a payment you risk going into foreclosure. If you know for sure that you will be selling you place within a year or two, this is still one of the best options.
Sell and move to a smaller home or condo - This can be a good solution if you truly want, or need to move, but it also comes with expensive closing costs on 2 properties and and you will leave many memories behind. This may also be your only solution if you don’t have a lot of equity in your property.
Reverse Mortgage - For many, this will be the best solution. A properly structured Reverse Mortgage will improve the quality of life for those who find themselves short of cash or concerned about the future.
These are just a few exanples of how a Reverse Mortgage can help you or your loved ones through these trying times.
My advise? Call me. Let’s discuss your options and see if a Reverse Mortgage is the best option.
Larry Morris, CMPS 503-476-3854
