With our current economic challenges, those of us looking forward to retirement need to be well-informed about our financial needs in coming years. And not only pre-retirees, but if you are already in retirement, you need to be wise to the changing economic environment. The good news is there are trained professionals who keep you abreast of changes in the current economy, changes in laws and changes in government programs for seniors. Professionals in this field are equipped to handle everything from help with retirement savings accounts, investment advice, guidance on government programs, estate planning or even newer funding options such as reverse mortgages.
A little planning prior to retirement will allow you to maintain your current lifestyle; whereas, a lack of planning may require you to live on an extremely tight budget. For those of you who already are retired, taking time right now to deal with financial problems instead of waiting for a crisis to happen is well advised.
Like a large number of other retired individuals, you may feel that you have planned well for the future only to find that rising medical costs, damage done to investment portfolios by the current economy and many other factors have caused you to go into debt. According to numerous reports, retirees and over-65s are racking up debt faster than ever before and are also failing to make repayments in record numbers.
If you are a senior in debt, you live with a constant burden over your head. If you are like most of these seniors in debt, you are on a fixed income and have no way of paying off credit cards and home equity loans that continue to mount to cover you household budget deficit. In order to meet ongoing payments, you may often forego purchasing medications and skimp on your food budget. You may even resort to living like a hermit, never going out and pinching every penny, in order to pay your obligations.
You have worked hard your entire lifetime and, up until now, have managed your debts. You probably never anticipated the rising costs of prescriptions, expensive medical care or depletion of savings by living too long. The good news is there is help for these individuals. Here are just a few examples of some relief options that could be available. There are many more besides these.
Reverse Mortgages. Home Equity Conversion Mortgages, also known as reverse mortgages, are a risk-free way of tapping into home equity without creating monthly payments and without requiring the money to be paid back during your lifetime. Instead of making payments to the bank, the cash flow is reversed and you receive payments from the bank. Thus the title “reverse mortgage”. For those of you seniors who are less fortunate financially but own a home, a reverse mortgage can allow them to remain in the home by creating extra income. The downside of reverse mortgages is that if you take out the maximum amount of reverse mortgage, the majority of the value of your home will just go to the bank to pay off the mortgage.
Life Settlements. A life settlement enables you to sell life insurance policies you currently own, but no longer want or need, for an amount greater than the cash surrender value. In some cases the value can be 2-3 times the cash surrender value. Even some term life insurance policies with a conversion option to permanent coverage can qualify for a life settlement. The downside of life settlements is that gain you have is usually taxable.
Government and Agency Programs. Some government programs such as food stamps provide temporary financial help for food. Other programs provide subsidized housing, help with medical expenses and provide tax credits. Medicaid can be used to pay for your nursing home costs. For veterans there is free health care, inexpensive prescriptions and disability income. Area agencies on aging may offer individual counselling, legal help and advice with Medicare costs and Medicaid programs. The St. Clair County Council on Aging provides Meals on Wheels, home maintenance assistance and other programs.
You may find that living on a fixed income and dealing with debt can be an overwhelming burden. There are knowledgeable professionals and debt relief strategies that can assist in easing this burden. In addition to the above, the National Care Planning Council keeps a list of financial advisers and attorneys who specialize in this area of planning at HYPERLINK “http://www.longtermcarelink.net” www.longtermcarelink.net. A little planning now can avoid a crisis later.
By Matthew M. Wallace, CPA, JD
Published edited July 15, 2012 in The Times Herald newspaper, Port Huron, Michigan as: Take care of retirement finances