National Reverse Mortgage Lenders Association, August 26th, 2010
In a technical briefing via telephone for industry participants and
interest groups, Deputy Assistant Secretary Vicky Bott shared the
Department of Housing and Urban Development’s plans for a new variant on
the HECM product aimed at seniors looking for a lower cost option.
Bott also reported accompanying changes intended for the existing HECM
product.
Implementation is planned for October 4 for a new product called
the HECM Saver. The original product will from now on be called the HECM
Standard.
The difference between the two products will be in the cost of the
upfront Mortgage Insurance Premium (MIP) and the Principal Limit Factor
(PLF).
The HECM Saver will have an upfront MIP of .01% of the Maximum
Claim Amount. The HECM Standard upfront MIP remains at 2.0% of the
Maximum Claim Amount.
Both products will have an ongoing or periodic MIP of 1.25%
annually. (This is an increase in the now HECM Standard MIP which has
been .5% annually).
Principal Limits for the HECM Standard will decrease somewhere
between approximately one and five per cent from where they currently
stand, the lesser decrease for younger borrowers and the larger for
older borrowers.
The HECM Saver, however, will have principal limits between 11 and
23 percent less than those currently available on the "traditional" HECM
-- or 10 to 18 percent below the new HECM Standard principal limits,
thus offering consumers the option of lower proceeds in exchange for
lower costs.
Both products will include all transaction types and all payment options.
Loans on which a case number has been assigned prior to October 4
will still be eligible to use the currently existing pricing structure.
All loans assigned case numbers as of October 4 must abide by the new
pricing structure.
Official explanation of the plan will be issued in a Mortgagee Letter expected to be released in mid-September.
Read more of this article.About Reverse Mortgages: What does this change mean for you? How will it affect your ability to access reverse mortgages. Keep updated on the latest at our Reverse Mortgage information resource.
The Wall Street Journal, August 28th, 2010
Hey, retirees: Looking for a way to bring in more money? Give back all the Social Security checks you have received so far.
But you had better do it fast, since this loophole could soon close.
An
often-overlooked provision allows Social Security recipients to
withdraw their original application for benefits and to refile. For many
retirees already collecting benefits, the strategy—known informally as a
"Social Security reset"—could sharply increase their monthly income.
Larry Kotlikoff, a Boston University economics professor who has
researched the strategy, likens it to finding tens of thousands of
dollars or more "just lying on the sidewalk."
Be warned, though:
Not all retirees will benefit, and those who potentially would will need
access to a large stash of cash to start the process.
That is
because to withdraw your original application you must repay all the
money Social Security already has paid you—and your spouse. Depending on
how long you have been collecting, that can add up to a hefty sum, as
your new benefit amount is based on your current age, not the age at
which you originally applied for Social Security.
The strategy is
particularly useful for retirees considering buying an immediate
annuity, which, in return for a lump sum of cash, provides an immediate
stream of monthly checks generally set up so a retiree won't outlive the
money.
In most cases, "the income from resetting Social Security
will greatly exceed the annuity income," says Charles Ryan, a certified
financial planner in Annapolis, Md., who recently described the strategy
in the Journal of Financial Planning.
Mr. Ryan calculated the
impact of resetting Social Security for an unmarried, 70-year-old female
who originally filed for benefits at age 62. The result: Her after-tax
benefits increase by $8,568 in the first year alone.
Read more of this article.
Social Security Optimization: There are ALL SORTS of things you can do to optimize your payments from Social Security. Our articles will show you how to do so, as well as help you calculate what's in your best interests as far as Social Security Strategy is concerned.
The Wall Street Journal, August 27th, 2010
Recently some critics have accused me of bullying
state employees. Headlines in California papers this month have been
screaming "Gov assails state workers" and "Schwarzenegger threatens
state workers."
I'm doing no such thing. State employees are
hard-working and valuable contributors to our society. But here's the
plain truth: California simply cannot solve its budgetary problems
without addressing government-employee compensation and benefits.
As former Speaker of the State Assembly and San Francisco Mayor
Willie Brown pointed out earlier this year in the San Francisco
Chronicle, roughly 80 cents of every government dollar in California
goes to employee compensation and benefits. Those costs have been rising
fast. Spending on California's state employees over the past decade
rose at nearly three times the rate our revenues grew, crowding out
programs of great importance to our citizens. Neglected priorities
include higher education, environmental protection, parks and
recreation, and more.
Much bigger
increases in employee costs are on the horizon. Thanks to huge unfunded
pension and retirement health-care promises granted by past governments,
and also to deceptive pension-fund accounting that understated
liabilities and overstated future investment returns, California is now
saddled with $550 billion of retirement debt.
The
cost of servicing that debt has grown at a rate of more than 15%
annually over the last decade. This year, retirement benefits—more than
$6 billion—will exceed what the state is spending on higher education.
Next year, retirement costs will rise another 15%. In fact, they are
destined to grow so much faster than state revenues that they threaten
to suck up the money for every other program in the state budget. (See
the nearby chart.)
I've held a
stricter line on government employment and salary increases than any
governor in the modern era (overall year-to-year spending has increased
just 1.4% on my watch). Nevertheless, employee costs will keep marching
upwards because of pension promises, and they will never stop doing so
until we get reform.
At the same
time that government-employee costs have been climbing, the
private-sector workers whose taxes pay for them have been hurting. Since
2007, one million private jobs have been lost in California. Median
incomes of workers in the state's private sector have stagnated for more
than a decade. To make matters worse, the retirement accounts of those
workers in California have declined. The average 401(k) is down
nationally nearly 20% since 2007. Meanwhile, the defined benefit
retirement plans of government employees—for which private-sector
workers are on the hook—have risen in value.
Few
Californians in the private sector have $1 million in savings, but
that's effectively the retirement account they guarantee to public
employees who opt to retire at age 55 and are entitled to a monthly,
inflation-protected check of $3,000 for the rest of their lives.
Read more of this article.
Yahoo News, August 30th, 2010
Here's a recent study with more gravitas than one of those
Facebook-clogging character quizzes: summaries by Allianz Life Insurance
Co. of North America of baby boomers' five retirement-related
"personalities."
Allianz Life, a leading provider of fixed index annuities, is part of
Allianz SE, one of the world's largest financial services firms. Its
study, Reclaiming the Future, crafted the categories using
demographic data and a survey, conducted in May, that included a
national sample of 3,257 U.S. residents, ages 44-75.
"What the
personalities show to me was a good representation of what is going on
across America right now in terms of how people are viewing retirement,"
says Robert DeChellis, president of Allianz Life Financial Services.
He cautions, however, that attitudes may not always reflect the reality of the respondents' situation.
"The
caveat I would put in is that, in our research, we found that people
underestimated their retirement needs by a factor of three," he says,
adding that there is "very little, if any, work being done on
consumption analysis."
"Even though 20% of the population is in a place where they feel really good, I would have to question that," he says.
The five personalities:
Overwhelmed
The
"overwhelmed" personality, the largest segment of respondents (32%),
tends to have the lowest income and education level. One-third has been
affected — directly or indirectly — by job loss.
"This group tends
to have high credit card debt and meager assets," the study says,
adding that "as a group, [they] tend to be somewhat pessimistic," "feel
unprepared for retirement" and are "unsure of when, or if, they will be
able to retire."
Allianz describes this population as, financially speaking, "in survival mode."
Resilient
Twenty-seven
percent of respondents were categorized as "resilient." They tended to
be in their mid-50s, still working full-time and with moderate income
and asset accumulation.
Nearly one-fifth has been affected by job
loss and worries that the U.S. is entering a major economic depression.
The report describes this group as "pragmatic and grounded."
About
half of the survey respondents fitting this personality said they plan
to retire. The other half, unsure that they will able to afford
retirement, are planning on investing, working longer or supplementing
Social Security with some other form of income.
Read more of this article.Retirement Calculator: Which personality are you? How well prepared are you for retirement. Consider your situation with our retirement calculator.
Reverse Mortgage Daily, August 29th, 2010
During a call with industry leaders last week, the Department of
Housing and Urban Development said it plans to raise the annual
insurance premium charged to borrowers and reduce the amount of money
they can receive from the Home Equity Conversion Mortgage (HECM).
Starting Oct. 4th, the principal limits for Federal Housing
Administration’s reverse mortgage program will decrease between
approximately 1% and 5% from where they currently stand. The changes
will have less of an impact on younger borrowers, while older borrowers
will see the biggest reduction in the amount of money available.
Additionally, the agency said it will raise the annual mortgage
insurance premium from 0.5% to 1.25%.
It’s the second time HUD has been forced to reduce the principal limits in the last two years. While not as steep as the 10% haircut from last year, Vicki Bott, Deputy Assistant Secretary for HUD said the changes are necessary to ensure the program is sustainable.
Earlier this year, the Obama Administration requested a $250 million credit subsidy
for the HECM in its FY 2011 budget to offset projected losses for the
program. While an appropriation bill passed by the House of
Representatives provides $140 million for the program, the Senate has
yet to bring its appropriations bill to the floor. At the moment,
Senate Appropriators have included $150 million for the program in the
Transportation, HUD, budget for FY 2011.
Read more of this article.About Reverse Mortgages: If this measure passes, reverse mortgages will become increasingly difficult to get once the institution of the new rules occurs. Perhaps it's time to consider if you should get a reverse mortgage while the getting is good.
Boing Boing, August 23rd, 2010
How is it that door-to-door salespeople, marketers, car dealers,
politicians, strangers, con artists, and cult leaders are able to
persuade people to do things that they wouldn't ordinarily do? That's
the question Robert B. Cialdini asked himself after falling victim to a
huckster's influence one time too many. But instead of shrugging his
shoulders, this professor of psychology decided to study the phenomenon
and find out if there is a set of common techniques used to convince
people to hand over their money or time against their better judgment.
And he discovered that indeed there was, and wrote a book about it
called
Influence: The Psychology of Persuasion.
The book covers the six methods used to influence people to do things that aren't necessarily in their best interest.
Read this article.
Reverse Mortgage Daily, August 18th, 2010
The last year hasn’t been easy on the reverse mortgage industry, but
during the National Reverse Mortgage Lenders Association’s “road show”
attendees expressed some optimism about things to come.
With at least $140 million provided through the appropriation process
so far and the possibility of a two product solution from the Federal
Housing Administration, stars seems to be aligning for the industry.
Specifically in respect to the tentatively named “HECM Saver”.
Designed with reduced costs and lower principal limits compared to the
traditional FHA insured reverse mortgage product, the HECM Saver lowers
the cost of entry for borrowers.
“The product could help broaden the demographic appeal of reverse
mortgages,” said John Nixon, Industry Relations, Sales Support and
Channel Integration Executive at Bank of America
during the general session. While the traditional HECM product has
been used by those looking to eliminate a mortgage payment, the HECM
Saver has the potential to reach a dfferen’t audience. ”The next
generation of the product would really be a retirement planning tool,”
he said.
According to John Lunde, President of Reverse Market Insight,
the majority of reverse mortgage borrowers have used the HECM to pay
off a previous mortgage balance and eliminate their monthly payments.
Whether the industry can be successful reaching the 75% of eligible
homeowners that RMI estimates have no mortgage on their current house is
yet to be seen.
“This group may have needs for periodic cash flow or even monthly
payments, but it’s very hard to get them over the upfront fees on a
traditional HECM in exchange for modest immediate cash needs,” said
Lunde.
Because there has always been a low cost alternative (HELOC) for this
group of borrowers, the industry hasn’t been able to reach them. But
with the HECM Saver, “it truly does become a matter of choosing which
rate makes the most sense, rather than comparing sunk upfront fee
costs,” he said.
Read more of this article.
About Reverse Mortgages: The Reverse mortgage program is always changing in response to different market pressures. Find out more about how the program works at NewRetirement.com.
Reuters News Service, August 23rd, 2010
A Japanese
media frenzy over missing centenarians has cast a spotlight on the
isolation and loneliness potentially faced by millions of elderly as the
government struggles to cope with a rapidly graying population.
The panic - and guilt - was
sparked by the discovery that a man believed Tokyo's oldest male at 111
had actually been dead for over 30 years with his remains found
mummified at his home. His family is under investigation for fraud.
Since
then authorities have been unable to locate over 250 elderly people and
reports have emerged of many old people dying alone, or of relatives
running scams to get their pensions amid broken communities and
overworked public volunteers.
"Don't
worry, my mum-in-law is not a mummy," one relative, Mio Akiyama,
jokingly reassured workers of Suginami ward, one of 23 special wards or
municipalities of Tokyo, as they were checking on the area's elderly
last week.
With investigations
underway, officials have found many older people have moved away from
their family homes, never to be heard from again, showing how the
vulnerable with few friends can easily fall through the cracks of a
leaky, support network.
Fusa Furuya
of Tokyo's Suginami district, thought to be Tokyo's oldest woman at age
113, was found not be living at the address where she was registered.
She has yet to be found and none of her family know her whereabouts.
Her step-granddaughter told Japanese media she had not seen her relative for more than 20 years.
"I
feel sad and lonely. I didn't realize that kind of thing can happen in
Suginami ward where I live," said 67-year-old retiree Katsuji Yamashiro.
These
reports have shocked Japan which is home to an estimated 41,000
centenarians and whose women have held the record for the world's
longest life expectancy for 25 years.
"I
can't picture a situation where I wouldn't know her whereabouts.
Perhaps the breakdown of family ties is the cause of the recent
happenings," said Akiyama, holding the hand of her frail, 107-year-old,
bed-ridden mother-in-law.
Read more of this article.
The Wall Street Journal, August 18th, 2010
A White House-created commission is considering proposals to raise the
retirement age and take other steps to shore up the finances of Social
Security, prompting key players to prepare for a major battle over the
program's future.
The panel is looking for a mix of ideas that could win support from
both parties, including concessions from liberals who traditionally
oppose benefit cuts and from Republicans who generally oppose higher
taxes, according to one member of the commission and several people
familiar with its deliberations.
In addition to raising the
retirement age, which is now set to reach age 67 in 2027, specific cuts
under consideration include lowering benefits for wealthier retires and
trimming annual cost-of-living increases, perhaps only for wealthier
retirees, people familiar with the talks said.
On the tax side, the leading idea is to increase the share of earned
income that is subject to Social Security taxes, officials said. Under
current law, income beyond $106,000 is exempt. Another idea is to
increase the tax rate itself, said a Democrat on the commission.
Even
before the commission settles on a plan, many liberals are vowing to
block any cut in retirement benefits. But the White House and the
powerful senior group AARP appear open to a deal.
Republicans on
the commission have mostly held their fire. One of them, Rep. Jeb
Hensarling (R., Texas) said Thursday he opposes tax increases but
wouldn't rule anything out at this stage in the discussions. Otherwise,
he said, "the thing blows up before it has a chance to work."
The
commission's Social Security proposals would face an uncertain
reception in Congress, which would have to approve changes to the
program. But some commissioners were optimistic.
"Are Republicans
willing to sign onto a tax increase, and are Democrats ready to sign
onto a benefit cut? I think the answer is probably yes in both cases if
the other is willing to do it," said Alice Rivlin, a Democrat and former
White House budget director. Some have suggested raising the retirement
age to as high as 70, but Ms. Rivlin said she doubts there is support
on the commission to go that high.
Read more of this article.
Social Security Optimization: With Social Security changing, it's important to know how to get the most out of it. Using our Optimization calculator will help you do that, as will the information on our website.
PBS, August 19th, 2010
Q: What is your advice on taking out long-term healthcare insurance at age 76, with premiums amounting to $6,000 per year?
Costa Mesa, CA
A: It's
important to understand what that long-term care insurance covers. It
covers the cost of nursing homes, assisted living facilities and in-home
care. In most cases, the insurance will cover expenses for those who
need assistance with such daily activities as eating, dressing and
bathing, or who have a severe cognitive impairment such as Alzheimer's
disease.
Keep in mind, neither employer health insurance nor Medicare pays for
long-term care expenses in a significant way. Medicare will pay for
short-term, skilled care. Medicaid--the federal and state health
insurance program for people with limited income and low assets--does pay
for long-term care, but you have to use most of your savings or other
assets before you can receive benefits.
When considering this type of insurance, think about the assets that
you would have to spend down should you need long-term nursing home
care. If you have assets, or want to keep them for your heirs, buying
this insurance is definitely something to consider. If you have
low income, or you don't have any assets to speak of, you may not be
able to afford the monthly premiums for this insurance. If you are
broke, you would quickly qualify for state aid.
Before you get this insurance, read "A Shopper's Guide to Long-Term
Care Insurance," put out by the National Association of Insurance
Commissioners. AARP is also an excellent source of information, including tips and resources (search for "long-term care").
Read more of this article.Long Term Care Insurance: There are a variety of methods to go about getting Long Term Care Insurance. Learning as much as you can is a good place to start. The resources at NewRetirement.com can help you do just that.
Reverse Mortgage Daily, August 18th, 2010
The Federal Reserve Board proposed enhanced consumer protections and disclosures for reverse mortgages on Monday.
According to the Fed, the proposal would improve the disclosures
consumers receive for reverse mortgages and impose rules to ensure
advertisements contain accurate and balanced information.
“Reverse mortgages are complex products available to older consumers,
some of whom may be more vulnerable to abusive practices,” the Fed
said. “To help consumers understand these complex products, creditors
would be required to provide improved disclosures that explain
particular features unique to reverse mortgages.”
Under the proposal, lenders must provide a new two-page disclosure
that highlights the basic features and risks of reverse
mortgages in simple language. Shortly after filling out the
application, consumers would also receive transaction-specific
disclosures that reflect the actual terms of the reverse mortgage being
offered in a tabular format.
Additionally, the Fed proposal protects consumers from unsuitable
reverse mortgage practices by prohibiting lenders from requiring
the purchase of another financial or insurance product as a condition of
obtaining the loan. Consumers are also required to receive reverse
mortgage counseling before any nonrefundable fee can be imposed (except a
fee for the counseling itself) to “help ensure that consumers
understand these complex products before they become obligated on the
loan.”
Read more of this article.About Reverse Mortgages: What protections exist on reverse mortgages today? How does the program work in general? If you're above the age of 62 and looking to fund your retirement, this is vital information. Consider the option of a Reverse Mortgage by learning more about the program on NewRetirement.com
ABC News, August 19th, 2010
More and more people are choosing to retire early, and they're dipping into their
Social Security benefits.
The 75-year-old program is facing a rare shortfall because so many
people took their benefits in 2009. Thanks to widespread unemployment
and a down economy, many baby boomers are finding it hard to get by
without that extra income.
This morning on "Good Morning America" you saw personal finance expert Mellody Hobson discussing the issue.
Hobson, who is president of Ariel Investments, talked about the pros and cons of early retirement.
She also gave the following Web-only extra tips:
Mellody's Extra Tips
If you want to determine what your normal age of retirement is, the Social Security Administration has a chart on its website. Click HERE to see the chart.
Read more of this article
San Francisco Chronicle, August 17th, 2010
Despite the plethora of websites, books, magazines, advisors and
other financial information and services available for retirees, there
will always be a contingent of people who fail to make their retirement
savings last for the rest of their lives. There are many ways to avoid
this, some of which are more proactive while others are reactive in
nature. But none of them are particularly difficult; all any of them
really require is discipline and common sense. Here are a few ways you
might be endangering your retirement.
- Too Much Risk
You
worked and sweated for years to accumulate enough money to be able to
live a comfortable retirement. Therefore, this is probably not money
that you want to use to start trading commodities futures contracts
unless you are very experienced with them. Derivatives, small cap stocks
and other high-risk ventures should be approached with caution and used
judiciously as part of a well-thought out investment strategy.
- Too Little Risk
This
mistake can be every bit as costly as the previous one; those who
invest their portfolios too conservatively may find that their expenses
are outgrowing their income. Treasury securities and CDs can be great
foundations for any retirement portfolio, but virtually all retirees
need to have at least a small portion of their assets invested in either
equities or real estate in order to provide themselves a hedge against
inflation.
- Retiring Too Early
Early retirement
has become something of a status symbol among the upper-middle class.
However, early retirement can be disastrous for those who are not
adequately prepared for it. For every five years that one wishes to
retire early, at least $100,000 of additional assets should be saved
(assuming a payout of $2,000 per month and a rate of 6%). Those who
choose this path should therefore be prepared to accept a reduced payout
and a smaller Social Security check every month if they have not done
this. (For related information, take a look at How Much Social Security
Will You Get?)
Read more of this article.
ABC News, August 18th, 2010
The Federal Reserve and other top regulators said on Monday reverse
mortgages pose "compliance and reputation risks" for lenders, and
offered guidance to financial firms on how to avoid such pitfalls.
The Fed said reverse mortgages, which enable borrowers to get a monthly
income stream by surrendering a portion of the equity in their homes,
are likely to become increasingly popular given an expected rise in the
elderly population.
The guidance puts no limits on fees that can be charged for reverse mortgages.
"Reverse mortgages present substantial risks both to institutions and to
consumers, and, as with any type of loan that is secured by a
consumer's home, it is crucial that consumers understand the terms of
the product and the nature of their obligations," the regulators said in
a statement.
"Lenders must institute controls to protect consumers and to minimize
the compliance and reputation risks for the institutions themselves,"
they said.
Supervisors said they want to ensure that lenders determine whether or
not borrowers are able to continue paying insurance and taxes on the
property, and avoid conflicts of interest by lenders trying to bundle
the loans with other products.
"Consumers are not always adequately informed that reverse mortgages are
loans that must be repaid (and not merely ways to access home equity),"
the agencies said.
Read more of this article.
About Reverse Mortgages: It is imperative when considering a reverse mortgage to know what you are getting into. The fees, interest rates, and terms of the loan are all important to bear in mind. You can use the resources at NewRetirement.com to determine whether or not the program is right for you.
US News & World Report, August 10th, 2010
Jason and Elizabeth Pearce moved from Canada to Belize three years
ago. They bought a piece of property on the sea. A year later, they
built a house. Today, they live in a beautiful Santa Fe adobe-style home
with gardens all around.
The
pair lives very comfortably, without wants or financial worries.
They've had no trouble making friends in their new community because the
folks in Belize speak English. They eat out three or four times a week.
They barbecue lobster and filet mignon at home. They have reliable
Internet to keep them connected to the outside world. By choice, they do
not have a television. "I used to think that the news was important,"
Jason explains. "But not anymore." The retired couple has a maid and a
gardener, each of whom visit once a week.
And here's the best
part. Jason and his wife are living on their Social Security income
alone. In fact, they're living on Jason's Social Security income alone.
Elizabeth's Social Security check goes into savings each month.
Everyone's
spending habits are different, but here's a sample monthly budget for a
couple living a comfortable expatriate lifestyle in Belize:
--Rent: $300
--Utilities, telephone, and Internet: $500 (Your biggest expense in this country.)
--Groceries: $150
--Health insurance: $50
--Entertainment: $100
--Car expenses: $300
One
of the most appealing things about Belize as an overseas retirement
choice is that it can make sense even if you're nowhere near
conventional retirement age. Through Belize's Qualified Retired Persons
program you can establish foreign residency as young as age 40.
Belize
is a beautiful little country. It's a peaceful, eco-tourist retreat
home to more than 540 species of birds, 4,000 species of flowering
plants, and 700 kinds of trees. Nearly 40 percent of the country is
protected as parkland and natural preserves. Belize boasts the
second-largest barrier reef in the world. This incredible underwater
resource teems with colorful fish, coral, and unusual marine life,
making the waters off this country's coast a fisherman's and diver's
paradise.
Read more of this article.Retirement Calculator: What are your retirement expenses? How little could you get by on, and how little would you have to if everything fell apart? Our calculator can help you determine the answers to these questions at NewRetirement.com