October 2, 2014
Primer: Home Equity → Retiree Income
Americans who are 62 or older had an estimated $3.6 trillion in total equity locked up in their homes in the first quarter of 2014, according to the National Reverse Mortgage Lenders Association. A new primer suggests they should start thinking seriously about using it to generate some extra retirement income.
The primer, published by the Center for Retirement Research at Boston College, which sponsors this blog, discusses two ways retirees can use home equity to generate income: by downsizing into a less expensive house or condominium or by taking out a reverse mortgage.
Click here to read the booklet online and learn how these strategies work and how much money each can provide. Their pros and cons are detailed in the graphic below, excerpted from the booklet:
September 30, 2014
Debit Card Beats Cash as Budgeting Tool
Plastic or paper? Americans have spoken.
In 2013, they made $4.1 trillion in purchases on their credit and debit cards, according to the Nilson Report – and that figure keeps marching upward.
Some researchers view this as a dangerous trend. Plastic cards, they contend, put distance between a man and his bank account. Without the tactile sensation of handing over one’s hard-earned cash, it’s easy – too easy – to spend money and harder to save.
New research out of The Netherlands has an entirely different take on the cash versus plastic debate. The study, based on a detailed Internet survey of nearly 1,500 Dutch people about their financial habits, shows that they view the debit card “as the better expense monitoring tool.” (The study compared cash and debit cards, excluding credit cards.) …Learn More
September 2, 2014
Sorting Out Medicare Enrollment Dates
Failing to meet one of Medicare’s many enrollment deadlines can be costly to new or imminent 65 year olds.
The Journal of Financial Planning helps aging baby boomers start out on the right foot with a clear run-down of at least five different enrollment windows for various parts of Medicare.
Getting these dates right is “very tricky,” and people often make mistakes that lead to higher out-of-pocket medical costs and gaps in their coverage, said Katy Votava, president of the consulting firm, Goodcare.com, and author of “Making the Most of Medicare: A Guide for Baby Boomers.”
“They often receive well-meaning but mistaken advice, and then they’re really in a pickle,” she said. “They aren’t eligible to apply when they want to or face penalties down the road. Coverage gaps can be a tremendous financial burden.”
The image displayed was extracted from the Journal’s enrollment timeline, and the entire graphic and a Journal article by Votava can be viewed here. The graphic is worth 1,000 words but here are some important don’t-miss dates: …Learn More
August 26, 2014
A Financial Plan for Alzheimer’s
First, the facts from the Alzheimer’s Association. At age 65, one in nine individuals has Alzheimer’s disease. At 85, the risk exceeds one in three. Its victims are more often women.
In the Ted video above, the global health consultant and writer Alanna Shaikh disclosed that her professor-father had Alzheimer’s. Since it can be hereditary, she’s preparing to possibly share his fate, by keeping her mind active and by learning to do things with her hands, such as knitting.
Shaikh doesn’t discuss financial preparations. But experts have some suggestions, chief among them getting one’s will, health care directive, and perhaps a power of attorney in order. Paramount in this process is finding trustworthy people to handle your affairs. You can also arrange for a lawyer or outside mediator if family members disagree about your care.
The Alzheimer’s Association recommends putting a financial plan in place as soon as there is a diagnosis. “Financial planning often gets pushed aside because of the stress and fear the topic evokes,” the association said in this new booklet. “The sooner planning begins, the more the person with dementia may be able to participate in decision making.” …Learn More
August 19, 2014
Retirees Live on Less
Many recent U.S. retirees in a new survey receive less than two-thirds of what they earned during their working years, and they’ve made significant adjustments along the way.
That finding for baby boomers who’ve retired in the past five years is contained in a larger national survey conducted by T. Rowe Price, the Baltimore mutual fund company. The full survey covered some 2,500 working and retired individuals, age 50 and over. All of them have at least some savings in a 401(k) account.
The majority of the recent retirees reported their annual income is between $25,000 and $100,000. Social Security is the largest single source of that income, and smaller but equal shares come from defined benefit pensions and from retirement savings plans.
Many of the retirees report their households are managing to get by on less than the 70 percent to 80 percent of their pre-retirement income that most financial planners and retirement experts estimate they need. And four out of 10 are living on 60 percent or less.
The retirees surveyed said they’ve had to lower their living standards, and four out of 10 described their situation as adjusting “a great deal.” …Learn More
August 14, 2014
South Has Highest Debt Collection Rate
It’s old news that working people in the South earn less than residents of thriving communities in California, the Northeast, the Upper Midwest and elsewhere.
What’s troubling is how many Southerners apparently can’t pay their bills.
West Virginia, North Carolina, Alabama, Kentucky, Texas – they’re among 13 states where more than four in 10 state residents’ credit card or other debts have been sent to collection agencies, according to a July report by the Urban Institute.
The report, based on data from the credit reporting firm TransUnion, provides insight into how many Americans continue to experience financial stress even though the recession is technically over. The Urban Institute’s analysis doesn’t focus on mortgage debt, since delinquent home loans generally go into foreclosure and rarely to collections. Yet many of the Southern states were also hit harder by the housing market collapse than the nation as a whole. …Learn More
August 12, 2014
Credit Union Popularity Rises
It’s not hard to find glowing testimonials online about credit unions – friendlier staff, lower fees, and faster processing of loan applications, credit union customers say.
“Way better than a bank!” Dan F. says about his Iowa credit union.
Now this warm, fuzzy feeling among existing credit union members seems to be reaching the general public. The Credit Union National Association (CUNA) reports membership growth exceeded 2 percent annually for the past three years, ending a lull that was taking hold only a decade ago.
In CUNA’s newest count – the year ending 2014 – total membership increased to 100.1 million members. CUNA president Bill Hampel’s theory is the financial crisis of 2008-2009 “soured a lot of people on the big banks.”
People do trust credit unions a lot more than banks, especially large banking companies, according to a “trust index” tracked by the University of Chicago and Northwestern University’s business schools. Two-thirds of Americans trust credit unions, the index showed recently, while only one in four trust a major bank. …Learn More