Archive for June, 2009

McCaskill urges reform on reverse mortgages

Posted on June 30, 2009 by Jason

St. Louis Post-Dispatch, June 30th, 2009

Poor oversight of the fast-growing reverse mortgage industry leaves
older people vulnerable to scams and could burden taxpayers, U.S. Sen.
Claire McCaskill said Monday at a hearing on the federally insured
loans.

The hearing at Ochs Senior Center in Heman Park was technically a
meeting of the Senate’s Special Committee on Aging. But McCaskill was
the only committee member present. For more than two hours, she
questioned local consumer advocates and grilled Washington-based
government regulators and a representative of the reverse mortgage
lending industry.

Reforms of reverse mortgages are needed, McCaskill said, to protect
consumers and to avoid a meltdown similar to the one that preceded the
recent real-estate collapse.

“If we learn nothing from the subprime mess, we all deserve to be
horsewhipped,” McCaskill said after the hearing. “The (reverse
mortgage) program can be a great benefit to seniors … But, if it goes
badly, it’s the American taxpayer that is holding the bag.”

A reverse mortgage is a special type of home loan that lets consumers
convert a portion of their home’s equity into cash. It’s different from
a home equity loan or second mortgage, because borrowers do not repay
the loan as long as they live in their home and pay insurance and tax
bills. Typically, loans are repaid after the borrower moves or dies and
the home is sold.

The vast majority of reverse mortgages are backed by the government.
The federal government has backed about 500,000 reverse mortgages since
1990. If some projections prove accurate, that number could jump to as
high as 700,000 this year.

Read more of this article.

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Survey: Millions Forced To Rethink Retirement

Posted on June 29, 2009 by Jason

National Public Radio, June 29th, 2009

With the recession squeezing wages and
holding back stock prices, millions of Americans are being forced to
rethink their plans for retirement, according to a new survey.

Watson
Wyatt Worldwide Inc., a retirement consulting firm, has released a
survey showing that in the past year, 44 percent of workers age 50 or
older have had to delay their planned retirement date. Three-quarters
of those now planning to postpone retirement cite the loss of savings
in their 401(k) accounts as the single biggest reason, the survey
showed. The respondents also said they need to work longer because of
rising health care costs and fears about price inflation.

If
Americans do keep working longer, it would reverse a decades-long trend
toward earlier retirement. The U.S. Bureau of Labor Statistics says the
average age for men at retirement in the early 1950s was just under 67.
That age fell continually until it hit 62 in the late 1990s.

The
survey of 2,200 full-time workers suggests the recession, stock market
crash and drop in home values could dramatically reverse the early
retirement trend. Half of workers over age 50 now say they plan to
retire at age 66 or later.

“The economic crisis has affected
many workers’ retirement plans and nest eggs, but those nearest to
retirement have been especially hard hit,” David Speier, senior
retirement consultant at Watson Wyatt, said in a written analysis of
the data. “Older workers do not have the time to offset declining
retirement account values, either by recouping their investment losses
or significantly increasing their savings rate. For many, the only
choice is to delay retirement.”

A Federal Reserve survey in
2007 found that the median household in the pre-retirement age group —
ages 55 to 64 — had total financial assets of more than $72,000. Based
on the stock market’s performance over the past two years, those
savings would have been whittled down to $55,000.

Such losses
appear to be spurring more Americans to save. On Friday, the Commerce
Department said the savings rate spiked to 6.9 percent in May, up from
5.6 percent the previous month. That’s the highest savings level in 15
years.

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How much is enough for retirement? Consider what’s important in your life

Posted on June 25, 2009 by Jason

Boston Globe, June 24th, 2009

I have enough. I hope you find you do, too, when you consider what’s really important in your life.

I’ve pondered the question of how
much is enough after receiving a perceptive e-mail from a reader and
review copies of two thought-provoking books.

The e-mail, from a longtime reader in Wisconsin, embodies the philosophy guiding my own semiretirement.

“Many
of my 50-something friends are wasting some invaluable time that
they’ve been given on Earth,’’ this reader said. They are caught up in
an “earning and spending cycle’’ (must keep working hard so they can
keep buying things they don’t really need) while worrying they’ll need
to save a lot of money to retire.

“I
can’t believe the number of smart, talented friends I have who are not
particularly happy doing what they are doing,’’ the reader said. But
they believe “they must continue so they can stop working at
(fill-in-the-blank age) to play golf or sit by the pool.’’

I must agree. What a waste, doing something you don’t like so eventually you can stop and do . . . nothing?

Why
not pursue your passions even if the pay is less? (This reader did,
returning to school for a degree in a different field.) If you love
what you do, you may never feel the need to totally retire, or at least
won’t mind working a few more years. Retirement, as this reader said,
would be a time to work for joy and learn new things.

Read more of this article.

Study weighs healthcare reform options

Posted on June 24, 2009 by Jason

UPI, June 24th, 2009

A comprehensive approach could slow healthcare cost increases in the
United Sates even while achieving near-universal coverage, an analysis
indicates.

However, the findings of The Commonwealth Fund study released
Wednesday reveal the national savings that could be realized from
health insurance,
provider payment and care delivery system reforms would vary
significantly depending on whether or not a public insurance plan
option is included and how such a plan is structured.

The private foundation’s analysis examined three scenarios: a public
plan option with healthcare providers paid midway between current
Medicare and private plan rates; a public plan option with payments more closely to Medicare rates; and no public plan, relying exclusively on private plans.

Commonwealth’s study found cumulative health system savings between
2010 and 2020, compared with projected trends for that period, would
range from $3.0 trillion under a public plan paying providers at
Medicare rates in competition with private plans, to $2.0 trillion for
a public plan paying providers at rates between Medicare and private
plan rates, to $1.2 trillion in the private plan-only scenario.

All three approaches would make affordable coverage available to
everyone, the 91-year-old healthcare oriented organization said.

Key to each version would be significant reforms to the way the
nation pays for care, rewarding value and efficiency over volume,
Commonwealth said in a news release.

Read more of this article.

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Is a Reverse Mortgage Right for You?

Posted on June 23, 2009 by Jason

US News & World Report, June 17th, 2009

Since the credit and housing meltdown largely removed private reverse mortgages from the market, home equity conversion mortgages
(HECMs)—federally insured reverse mortgages—have been growing steadily.
Now, with housing activity improving in most markets, the time is right
for homeowners age 62 and older to see if a HECM might work for them.
The loans have been controversial, and they are complicated, which is
one reason that consumer counseling is a required component of the HECM
loan process.

Pros . The
benefits of a HECM loan are that people get to stay in their homes as
long as they wish without making further mortgage payments. They can
access the available equity in their home whenever they want, and that
amount of money is guaranteed to them because their loan is federally
insured. They retain the title to the home until they leave, and any
untapped equity or price appreciation can be captured by them or their
heirs by selling the home. If they’ve stayed in the home so long that
they owe more money on the HECM loan than the home is worth, they can
simply walk away with no financial obligations under HECM’s nonrecourse
loan rules.

Cons. The downside of a HECM is that fees and closing
costs can be steep. Also, a fair-sized percentage of a home’s equity
must be set aside to cover future interest payments on the loan funds
that lenders have committed to pay to the borrowers. Some private firms
selling HECMs have been charged with misleading and overly aggressive
sales tactics. And some borrowers have been encouraged to use the loan
proceeds to make risky or unwise investments.

Safeguards. Last week, the comptroller of the
currency, John C. Dugan, compared reverse mortgages to subprime loans.
Because borrowers need not provide financial information or credit
scores to qualify for a HECM, he noted, it’s not clear whether they
have the financial ability to maintain the home and stay current on insurance
and property taxes. Failure to do so is grounds for the lender to take
over the home, and Dugan urged regulators to develop stronger consumer
safeguards to weed out unqualified borrowers. An official with the
Federal Housing Administration, which oversees the HECM program,
says such defaults are less than 1 percent of HECM loans but that
regulations will be proposed later this year to require lenders to seek
financial information from loan applicants and to include set-asides
for home insurance and taxes if they feel the borrower will have
trouble keeping up with such payments.

Here are eight questions you should answer to determine if a HECM is a good idea for you.

Read more of this article.

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Obama Announces Agreement With Drug Companies

Posted on June 23, 2009 by Jason

The Washington Post, June 23rd, 2009

President Obama today announced an offer by drug manufacturers to
contribute $80 billion over the next decade to narrow the controversial
gap in Medicare prescription drug coverage, a deal the president said
moves the nation a step closer to comprehensive health care reform.

“This is a significant breakthrough on the road to health care
reform, one that will make the difference in the lives of many older
Americans,” Obama said as he made the announcement from the White House.

The president was joined at the White House today by Barry Rand,
head of the influential senior citizens’ advocacy group, AARP, which
endorsed the deal.

“This is an early win for reform. It’s a major step forward,” Rand said.

Obama reiterated his vow to restructure the nation’s health care
system to expand care and slow the increase in long-term expenses,
despite mounting concerns about the initial costs and structure of
various plans that have been put forward. “And to those … here in
Washington who’ve grown accustomed to sky-is-falling prognoses and the
certainties that we cannot get this done, I have to repeat and revive
an old saying we had from the campaign: Yes, we can,” Obama said. “We
are going to get this done.”

After weeks of
secret talks, the pharmaceutical industry trade group voted Friday to
dedicate $80 billion to lowering the price of medicines sold to seniors
and the government. The unusual offer by the Pharmaceutical Research
and Manufacturers of America (PhRMA) is part of its effort to convince
skeptical lawmakers that it backs major health-care legislation.

Read more of this article.

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World’s 65 and older population to triple by 2050

Posted on June 23, 2009 by Jason

Yahoo News, June 23rd, 2009

The world’s 65-and-older population will triple by mid-century to 1
in 6 people, leaving the U.S. and other nations struggling to support
the elderly.

The number
of senior citizens has already jumped 23 percent since 2000 to 516
million, according to U.S. census estimates released on Tuesday. That
is more than double the growth rate for the general population.

The
world’s population has been graying for many years due to declining
births and medical advances that have extended life spans. As the
fastest-growing age group, seniors now comprise just under 8 percent of
the world’s 6.8 billion people. But demographers warn the biggest shift
is yet to come. They cite a coming wave of retirements from baby
boomers and China’s Red Guard generation that will shrink pensions and
add to rising health care costs.

Germany, Italy, Japan and Monaco have the most senior citizens, with 20 percent or more of their people 65 and older.

In
the U.S., residents who are 65 and older currently make up 13 percent
of the population, but that will double to 88.5 million by mid-century.
In two years, the oldest of the baby boomers will start turning 65. The
baby boomer bulge will continue padding the senior population year
after year, growing to 1 in 5 U.S. residents by 2030.

Read more of this article.

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For Older Investors, Old Rules May Not Apply

Posted on June 22, 2009 by Jason

The New York Times, June 19th, 2009

But what should you do right now with the money you have left?
Should you wade back into the stock market, if you bailed out when the
market was plunging? Or if you watched your investments
drop and then recover a little in the last few months, should you just
hold on? What happens if the market doesn’t fully recover for a long
time? (That happened in Japan in the ’90s.)

This economic
downturn has been steep enough and frightening enough to undermine the
idea that the stock market, over time, will always deliver. So a lot of
investors have retreated to a more conservative stance.

The
wisdom of that move is debatable. The investment industry warns that
becoming too defensive is costly in the long run. Its argument goes
something like this: People are living longer, retirement may last 25
or 30 years and stocks
are supposed to protect you from the ravages of inflation. And since
stocks tend to outpace most investments over long periods of time, the
industry says, your savings will do all right in the end.

But some people are no longer comfortable with that logic. There’s even a new study
that contends holding stocks over long periods of time may be riskier
than previously thought. Robert F. Stambaugh, a finance professor at
the Wharton School at the University of Pennsylvania
and a co-author of the report, said most investment research only
accounted for the risk of short-term market swings around the stock
market’s average gain over time. It doesn’t factor in the fact, he
said, that the average itself is subject to change.

So what should retirees and pre-retirees make of all of this?

Read more of this article.

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Retirement planning, year by year

Posted on June 19, 2009 by Jason

San Francisco Examiner, June 19th, 2009

Over the past few
months, we have heard that Social Security and Medicare have been hit
hard by the current recession. The experts are warning that these funds
may be empty far sooner than previously expected. These warnings make
us question the retirement safety net millions of workers have depended
upon. Since more
and more pension funds are disappearing or are greatly reduced, workers
have to look to other solutions for retirement income. We can no longer
count on employers.  Plus many of us do have not employer sponsored
retirement plans anyway.
 
And since other reports warn that baby boomers have not really saved enough for retirement, something must be done.
If you plan to retire within a decade, think about a 10-year plan:
 
10 Years to Go:
Evaluate assets and debts. Check an online retirement calculator to
determine how much money you will need for a successful retirement.
Have you saved enough? Do you have a lot of debt? Compare where you are
with where you need to be.
9 Years to Go:
Do you have disability insurance in place to protect your income while
you are working? Most employers provide this coverage. If yours does
not, purchase your own insurance to cover you until retirement age.

Read more of this article.

About Reverse Mortgages:  Learn all about reverse mortgages at NewRetirement.com

Professional Financial Advisors:  Find out what a financial advisor can do for you at NewRetirement.com.

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California Updates Reverse Mortgage Elder Protection Act

Posted on June 19, 2009 by Jason

Reverse Mortgage Daily, June 19th, 2009

California’s Senate Committee on Banking, Finance, and Insurance
passed a new version of AB 329 by a 9-2 vote on Tuesday and is being
referred to the Committee on Judiciary according to the Senate’s website.

AB 329 includes provisions which prohibit any person who
participates in the origination process from requiring an applicant to
purchase an annuity as a condition of obtaining a reverse mortgage.  It
also prohibits referring the borrower to anyone for the purchase of an
annuity or other financial or insurance products prior to closing the
reverse mortgage or before the borrower’s rescission period is
complete. 

AB 329 also revises the notice that must be provided by a reverse
mortgage lender to a prospective borrower before the lender takes a
loan application by adding the following language, and would require
that the notice be given to the prospective borrower before that
borrower receives counseling:

SENIOR CITIZEN ADVOCACY GROUPS ADVISE AGAINST USING THE
PROCEEDS OF A REVERSE MORTGAGE TO PURCHASE AN ANNUITY OR RELATED
FINANCIAL PRODUCTS. IF YOU ARE CONSIDERING USING YOUR PROCEEDS FOR THIS
PURPOSE, YOU SHOULD DISCUSS THE FINANCIAL IMPLICATIONS OF DOING SO WITH
YOUR COUNSELOR AND FAMILY MEMBERS;

The bill also requires that lenders give borrowers a list of 10
counseling agencies and goes beyond federal law by requiring the
provision of a specified checklist to  prospective borrowers, for their
use when discussing the potential ramifications of a reverse mortgage
with a HUD-certified housing counselor.

Read more of this article.

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