Archive for May, 2010

After foreclosure: How long until you can buy again?

Posted on May 28, 2010 by Jason

CNN Money, May 27th, 2010

Walking away from a mortgage you can still afford to pay has
consequences; everyone knows that. Your credit score is shot and it can
be impossible to get credit.

Some homeowners, no doubt, believe
that the credit score hit is worth getting out from a deeply underwater
mortgage. They may owe, say, $500,000 when their house value is only
valued at $350,000. And, they figure, there’s no way it will ever be
worth what they owe so it’s better to get out from underneath the
burden.

After default, they reason, they can raise their FICO scores by
paying all their bills on time and eventually finance another home
purchase.

Don’t count on it.

While homeowners who default
due to economic hardship, such as a job loss or divorce, normally must
wait two to five years before buying a home again, walkaways may face
double that time.

“It could be well over seven or eight years
before [walkaways] are able to obtain a mortgage to buy a home again,”
said Jay Brinkmann, chief economist for the Mortgage Bankers
Association.

How
foreclosure impacts your credit score

“Credit
scores are only one component of a complete credit decision,” Brinkmann
said. “[In these cases] credit scores are not a good indicator of their
willingness to continue to pay their mortgage.”

But future
underwriters will scrutinize their records very closely, and if they
find no precipitating factors leading to the defaults — no job loss, no
health issues –the repaired credit score won’t overshadow the black
mark of a walkaway.

“If you made a strategic decision to default
on paying your mortgage, it will work against you,” said Bill Merrell of
the National Association of Review Appraisers and Mortgage
Underwriters.

Read more of this article.

Retirement Calculator:  Most financial professionals suggest that you avoid walking away from a home if you can possibly avoid it.  Our Retirement Calculator can help you determine how best to do just that.

Advice for Seniors: Understand the Risks and Costs of Borrowing With a Reverse Mortgage

Posted on May 27, 2010 by Jason

Federal Deposit Insurance Corporation, May 18th, 2010

A reverse mortgage is essentially a loan against your home that you
do not have to pay back for as long as you live there. It allows
homeowners age 62 or older to borrow cash from the equity in their homes
without having to make monthly payments. A reverse mortgage is often
advertised as a great source of easy money for older homeowners to
supplement their income, pay healthcare expenses or use the money as
they please. But as FDIC Consumer News has
reported in the past, while there are potential benefits to a reverse
mortgage, it may not be the best option for everyone. With the number of
potential borrowers growing with the aging population, it’s important
that homeowners fully understand the risks involved. Here are our
latest tips.

Remember that a reverse mortgage is a loan that must be
repaid. “Not all advertisements clearly indicate that a reverse
mortgage is a loan,” said Mira Marshall, an FDIC Section Chief
specializing in consumer issues. “In fact, a reverse mortgage is a very
complicated loan that uses home equity as collateral, just like the
mortgage you probably used to purchase your home.”

Reverse mortgages allow homeowners to receive cash in a lump sum,
through monthly payments, as a line of credit whenever they need money,
or any combination of these options. Unlike traditional mortgage
products, homeowners do not make any monthly payments to the lender.
However, they eventually do have to repay the principal and interest
when they move, sell the house or pass away. And, because no monthly
payments are being made, the amount owed will grow over time as interest
costs build up and, in some cases, as additional funds are advanced.

The borrower also is still responsible for paying the property taxes and
insurance and maintaining the house. Failure to do so can cause the
reverse mortgage to become immediately due and payable in full.

The rules to determine how much you can borrow through a reverse
mortgage are
complex. For example, the total amount of cash available is a percentage
of the
home’s value that will vary by the age of the borrower and the location
of the
property. And if there’s a co-borrower, the value is determined by the
age of
the youngest borrower.

Let’s say your house has a market value of $250,000, you owe nothing on a
mortgage and the youngest co-owner is 70 years old. Even though your
home equity is about $250,000, with a reverse mortgage and depending on
the location of the property, you can borrow only up to approximately
$130,000. In contrast, with a traditional home equity loan, it may be
possible to borrow up to 100 percent of the value of the home.

Read more of this article.

About Reverse Mortgages:  As you have it directly from the Federal Government it is important to understand the risks and costs associated with getting a reverse mortgage if you are attempting to acquire one for yourself.  You can learn more about these subjects at NewRetirement.com

Lifelong Exercise Keeps Seniors Young at Heart

Posted on May 27, 2010 by Jason

Healthday News, November 18th, 2009

Lifelong exercise helps
seniors keep their hearts healthy, new research shows.

The study included healthy people over age 65 — without chronic
diseases such as diabetes or high blood pressure — who were recruited
from another study in which they’d been reporting their weekly physical
activity for the previous 15 to 25 years.

For the new study, the participants underwent cardiopulmonary stress
tests, ultrasounds of the heart and blood vessels, and other tests to
assess heart health.

The more exercise participants had done during their lives (as measured
by the number of days per week of exercise training), the more likely they
were to have preserved the youthful characteristics of their heart, said
Dr. Paul Bhella, of the University of Texas Southwestern Medical Center in
Dallas, and colleagues.

For example, those who exercised four to five times a week during their
lives had about 54 percent of the benefit seen in “Master” athletes, while
those who exercised two to three times a week had 42 percent of the
benefit.

Master athletes are seniors who’ve exercised six to seven times a week
for 15 to 25 years and retained 100 percent of their heart’s youthful
characteristics and have hearts similar to those of 30-year-olds.

The study was scheduled to be presented Wednesday at the American Heart
Association‘s annual meeting in Orlando, Fla.

In other research presented at the meeting, researchers found that stem
cell therapy improves heart function, exercise ability and outcomes in
patients with severely enlarged hearts caused by dilated cardiomyopathy
and normal coronary arteries.

Read more of this article.

Supplemental Medicare Insurance: work with a pre-screened insurer
to find the right Medicare Advantage program for you and your medical
needs.

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

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

NewRetirement Retirement Calculator:   Assess your retirement plan with the NewRetirement Retirement Calculator

Reverse mortgages just got cheaper

Posted on May 27, 2010 by Jason

The Boston Globe, May 27th, 2010

As retirees enter retirement with account balances that aren’t quite
as high as they would like, more an more are considering reverse
mortgages. Reverse mortgages are available to anyone over the age of 62
who owns their home outright or holds only a very small mortgage.

The majority of reverse mortgages are made through the Home Equity
Conversion Mortgage (HECM) program and the amount that can be borrowed
depends on the appraised value of the home, the interest rate in effect
at the time and the age of the youngest homeowner. (Other things being
equal, an older homeowner will be able to get a high monthly payout than
a younger homeowner).

The maximum amount that can be received is $625,000. Money can be
taken in three ways: as a lump sum, in installments or a “credit line”
can be set up and money can be withdrawn as needed. With reverse
mortgages, retirees can remain in their homes and they wont be forced
out and there are no income or credit checks required.

Reverse mortgages have been around for a pretty long time and the
reason they aren’t more popular is that the fees associated with them
have typically been pretty high. Lenders add on a lot of charges and
these charges include origination fees which can be as high as 2 percent
of the first $200,000 borrowed and then 1 percent of the amount over
$200,000. Borrowers are also usually on the hook for mortgage insurance
premiums and possibly monthly service fees as well. All these expenses
really add up.

However, things are now changing and reverse mortgages are now
getting less expensive. For example, many lenders are now cutting the
origination fee and the monthly service fees. That doesn’t mean reverse
mortgages are now inexpensive — you should still expect to pay many
thousands in fees to get a new mortgage in place — but if its been a
while since you’ve looked into these mortgages, you might want to take
another look.

Read more of this article.

About Reverse Mortgages:  The changing Reverse Mortgage environment can be tough to keep track of.  We do the legwork to help out.  Look into your options at NewRetirement.com

How to Retire Comfortably

Posted on May 25, 2010 by Jason

The New York Times, May 18th, 2010

Choose your venue wisely. Where you are living when you retire need not
be where you end up, but moving gets harder as time goes on. If you move
to reduce costs, factor all of them in: Low property prices may not
make up for high health-care costs, rising property taxes or travel
expenses to see family.

Know your benefits.Many pre-retirees have an outdated idea of how much
they’ll have in pension income and how much health care will cost. But
laws and policies change, generally not to the benefit of retirees. Sit
down at least a year in advance with a benefits expert and get the
correct, up-to-date information.

Have a cushion handy. The best insurance against rising costs is to have
liquid assets set aside to throw off income or draw down in an
emergency. Salt away as much as you can in the years leading up to
retirement. Do not count on being able to sell illiquid assets, like
real estate, in an emergency, as the market may be against you just when
you need it most.

Lowball your budget. Living below your means is the best way to ensure
that you do not outlive your money. Even if your pension is lower than
your final salary, aim to keep monthly expenses at least 25 percent
below your monthly fixed income, at least at first. Bank the rest to add
to your cushion (see above).

Stay out of debt. Paying interest, otherwise known as rent on money, is a
bad idea when you are earning a salary. On a fixed income, it is
positively foolish. Before you retire, pay off credit cards and other
consumer debt. Once retired, don’t take on any more unless you can pay
it off easily each month.

Read this article.

Retirement Just Got a Little Harder

Posted on May 25, 2010 by Jason

The New York Times, May 18th, 2010

If retirement planning has grown more complicated and time consuming,
it’s because life itself is like that.

Life spans are longer than ever, stretching out retirements many more
years, and before the stretching begins, many of us live in more places
and hold more jobs through our careers than in the past. Each of these
developments can make it harder to set aside enough money for retirement
or even to know what enough will be.

Governments and employers are having trouble getting by, too, as recent
events in Europe make clear. That threatens to add another layer of
complexity and uncertainty for individuals and families that had counted
on those institutions.

With few exceptions, the state and occupational pension systems that we
continue to pay into will not leave us high and dry, financial planners
say. But they may leave us short when it comes to financing a
comfortable retirement, so it’s up to us to make up the difference.

“Liability for pension provision is going to fall unavoidably on the
shoulders of virtually every man and woman on the planet,” said Bill
Blevins, managing director of Blevins Franks International, a large
London firm of financial advisers. “Governments can’t afford to do it at
a time when populations are aging and there are fewer people paying the
bills. It’s quite a conundrum.”

Specialists on retirement benefits speak of three pillars. State
pensions compose the first; occupational pensions, the type provided
through employers or trade unions, are the second, and personal savings
make up the third.

The first pillar is a bit wobbly these days, with population growth
slowing in many countries, leaving fewer workers to pay for current
retirees’ benefits. Then there is the recent — or is it continuing? —
economic crisis, which has raised debt loads to uncomfortable levels.

Read more of this article.

How the Finance Bill Affects Consumers

Posted on May 25, 2010 by Jason

The New York Times, May 21st, 2010

For consumers trying to figure out what the financial overhaul bill
means for them, the legislation the Senate passed Thursday offers some
tantalizing possibilities.

Merchants might offer more discounts to people who pay cash. You could
get a free credit score every time a lender or landlord penalizes you
with a high interest rate or rejects your application because your score
is not up to snuff. Many mortgage
prepayment penalties would go away. And there will be a consumer
financial protection agency, despite many efforts to kill it off.

But some of the measures that could have the most impact on consumers
are not in the House version of the bill that passed in
December. So we will not know which new rules will exist in what
form until the two sides haggle in conference and produce a final bill.

One last-minute Senate addition would lower the fees that merchants pay
to process many debit card transactions. If banks lose revenue as a result, they could
make up for it by adding fees to checking accounts or cutting back on
rewards programs. Retailers say that once card costs fall, they will
hire more workers and hold the line on prices. There is a fair bit of
disagreement about who has the better argument.

It will not be clear until there is a final bill — and perhaps not for
years afterward — how much money the measures will put in your pocket
or whether they will keep it from being picked. But the basic outlines
are clear, so here are the areas to watch as a final bill emerges.

DEBIT AND CREDIT CARDS The Senate bill contains an
amendment with provisions that could affect how you use your credit
card. You have probably encountered those irritating handwritten signs
that forbid card use unless you’re spending more than $10 or so, even
though stores are generally not supposed to do this. The bill would
allow such minimums, as long as stores were not setting minimums for,
say, Bank
of America’s credit card but not Chase’s. Merchants would also not
be allowed to set different credit card spending minimums for, say, a Visa and MasterCard.

Read more of this article.

Some Novel Ideas for Improving Retirement Income

Posted on May 24, 2010 by Jason

The New York Times, May 20th, 2010

Employees have increasingly been forced over the last few decades to
take responsibility for ensuring they have enough savings to last
through retirement. But many of them are making inadequate saving
decisions and finding themselves facing financial difficulty in
retirement.

As a result, the Department of Labor and the Department of the
Treasury are reviewing retirement plan rules to determine if the
retirement security of participants could be enhanced with arrangements
aimed at providing a lifetime stream of income after retirement. Earlier
this year, the agencies put
out a request for comments on the topic from the retirement plan
industry and the general public.

In drafting its response, a financial services provider, Allianz Global
Investors, with the help of Shlomo Benartzi, a behavioral finance
professor at the University of California-Los Angeles, reached out to
academics in the behavioral science field and asked each one for a “key
insight” that they believed would be most helpful in creating policies
and solutions to  the issue. In its
response, released earlier this week, Allianz presented the
insights of the 10 academics and compiled their findings into a
checklist that could be used by policy makers.

“These insights can add a human dimension to the design of a
retirement system, helping to prevent ‘behavioral blind spots’ that
could dramatically compromise it,” Mr. Benartzi wrote in the report. “At
a time when individuals are asked to assume more responsibility for
their retirement savings, we believe the human element is a critical
determinative factor.”

So what are some of the main ideas? Here’s a look at a few we found
interesting. Check out the
response and let us know in the comments below which idea you find
most interesting and why.

Read more of this article.

Retirement Calculator:  How do these ideas fit into your current retirement situation?  You can use our NewRetirement Retirement Calculator to determine whether or not these solutions can potentially help you.

Europeans Fear Crisis Threatens Liberal Benefits

Posted on May 24, 2010 by Jason

The New York Times, May 22nd, 2010

Across Western Europe, the “lifestyle superpower,” the assumptions and
gains of a lifetime are suddenly in doubt. The deficit crisis that
threatens the euro
has also undermined the sustainability of the European standard of
social welfare, built by left-leaning governments since the end of World
War II.

Europeans have boasted about their social model, with its generous
vacations and early retirements, its national health care systems and
extensive welfare benefits, contrasting it with the comparative
harshness of American capitalism.

Europeans have benefited from low military spending, protected by NATO and the American nuclear umbrella. They have
also translated higher taxes into a cradle-to-grave safety net. “The
Europe that protects” is a slogan of the European
Union.

But all over Europe governments with big budgets, falling tax revenues
and aging populations are experiencing rising deficits, with more bad
news ahead.

With low growth, low birthrates and longer life expectancies, Europe can
no longer afford its comfortable lifestyle, at least not without a
period of austerity and significant changes. The countries are trying to
reassure investors by cutting salaries, raising legal retirement ages,
increasing work hours and reducing health benefits and pensions.

“We’re now in rescue mode,” said Carl Bildt,
Sweden’s foreign minister. “But we need to transition to the reform
mode very soon. The ‘reform deficit’ is the real problem,” he said,
pointing to the need for structural change.

The reaction so far to government efforts to cut spending has been
pessimism and anger, with an understanding that the current system is
unsustainable.

In Athens, Aris Iordanidis, 25, an economics graduate working in a
bookstore, resents paying high taxes to finance Greece’s bloated state
sector and its employees. “They sit there for years drinking coffee and
chatting on the telephone and then retire at 50 with nice fat pensions,”
he said. “As for us, the way things are going we’ll have to work until
we’re 70.”

In Rome, Aldo Cimaglia is 52 and teaches photography, and he is deeply
pessimistic about his pension. “It’s going to go belly-up because no one
will be around to fill the pension coffers,” he said. “It’s not just
me; this country has no future.”

Read more of this article.

Padded Pensions Add to New York Fiscal Woes

Posted on May 24, 2010 by Jason

The New York Times, May 20th, 2010

In Yonkers, more than 100 retired police officers and firefighters are
collecting pensions greater than their pay when they were working. One
of the youngest, Hugo Tassone, retired at 44 with a base pay of about
$74,000 a year. His pension is now $101,333 a year.

It’s what the system promised, said Mr. Tassone, now 47, adding that he
did nothing wrong by adding lots of overtime to his base pay shortly
before retiring. “I don’t understand how the working guy that held up
their end of the bargain became the problem,” he said.

Despite a pension investigation by the New York attorney general, an
audit concluding that some police officers in the city broke overtime
rules to increase their payouts and the mayor’s statements that future
pensions should be based on regular pay, not overtime, these practices
persist in Yonkers.

The city has even arranged for its police to put in overtime as flagmen
on Consolidated
Edison construction sites. Though a company is paying the bill, the
city is actually reporting the work as city overtime to the New York
State pension fund, padding future payouts — an arrangement at odds with
the spirit of public employment, if not the law.

The Yonkers experience shows how errors, misunderstandings and wishful
thinking are piling hidden new costs onto New York’s public pension
system every year, worsening the state’s current fiscal crisis. And the
problem is not just in New York. Public pension costs are ballooning
everywhere, throwing budgets out of whack and raising the question of
whether venerable state pension systems are viable.

In fact, the cost of public pensions has been systemically
underestimated nationwide for more than two decades, say some analysts.
By these estimates, state and local officials
have promised $5 trillion worth of benefits while thinking they were
committing taxpayers to roughly half that amount.

The use of public money for outsize retirement pay really stings when
budgets don’t balance, teachers are being laid off, furloughs are being
planned and everything from poison-control centers to Alzheimer’s day
care is being cut, as is happening in New York.

Read more of this article.

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