Archive for January, 2011 Page 2 of 3

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New Reverse Mortgage Hits the Market

Posted on January 24, 2011 by Jason

Kipplinger, January 18th, 2011

If you’re shopping for a reverse mortgage, you
have a new choice to mull over. The federal government has expanded its
home equity conversion mortgage, or HECM, to include a product with a
smaller loan amount and lower fees.

The new HECM Saver made its debut in fall
2010. The traditional HECM is now known as the HECM Standard. Both types
allow homeowners age 62 and older to tap their home equity. The loan
must be repaid with interest when the homeowner dies, sells the house,
or moves out for 12 months or more.

Borrowers will receive about 10% to 20% less in proceeds with the
Saver than with the Standard — but at a cheaper cost. “The new Saver
has virtually eliminated the upfront insurance premium,” says Eric
Declercq, vice-president for the reverse-mortgage operations of MetLife Bank.

When you take a federally backed reverse mortgage, you pay an upfront
mortgage insurance premium. The premium is not based on the loan
amount. Rather, it’s based on the “maximum claim amount,” which is the
home’s appraised value, the sales price or the government’s lending
limit of $625,500 — whichever is lowest.

Smaller Loans and Smaller Fees

For the HECM Saver, the initial insurance premium is 0.01% of the
“maximum claim amount,” while it remains 2% for the Standard. The
upfront premium on a Saver loan with a $300,000 maximum would be $30,
while the Standard premium would be $6,000. “It’s a big savings for
consumers,” says Jeff Lewis, chairman of Generation Mortgage.

A homeowner will qualify for a smaller loan with the HECM Saver than
with the Standard. According to AARP’s reverse-mortgage calculator, a
75-year-old in Arlington, Va., with a home worth $500,000 could get a
lump sum of about $258,000 from a fixed-rate Saver or a lump sum of
about $328,000 from a fixed-rate Standard.

Read more of this article.

About Reverse Mortgages:  The new HECM Saver program is already making a splash in the reverse mortgage industry, and many homeowners are turning to it for a low-fee alternative to the standard reverse mortgage.  Find out if the Saver is right for you at NewRetirement.com.

View of Retirement at 107

Posted on January 21, 2011 by Jason

Yahoo Finance, January 17th, 2010

Editor’s Note:  No links in this case, as this concerns more than simple retirement financial products, but the article below is a fascinating view of Retirement from someone who, by every possible measure, has gone through the entire process.  We could all stand to learn a great deal from Leonard McCracken.

Eight years ago, at age 99, Leonard McCracken failed the eye test for
renewing his driver’s license. He put his Lincoln Continental up for
sale and got $1,600. “I sold it in three days — I got a good price. I
love to haggle,” he says.

McCracken, who lives in Florida, has been living in retirement since
about 1969, when he left a position as a salesman with a now-defunct
steel company in Ohio. Since then, he’s been living on savings, Social
Security and a lifetime annuity that he purchased before he retired. He
has never had a pension. At 107, after living in retirement for 41
years, he’s still paying the bills and getting by on his own resources.

“Dad never made more than $10,000 a year in his life,” says his son Bob, a 73-year-old retired GE aircraft engineer.

How
does a guy with modest income manage such a retirement planning feat?
McCracken points to a half-dozen basic principles that have gotten him
through life and continue to serve him well.

Thrift

In
his whole life, McCracken says, he has only owned two new cars. The
rest of the time he bought used. He still shops at the thrift store. And
he remembers vividly the time that his wife was holding a garage sale
and left him in charge. When she returned, he had sold the living room
sofa for $100. “I had a very understanding, frugal wife (Dorothy, who
died in 2002 at 95 after 75 years of marriage). We gave up a lot of
things that other people were buying in order to break even.”

Read more of this article.

Get Tax Credit for Your Retirement Savings

Posted on January 21, 2011 by Jason

Yahoo News, January 14th, 2011

Tax time
is coming soon. The IRS starts accepting e-file Friday January 14th and
employers are in the process of getting W-2s out. Many people pay more
taxes than they need to because they fail to take all the credits that
are available to them. One of the most commonly overlooked credits it
the Retirement Savings Contribution Credit.

[In pictures: 10 Ways to Improve Your Finances in 2011.]

The Retirement Savings Contribution Credit is a tax credit
of up to $1000 ($2000 if married filing jointly) that you may be able
to take if you make eligible contributions to an employer sponsored
retirement plan or an IRA. This credit could reduce the amount of your
federal income tax liability dollar for dollar. It is a non-refundable credit so the amount of your RSCC can not exceed the amount of your tax liability.

In order to be able to claim the RSCC you must meet
the following conditions. You must be 18 or older and not a full-time
student. No one else (such as parents) can claim an exemption for you on
their tax return. Your adjusted gross income must not be more than
$55,000 if your filing status
is married filing jointly, $41,625 if your filing status is head of
household or $27,750 if your filing status is single, married filing
separately or qualified widow(er).

The amount of your tax credit is determined by how much you contribute to a qualified retirement plan
and your credit rate. The credit rate ranges from as low as 10 percent
to as high as 50 percent and is determined by your filing status and
income. You can find your credit rate using Form 8880 at IRS.gov.

Read more of this article.

Retirement Calculator:  Taxes have a massive implication on your retirement, not merely for this year but for all the years to come.  See what the implications are with our Brand New Retirement calculator (pun intended)

A Path Is Sought for States to Escape Their Debt Burdens

Posted on January 21, 2011 by Jason

The New York Times, January 20th, 2010

Policy makers are working behind the scenes to come up with a way to let
states declare bankruptcy and get out from under crushing debts,
including the pensions they have promised to retired public workers.

Unlike cities, the states are barred from seeking protection in federal
bankruptcy court. Any effort to change that status would have to clear
high constitutional hurdles because the states are considered sovereign.

But proponents say some states are so burdened that the only feasible
way out may be bankruptcy, giving Illinois, for example, the opportunity
to do what General Motors did with the federal government’s aid.

Beyond their short-term budget gaps, some states have deep structural
problems, like insolvent pension funds, that are diverting money from
essential public services like education and health care. Some members
of Congress fear that it is just a matter of time before a state seeks a
bailout, say bankruptcy lawyers who have been consulted by
Congressional aides.

Bankruptcy could permit a state to alter its contractual promises to
retirees, which are often protected by state constitutions, and it could
provide an alternative to a no-strings bailout. Along with retirees,
however, investors in a state’s bonds could suffer, possibly ending up
at the back of the line as unsecured creditors.

“All of a sudden, there’s a whole new risk factor,” said Paul S. Maco, a
partner at the firm Vinson & Elkins who was head of the Securities and Exchange Commission’s Office of Municipal Securities during the Clinton administration.

For now, the fear of destabilizing the municipal bond
market with the words “state bankruptcy” has proponents in Congress
going about their work on tiptoe. No draft bill is in circulation yet,
and no member of Congress has come forward as a sponsor, although
Senator John Cornyn, a Texas Republican, asked the Federal Reserve chairman, Ben S. Bernanke, about the possiblity in a hearing this month.

House Republicans, and Senators from both parties, have taken an
interest in the issue, with nudging from bankruptcy lawyers and a former
House speaker, Newt Gingrich,
who could be a Republican presidential candidate. It would be difficult
to get a bill through Congress, not only because of the constitutional
questions and the complexities of bankruptcy law, but also because of
fears that even talk of such a law could make the states’ problems
worse.

Read more of this article.

Phys Ed: Why Wii Fit Is Best for Grandparents

Posted on January 18, 2011 by Jason

The New York Times, December 1st, 2010

With the Christmas video-game-buying season in full swing, now seems the
right time to ask, Are active video games being aimed, at least in
part, at the wrong audience? Active video games refer, of course, to
games that require you to be active. Often also called exergames, they
include the Wii Fit, Dance Dance Revolution from Konami and the new
Microsoft Xbox Kinect and Sony PlayStation Move systems, among others.
Depending on the game, they exhort players to hop, wriggle, serve and
volley, left-hook a virtual boxing opponent or, in some other fashion,
move. The underlying premise of these games is that, unlike Madden NFL
11 or Super Street Fighter IV, playing them should improve people’s
fitness and health.

But the latest science suggests that that outcome, desirable as it
may be, is rarely achieved by most players, particularly the young. In
theory, active games should come close to replicating the energy demands
and physiological benefits of playing the actual sports they imitate.
But as most of us might guess, they don’t. Studies consistently have
found that active video games, although they require more energy than
simply watching television or playing passive video games, are not
nearly as physically demanding as real sports and physical activities. A
study published earlier this year in Medicine and Science in Sports and
Exercise found that when adults “exergamed” in a metabolic chamber that
precisely measured their energy expenditure, only 22 of the 68 active
video games tested resulted in moderately intense exercise, similar to
brisk walking. The vast majority were light-intensity activities, which
burned few calories and raised heart rates only slightly. None of the
games were as vigorous as a run or an actual tennis match, and few
lasted long.

Another issue with exergames is that they do not contain images of
viscera, explosions, chase scenes or aliens. Parents might applaud that.
But many gamers do not. Several recent studies have found that young
people often grow bored with exergaming. Three months into a recent
six-month study of the effects of a dance game, for instance, only 2 of
the 21 children participating were still using the game at least twice a
week.

Read more of this article.

Health Buzz: Shingles Vaccine Is Effective, but Underused

Posted on January 18, 2011 by Jason

US News & World Report, January 12th, 2011

Vaccine Cuts Seniors’ Shingles Risk by 55 Percent

A little-known shingles
vaccine can prevent tens of thousands of cases of the painful,
blistering condition each year, but only reaches roughly 11 percent of
those who could benefit, according to a Kaiser Permanente study
published Tuesday in the Journal of the American Medical Association.
Researchers reviewed the medical records of more than 300,000 seniors
and found that the rate of shingles was 55 percent lower among those who
received the herpes zoster vaccine, compared to those who did not.
Shingles, a rash triggered by the same virus that causes chickenpox,
typically strikes at age 50 or older. About 30 percent of Americans
develop the condition in their lifetime. It can cause scarring, chronic eye problems,
and pain that persists even years after the rash has healed. But the
vaccine, approved in 2006, costs about $200, which makes it the most
expensive of all the vaccines recommended for the elderly–and not all
insurance plans cover it, The Los Angeles Times reports.

–It’s Official: Get Your Shingles Vaccination

–Many Vaccines for Adults

A School Nutrition Experiment: Junk Food Carrots

Fayetteville-Manlius High School
in Syracuse, N.Y.–or F-M, as everybody calls it–and Mason High School
in Cincinnati are the designated launch sites for the first phase of a
proposed $25 million “Eat ‘Em Like Junk Food” campaign intended to give baby carrots a big bite out of vending-machine sales. Facebook and Twitter
pages have been created, a video game has rolled out, and a commercial
featuring a busty redhead lusting after “baby carrots, baby” is airing
in both cities. But the real grab-the-customer hook is the junk-food
packaging–crinkly, eye-catching, Doritos-type bags, U.S. News reports.

“We want people to consider baby carrots a regular
snack,” Bolthouse Farms CEO Jeffrey Dunn, the force behind the campaign,
told the Syracuse Post-Standard at the unveiling of F-M’s
carrot vending machine. Headquartered in Bakersfield, Calif., Bolthouse
owns fully half of the baby carrot market. “[We] thought we’d use some
of the emotional imagery the junk food industry uses and take a page out
of their book.”

And why not? A study published in September in the journal Pediatrics
found that presented with samples of graham crackers, gummy fruit
snacks, and baby carrots, 50 percent of 4- to 6-year-olds said that any
of the foods from a package adorned with a cartoon tasted better than
the same food out of a plain package. But would the same trick work on a
tougher crowd of marketing-savvy high-schoolers at my old stomping
ground? [Read more: A School Nutrition Experiment: Junk Food Carrots.]

–Junk Food: The New Weight Loss Diet?

–Are Sports Drinks Healthier Than Soda? Teens Think So

5 Kid-Friendly Foods With Iron

Iron deficiency can be a real problem for children. Lack of iron can stunt brain development, permanently lower a child’s IQ, and also cause anemia, which saps children’s strength, writes U.S. News correspondent Nancy Shute.

Read more of this article

Falls as Serious for Elderly as Stroke, Heart Attack: Experts

Posted on January 18, 2011 by Jason

Yahoo News, January 13th, 2011

Fall screening and prevention
should be a regular part of health care for older adults, and all programs
to prevent falls should include exercise, according to updated guidelines
for preventing falls in the elderly.

A summary of the American Geriatrics Society and British Geriatric
Society recommendations — based on a review of fall prevention studies –
appears Jan. 13 in the Journal of the American Geriatrics
Society.

“Falls are one of the most common health problems experienced by older
adults and are a common cause of losing functional independence. Given
their frequency and consequences, falls are as serious a health problem
for older persons as heart attacks and strokes,” guideline panel co-chair
Dr. Mary Tinetti, of Yale University School of Medicine, said in a journal
news release.

Doctors and other health professionals should ask older patients if
they have fallen recently or if they are unsteady when they walk. If so,
health providers should assess patients for problems such as muscle
weakness, poor balance or a significant drop in blood pressure when the
patient stands. If they have any of these problems, then older adults
should receive the interventions outlined in the guidelines.

These include:

  • Exercises to improve balance, gait and strength, such as Tai Chi or
    physical therapy.
  • Making changes to reduce the risk of falls in the home and while doing
    daily activities.
  • Reduction of medications, particularly those that affect the brain,
    such as antidepressants and sleep drugs.
  • Boosting low blood pressure and managing heart rate and rhythm
    abnormalities.

Read more of this article.

Reverse mortgages should be first resort for advisers

Posted on January 17, 2011 by Jason

Investment News, January 16th, 2010

Twenty-two years after they were introduced by the Department of Housing
and Urban Development, reverse mortgages still aren’t being used by
most financial advisers as the viable retirement income vehicles that
they can be.

Shunned as being too expensive, confusing and misleading to older
homeowners, the reverse mortgage typically is considered a “last resort”
by advisers.

But because they allow people 62 and older to stay
in their homes and convert home equity into tax-free income, reverse
mortgages probably should be an adviser’s first resort. In fact, there
are many times when a reverse mortgage can be the best way to stretch a
retirement portfolio.

Consider, for example, a 75-year-old who is
living in a mortgage-free home valued at $350,000 and has a $200,000
retirement portfolio.

Assuming a desired after-tax annual income
of $27,500, a 6.5% annual retirement account investment return and a 2%
annual home value appreciation, turning to a reverse mortgage first
would generate total income of $590,000 and fund retirement for 19
years. Applying the same criteria to a last-resort strategy, which uses a
reverse mortgage only after the retirement portfolio is spent, would
fund retirement for 16 years with a total income of $500,000.

The
$90,000 difference is created primarily by giving the higher-performing
retirement portfolio more time to benefit from market appreciation. A
third option, drawing down the retirement account, then selling the home
but having to finance other living arrangements, would fund retirement
for 16 years with a total income of $475,000.

The analysis was
compiled with the help of Generation Mortgage Co., which clearly has a
dog in this fight as the nation’s largest independent originator of
reverse mortgages.

But that doesn’t make the results any less
significant for a financial planning industry that is notorious for
disregarding home equity as part of an overall financial plan.

Clearly,
the reverse mortgage has its share of warts that will turn off many
advisers. One of the biggest issues is the cost, even though all fees
are deferred until the sale of the home, the death of the borrower or
when the borrower moves out permanently.

In the scenario
described above, a $6,000 loan origination fee, $2,000 in closing costs,
a one-time 2% mortgage insurance premium, a continuing 1.25% mortgage
insurance premium and 5.75% in interest on the loan would all be
deducted.

Read more of this article.

About Reverse Mortgages:  Long thought of as a loan of last resort, reverse mortgages are becoming more popular for people who are simply looking to maximize their financial return.  Consider the options today at NewRetirement.com

Rising rates and the impact on reverse mortgage proceeds

Posted on January 17, 2011 by Jason

Reverse Mortgage Daily, January 17th, 2010

Sounding like some alien character in a science fiction story, LIBOR
is actually a critical financial factor in determining how much money a
senior can receive in a reverse mortgage transaction, especially when
borrowers may or may not qualify depending on how the index moves.

LIBOR, an acronym for London Interbank Offered Rate, is a “daily
reference rate based on the interest rates at which banks borrow
unsecured funds from other banks in the London wholesale money market
(or interbank market),” according to Wikipedia.

It’s good news for reverse mortgagors when the 10-year LIBOR index
drops – used to calculate the expected rate – but not so good when it
rises, driving down principal limit factors – and the aforementioned
proceeds. Cliff Auerswald, All Reverse Mortgage Company,
is concerned about seeing the “swap rate” affecting the LIBOR go up
“pretty consistently over the last two months,” he says, driving down
significantly the amount of money reverse mortgage recipients could
obtain.

Auerswald cites one example where a client would have qualified for
$286,194 in proceeds on a property valued at $455,000, but waited just
long enough to sustain a loss when the LIBOR rose. As a result, the
client could only qualify for $243,000. “I think it’s going to affect
the viability of the [reverse mortgage] program for many borrowers,” he
worries, acknowledging that this rate rise “has happened before – a
couple of years ago.”

He notes that the new HECM Saver product, which has a separate and
much lower, initial mortgage insurance premium (MIP) option, “uses both
the same initial and expected LIBOR rates as the Standard.” One big
deterrence, though, is that since the Saver is new to secondary markets,
it has been priced at about a .25 percent to .50 percent higher margin,
which will produce even lower principal limit factors.

Read more of this article.

About Reverse Mortgages:  Reverse Mortgages fluctuate with interest rates in all sorts of ways, and while rates have been at or near historic lows for some time, they will soon begin to change once again.  As such, it might be a good idea to consider the program now, while rates are still low.

Colleges hope to hire back retirees

Posted on January 13, 2011 by Jason

News Observer, January 12th, 2010

Strapped for cash and short on staff, the UNC system wants the state
to lessen the six-month period that retired state employees must wait
before going back to work for North Carolina.

If the state scaled
that waiting period back to one month, as the UNC system wants, faculty
and staff members could draw retirement pay while providing expertise in
classrooms and elsewhere that, in an era of budget cuts, may otherwise
be lacking, officials say.

UNC-system leaders will discuss the
issue this week and might make it a formal part of the system’s 2011-13
legislative policy agenda – essentially, a priority list of needs to
lobby for.

For university leaders, the use of newly retired professors -
generally on a short-term, part-time basis – is a cheap way to fill
teaching slots with experienced instructors. The six-month waiting
period is, in many cases, too long to wait, said Laurie Charest, interim
vice president for human resources with the UNC system.

“Retirees
are the most valuable and most needed immediately after they retire,”
Charest said. “We’re getting a knowledgeable person to do a job,
generally at a low rate of pay.”

In some states, versions of this
practice, known as “double-dipping,” have been frowned upon because
retired employees – often highly paid administrators – draw pension
payments while going right back to their old jobs and salaries.

In North Carolina, there are safeguards against this, Charest said.

Now,
the state mandates that all employees who retire wait six months before
working again for any state agency. Retirees can return only to
part-time service, usually for a set period guaranteed by contract. A
worker can earn only up to half of the annual salary he or she was
receiving at the time of retirement. Such workers don’t receive health
benefits.

Read more of this article

Working in Retirement:  It’s not just college professors and academics who find working in retirement tempting, but many people from all manner of career paths.  Find out what the benefits would be for you at NewRetirement.com

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