Reverse Mortgage Case Study - Home Environment Modification

A 74 year old wife needs a way to help her husband stay in their home. Her 76 year old husband has been wheel-chair bound by a debilitating stroke that has left him partially paralyzed on his left side. Their current home will not accomodate a wheel-chair and the wife does not want her husband put into a nursing home.

One solution is for them to take out a reverse mortgage on thier current home and use the reverse mortgage proceeds to add on a wheel-chair accessible addition to the home. The reverse mortgage would provide them with a $95,000 line of credit, part of which would be used to build the new addition.

They remaining part of the reverse mortgage line of credit could be used to cover any additional expenses needed to help care for her husband.

With the reverse mortgage, the husband and wife would be able to stay in their home together. The wife would not have to worry about making payments on the reverse mortgage while caring for her sick husband.

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Ready for Retirement?

Millions of Americans - 43 percent of all working-age households - are at risk of lower living standards when they reach 65, according to a new National Retirement Risk Index released Tuesday by the Center for Retirement Research at Boston College. Even two-earner households are at risk, because Social Security replaces less of their preretirement income.

The retirement risk index is drawn primarily from analysis of the federal government's Survey of Consumer Finances, which is updated every three years. By applying research methods to the federal surveys since 1983, the center found we're in substantially worse shape than we used to be.

The retirement risk index is based on a best-of-all-possible worlds scenario. It assumes workers don't retire until they are 65, that they spend down the equity in their homes by getting a reverse mortgage and that they create their own pensions by putting all their savings in an inflation-adjusted annuity at retirement - three things most Americans don't do.

Change those assumptions to workers retiring at 63, not tapping into home equity and investing their assets themselves, and a whopping 66 percent of working-age households are at risk.

One reason retirement readiness has declined over the last two decades is that fewer workers can count on a traditional pension plan. Instead, many have retirement savings plans, such as 401ks, which they have to fund and manage themselves.

Younger people and those in low-income households are most at risk of being unable to support their current lifestyles when they reach retirement age. Retiring later and saving more are ways to tackle the problem.

Source: Center for Retirement Research at Boston College

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Financial Planners Say Retirement Income Market Will Grow Slowly

The 2006 FPA Financial Advisors' Attitudes and Perceptions survey about
the Retirement Income Distribution Market, sponsored by OppenheimerFunds
Inc. and produced by the Diversified Services Group, Inc. (DSG), indicates that
the majority of financial planners believe that the retirement income market will grow substantially, but at a slow pace.

"Regardless of the pace of growth, retirement continues to evolve into
a more and more complex financial planning issue," said Kathleen Beichert,
Senior Vice President of Retirement Plans at OppenheimerFunds, Inc.

Key findings of the study:

• Systematic withdrawal strategies and dividend-paying investments are by far the most commonly recommended retirement income solutions.


• Specific income-generating products such as annuities and Certificates of Deposits (CDs) are recommended far less frequently.


• 60 percent of the planners surveyed have recommended reverse mortgage products at some point, however, only 6 percent recommend them often.


• 75 percent of those surveyed use some type of retirement income planning software program. Two-thirds of these programs are modified accumulation programs or were designed by the planners themselves.


• Respondents typically rely on existing clients to fuel their retirement income business. It appears that this group waits for their clients to reach retirement age and/or leverages their existing relationships for referrals.
  

"While existing clients and referrals are always a good way to target this market, there is a real opportunity for planners to reach out toothers who need help with retirement planning," said Beichert. "Planners should look for ways to partner with financial services companies and expand their retirement income client base."

About the Financial Planning Association:
The Financial Planning Association(R) (FPA(R)) connects those who need, support and deliver financial planning. We believe that everyone is entitled to objective advice from a competent, ethical financial planner to make smart financial decisions. FPA members demonstrate and support a professional commitment to education and a client-centered financial planning process. For more information on FPA, visit http://www.fpanet.org.

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