Boatman: Consider all options when planning for retirement
By Gary Boatman
Published: Wednesday, Feb. 19, 2014, 12:01 a.m.
People have many things to consider as they prepare for retirement.
One major thing that is often overlooked is housing options. Many times people are able to start out in the same house that they lived in while working. It is easy and they have everything located where they are comfortable.
Some people plan on moving to warmer climates once they retire. Their plan needs to have realistic estimates of what the new home will cost and what their current residence will sell for.
Some people will decide that their current home is too large and expensive to operate with a smaller household size.
A smaller home may have lower taxes, utilities and other operating expenses.
Some people find themselves home-rich and cash-poor. This happens when the value of their home is a large part of their asset base.
Sometimes, they can unlock some of this value by using a reverse mortgage.
This requires very careful consideration. When you have a reverse mortgage, you are still responsible for taxes, repairs and insurance. How much you can receive from a reverse mortgage depends primarily on the home's value and your age.
Older people will get a higher percentage of value out of the property because of the shorter life expectancy. You will never get the full value since the lender has to recover the cost of interest when the mortgage ends due to death or moving out of the house.
Many houses in the Mon Valley will produce limited income because of our lower housing values. The income from a reverse mortgage is received income-tax free. Never take out a reverse mortgage to get funds for another investment.
If you stay in the house, you may have to make it age-safe later in life. This might mean adding ramps, changing bath tubs, railings or making other modifications. Make sure that you will have sufficient funds available to accomplish this. This is one of the areas where you need lump-sum assets available during retirement.
Some of your money should be invested so that you can access it for one-time purchases such as this and other funds to provide a steady income.
When a senior's health worsens, they may need to move to another residence. This may be because they can no longer make the repairs at the house or they may move to be closer to a family member who can offer some assistance. If their health takes a serious turn for the worse, they may have to move into some kind of facility.
There are different levels of care available depending on what kind of help is needed.
Some provide medical care and some just help with daily living. Sometimes a person will move at the death of a spouse because they want to be around people similar to their age to have daily interaction with.
There are various costs involved with all of these options. If you have not made plans for these, your options are limited.
Sometimes the cost for medical care can come from specialized financial products. Regular long-term care insurance is often very expensive and if you don't use it, you lose it. There may be some other no-premium options available.
We will be discussing some of these and other retirement issues at the March 20 Mon Valley Financial Seminar Series sponsored by The Valley Independent, Valley 1st Credit Union and Boatman Wealth Management at the Mon Valley Financial Education Center in Monessen next to Family Dollar. Call 724-684-6600 for more information.
Gary Boatman is a certified financial planner and a local businessman who serves as president of the Monessen Chamber of Commerce.
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