Retired and concerned about your finances?[1] Will you outlive your money?
Sometimes the retirement funds you planned or did not plan for to provide a secure retirement are looking a little thin. What can you do? Here are two ideas.
If you did not save enough and you own your home you have some choices that will free up funds.
- You can move to a place that costs less. Sell your home and downsize. Move to a home that is more appropriate for you as you age. The lower cost of the new home, along with lower property taxes and insurance will lighten your expenses on an annual basis, and give you extra cash to put in savings. Or, sell your home and move into an apartment or an independent living facility. Or, sell your home and move to a community that has a lower cost of living, so the house prices will be lower.
- Consider a Reverse Mortgage if you want to stay in your home. A reverse mortgage allows you to free up a portion of the equity in your home. You will receive a large payment to put into your bank account that you can spend any way you choose. Another benefit to you – there are no monthly payments to be made to the mortgage company. The only times the mortgage is paid off are when you die, sell the home or move out of the home. Reverse Mortgages are regulated by the U.S. Government, so no one can cheat you. You get the same good deal as everyone else and now have extra funds to enjoy.
Do you know that 6 out of 10 people age 50 and older are financially supporting an adult child or relative? Ouch!
Retired people have regular income from social security, pensions and retirement accounts. Most retired persons are not interested or able to go back into the work force to earn significant income.
Everyone wants to help their family, but is it really a help to support / gift to an adult child on a regular basis? Everyone needs the ability and pride to support themselves. If not what happens when you die and gifting stops? What will they do?
If you feel you must help a family member you may want to consider three options:
- Set limits for how long and for what reasons you will provide support. Perhaps the child has lost a job and you agree to help by paying the rent for 3 months.
- Sign a written loan agreement with the child and charge interest of at least 2.05% (IRS recommended rate). The promissory note should have a due date. That way you both know this is a loan and when it is to be paid off. Better yet, secure the loan against the child’s vehicle or home.
- Stop making gifts. If you find it hard to say no, refer the child to your attorney, accountant or financial advisor who can do this for you. That way it is not your fault. You can tell your child that your advisor insisted you do this.
Not worrying about your finances during your retirement makes life more fun. If you need help try these steps.
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[1] Money Missteps, by Eileen Ambrose, AARP Bulletin April 2017, page 10
