Live comfortably in retirement Archives

August 25, 2022August 25, 2022

Why Women Need to Play Active Role in Retirement Planning

When it comes to retirement planning for women, some of the current stats may surprise you. Nearly one third of adult women (29%) don’t have a retirement strategy in place. The figures around what percentage of women invest in their retirement are similar: the Teachers Insurance and Annuity Association (TIAA) recently found that just 31% of those surveyed are saving for retirement, as opposed to 44% of men. This information is especially concerning, considering that women live longer than men on average, typically earn less than men during the span of their career, and receive fewer retirement benefits on the whole than men as well.

As a result, they may be able to invest less overall than men, regardless of when they begin putting aside money. They tend to retire earlier, too; the average retirement age for women is 62.3, whereas for men it’s 64.6.

But If you’re a woman who has yet to start saving for retirement, it’s not too late. While it can seem overwhelming to know where to start, taking it step by step can make the process much more manageable and less stressful.

Enlist the Help of a Financial Planner

Experts recommend first meeting with a financial advisor. If your employer provides a retirement plan like a 401(k), you can likely connect with that company, and they can refer you to an in-house planner who can begin working with you to establish retirement goals and help you make strides toward reaching them.

Decide on Your Approach

There are a few different schools of thought when it comes to determining the amount of money you’ll need to retire. Here are the most common ones:

Strategy #1: The End Result

This approach holds that you should save 10 to 12 times your annual income by retirement age. While this is wise, you’ll want to make sure you have some more granular milestones in place to keep yourself on track (see below).

Strategy #2: Pace Yourself

A pacing plan takes the above idea a little further, advising that your savings should be equivalent to a multiple of your annual income as you age. For example, by age 30, you should have set aside as much as you’re making per year. By age 40, your retirement fund should be equal to three times your salary, six times by age 50, and so on — leading to 10–12 times your salary by age 67.

Strategy #3: Percentage Plan

Similar to strategy #1, this approach advises that you should have saved enough money to replace 60–100% of your pre-retirement annual income by the time you retire.

Strategy #4: Who Wants to Be a Millionaire?

This is probably the most basic rule, that generally suggests aspiring retirees should have a million dollars in the bank before they stop working. Yet, these days, this thinking is a bit outdated — as a million dollars certainly doesn’t go as far as it did 20 or 30 years ago. While it may be a good initial goal for some, you’ll want to take a look at your own current and desired lifestyle to roughly estimate your ideal savings amount in order to live most comfortably.

Retirement Tips for Women

Regardless of what plan you choose, the earlier you begin putting money away for retirement, the better. An easy way to get started, even prior to meeting with a financial advisor, is to automate your 401(k), 403(b), or IRA contributions; whatever you can afford to contribute to begin with helps.

In addition, as you approach retirement age, it can also be valuable to look at the ways in which you can optimize social security and maximize your benefits, as social security benefits represent 30% of retirement income for elderly individuals. However, the amount you’re eligible for depends on when you choose to collect your benefits, as well as factors like Medicare deductions and your spouse.

Finally, it’s important to consider your lifestyle goals for retirement. For example, if your plan is to downsize and live pretty frugally, you can aim for a lower savings target. On the other hand, if you want to travel far and wide or treat yourself to luxury vacations, consider ballparking what that might look like for you cost-wise and plan accordingly.

Explore Retirement Resources

Fortunately, there are a number of resources centered around women and retirement savings that are designed for those looking to begin their investing journey, including Ellevest, a wealth management app designed by women, and Female Invest.

If you need to pay down debt or take care of other financial obligations so you can begin saving for retirement, a home equity investment might be able to help you access the cash you need, all without interest or monthly payments.

Take our five-minute quiz to see if a Hometap Investment might make sense for you as you plan for retirement.

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We do our best to make sure that the information in this post is as accurate as possible as of the date it is published, but things change quickly sometimes. Hometap does not endorse or monitor any linked websites. Individual situations differ, so consult your own finance, tax or legal professional to determine what makes sense for you.

March 15, 2021February 5, 2023

Home Equity Investments: A Smart Reverse Mortgage Alternative

One of the questions we receive most often at Hometap is whether a home equity investment is like a reverse mortgage. In short, the answer is no. While they may appear similar on the surface, the two are actually different in just about every way. Below, we’ll compare Reverse Mortgages vs. Home Equity Investments so you understand exactly how they differ.

How Do Reverse Mortgages Work?

A reverse mortgage can be a good option for older homeowners looking to get some extra cash to supplement their retirement funds. According to the National Reverse Mortgage Lenders Association, senior housing wealth reached a record $7.54 trillion in Q4 of 2019, representing a major opportunity for retirees to tap into the cash that’s tied up in their homes.

With this type of loan, the lender actually pays you every month, the homeowner, based on a percentage of your home’s value, rather than the other way around. You can also get cash fairly quickly, which can be a huge help to retirees who find themselves without a large amount of retirement savings. While this may seem very appealing on the surface, it’s important to understand the ins and outs, because reverse mortgages are more complicated than they appear.

This might be one reason why, according to Reverse Mortgage Daily, they’re used far less than other means of accessing equity.

“Whether it’s a reverse mortgage or a home equity loan, or cash-out refinance, they just are not showing any meaningful desire to liquefy the equity in their home,” says researcher Karan Kaul. “And, that may be because they don’t want to take on debt in their 60s, 70s and 80s. They may want to leave a bequest, or they may just be trying to stay financially conservative.”

Read more about your options with Reverse Mortgages in Retirement: When to Sign On and When to Steer Clear >>

There are three different types of reverse mortgages: single-purpose, proprietary, and Home Equity Conversion Mortgages (HECMs). Each is slightly different, and it’s wise to consider the nuances of each one to find the best fit.

Single-purpose mortgages, like the name suggests, are limited in their use as dictated by the lender — like, for example, home repairs or property taxes. They don’t cost as much and have fairly flexible qualification criteria, but aren’t as widely available as other choices, mostly provided by state and local governments and some nonprofits.

Proprietary mortgages are private mortgages that aren’t federally-insured and therefore, aren’t typically subject to as much regulation as single-purpose or Home Equity Conversion Mortgages. So if you’re seeking more equity from your home or simply have a home that’s of high worth, you might have more luck with a proprietary mortgage.

Finally, Home Equity Conversion Mortgages are backed by the U.S. Department of Housing and Urban Development. Once you’re approved, you can use the funds for anything you’d like, and there isn’t a firm income requirement to qualify. However, your loan amount will be capped at about half your equity, and they can be more expensive than traditional home equity loans. It’s for this reason that those looking to access equity from a high-value home might find proprietary mortgages to be more attractive.

Pros and Cons of Reverse Mortgages

The biggest advantage of a reverse mortgage is that unlike a regular (forward) mortgage, you don’t need to make monthly payments and the loan balance won’t come due until the loan matures. This can be a huge plus for homeowners on fixed incomes who want to stay in their homes. It can also help delay the need to pull money out of Social Security earlier, potentially helping you get bigger and better benefits later on.

However, you’re still responsible for taxes and insurance on the home, and those costs can add up. You’re also required to use the property as your primary residence for the life of the loan, and an unexpected 12-month stint in a nursing home would be considered a permanent move, making you responsible for paying back the loan. Overall, despite the lack of monthly payments, the fees associated with reverse mortgages are often higher than those of traditional mortgages.

You must be 62 years old to qualify for a reverse mortgage, which immediately rules it out as an option for many homeowners. Finally, a reverse mortgage decreases your home equity and increases your debt, since the interest becomes part of the loan balance over time rather than being due upfront.

Read more about the pros and cons of a reverse mortgage >>

Frequently Asked Questions About Reverse Mortgages and HECMs

What is the difference between a HECM mortgage and a reverse mortgage?

Home equity conversion mortgages (HECMs) are a type of government-backed reverse mortgage that give you up to approximately half of your home’s equity to use as you wish. There are two other types of reverse mortgages — single-purpose, which are limited in their approved use, and proprietary, which aren’t federally insured and aren’t as highly regulated — so it all depends on what works best for you.

Why do people dislike reverse mortgages?

While reverse mortgages can be a good fit for some homeowners, the criteria can be restrictive in terms of who qualifies — they’re only available to homeowners aged 62 or older. You’re also required to use the property as your primary residence for the life of the loan, so it might not be the best for everyone.

What is the H4P program?

The H4P program is a reverse mortgage program that allows seniors aged 62 or older to buy a new primary residence using the proceeds from their HECM loan at the same time — when they take out the mortgage, they purchase the home as well.

What credit score is needed for reverse mortgage?

There are typically no firm credit score requirements for a reverse mortgage, though criteria might vary by lender.

Home Equity Investments: A Reverse Mortgage Alternative

If you’re worried about these disadvantages, consider the alternatives to reverse mortgages. There are the more traditional avenues, but they may not be the best choice if you want to avoid taking on more debt or monthly payments.

For example, a home equity loan gives you a lump sum of cash and tends to have a fixed rate and predictable monthly payment. However, the loan installments come on top of your existing mortgage payments, so older homeowners may not want or be able to handle both.

A cash-out refinance is another option that involves taking out a new mortgage on your home and potentially locking in a lower interest rate — but there are closing and origination fees, and they’ll likely extend your mortgage payoff timeline.

Finally, home equity lines of credit (HELOCs) give you flexibility in terms of the amount of cash and frequency with which you can take it out. However, the application and approval process can be challenging, and the variable interest rate means that monthly payments will be unpredictable, so it may not be a great fit for older homeowners looking to keep spending down.

Fortunately, there’s also a fairly new option, a home equity investment. It gives you near-immediate access to cash without monthly payments — just like a reverse mortgage — but without any interest or additional debt. Since Hometap is an investor, not a lender, it can provide you with up to 30% of your hard-earned equity in exchange for a share of your home’s future value.

There’s no age minimum or firm credit score requirement, and you can use the money for whatever is most important to you, whether it’s getting rid of debt, completing a home renovation, paying off medical bills, or anything else you want; it’s up to you. Quickly compare reverse mortgages and home equity investments with the chart below.

You should fully understand your options before making a decision, as Hometap Investments do have an effective period of 10 years, by which point you’ll need to settle. While you don’t have to sell your home to do this — a buyout with savings or a home refinance works, too — it’s something to take into consideration if you don’t think you’ll be able to refinance or buy out the Investment.

It only takes five minutes to see if a Hometap Investment might be a good reverse mortgage alternative for you.

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January 21, 2020January 13, 2021

Help Your Parents Retire Without Compromising Your Finances

It’s no secret that saving for retirement requires hard work starting long before retirement. But many workers who are nearing or at retirement age are finding they’re unable to retire because they don’t have enough money saved. In fact, Insured Retirement Institute data suggests that as of 2019, 45 percent of Baby Boomers have nothing saved for retirement. Hometap’s 2019 study on homeowner stress that looked into the house-rich, cash-poor phenomenon shows that Baby Boomers have more debts they’re struggling to pay down than in previous generations, pushing many to retire after age 65.

If you’re the child of a Boomer, this data is alarming. You want to see your parents enjoy retirement, but it’s likely challenging to offer financial help without risking your own financial wellbeing. But by getting your parents back on track, you can break the cycle, ensuring your own children don’t have to help you in retirement.

Meet the Sandwich Generation

According to a PNC survey, 16 percent of respondents are caring for parents or elderly family members, and many of those are also caring for children, too. This financial sandwiching effect poses a major challenge for those stuck between generations, hence the nickname “the Sandwich Generation.”

So, how do you help your parents without hurting your own financial standing? Perhaps you have the means to help—great! But, if you’re like most, you may only be able to help so much, leaving both your own family and your parents in a not-good-enough situation. Or maybe you don’t have the ability to help at all. If you find yourself in one of the two latter groups, there are ways you and your parents can thrive in retirement.

1. Perform Financial Triage ASAP

If you’re unsure of where your parents’ finances stand, have a gut feeling they’ll ask for help down the line, or have already been asked for help, the first step is to have an open and honest conversation. Your parents, as your caregivers, may have a hard time giving up the caregiving role. Let them know you’re not worried about your inheritance, you’re worried about your own financial future and don’t want bitter emotions to take a toll on your relationship if they end up needing significant financial help down the line. If you have siblings, you’ll want to address this as a team.

If they’re open to it, take stock of their expenses (including any they can cut), debts, and available income from either a pension or Social Security benefits to begin retirement planning. You’ll want to help them plan for healthcare costs, which, on average, adds up to 15 percent of annual expenses. Check for any tax credits they may qualify for, too.

2. Confer with an Unbiased Third Party

If you have the means, particularly if your parents are reluctant to talk openly with you about their finances, consider getting a fiduciary financial advisor involved. A fiduciary has a responsibility to the individual they’re helping—not an organization that they work for. This can give you peace of mind that the advisor will guide your parents to products and services that will work best for them.

While your parents may feel embarrassed talking with you, they may feel more comfortable with an advisor. Advisors can also check that your parents have the right investment mix and steer them away from any get-rich-quick schemes that tend to target older generations.

3. Consider Downsizing

One way your parents can access necessary funds for an early retirement and reduce expenses is by downsizing their home. Moving into a smaller home can reduce monthly mortgage costs in addition to energy expenses like heating, lawn care, and other maintenance upkeep costs.

It’s also possible to move to a location where you can reduce transportation costs, too. If your parents are still mobile and can use public transportation, they can reduce car costs like insurance, gas, and maintenance. Being around services they need increases convenience and may even allow them to find a part-time job to supplement income.

4. Help Your Parents Access Their Home Equity

Your parents don’t have to sell or downsize. There are several government housing programs for those of retirement age, including reverse mortgages that allow homeowners to access a portion of their home equity. However, reverse mortgages get tricky if an unexpected illness takes you out of your home for more than a year. In this case, your parent(s) would be faced with paying back the loan in full. Fortunately, there are more solutions for accessing home equity that don’t require a reverse mortgage.

Read 3 Ways Home Equity Can Fund Your Retirement »

Many retirees find that a home equity loan or home equity line of credit is a way to retire when they want (or have to), but delay Social Security benefits until 70 when they can maximize their benefits. But you need a plan to pay that money back. If your parent unexpectedly has to move to a more accessible home, for example, that money is owed back.

Unlike a loan, a home equity investment allows your parents to access a portion of their home equity in cash now in exchange for a share of the future value of their home. And since it’s an investment and not a loan, there are no monthly payments or interest. Many Hometap homeowners find a Hometap Investment is a way to live comfortably in retirement, whether that’s paying off debt or making necessary home renovations to age in place. Plus, you can do a lot of the legwork on behalf of your parent if your parent is unable or wants you to manage the process. There are two steps in which the homeowner must play a role:

They will sign a consent form that allows Hometap to run a soft credit pull
They must be present on the day of the signing to sign investment documents.

Frequently, Hometap Investment Managers will have initial discussions with the adult children of the homeowner, and then have joint calls with all parties on the call to understand the details of a Hometap investment.

As you help your parents navigate their financial future, remember money isn’t the only way to help your parents and, in many cases, is not the best way to help them either. Taking the time to help them understand their options and get their finances back on track for the long-term ensures everyone can thrive in retirement and that your relationship can thrive, too.

Take our 5-minute quiz to see if a home equity investment is a good fit for you.

LEGAL DISCLAIMER

The opinions expressed in this post are for informational purposes only. To determine the best financing for your personal circumstances and goals, consult with a licensed advisor.

September 5, 2019June 17, 2022

3 Ways Home Equity Can Fund Your Retirement

First, let’s start with the bad news. Today, the average 65-year-old has 47% more debt than 65-year-olds did in 2003, according to the Federal Reserve Bank of New York.

Now, the good news. Despite the bleak numbers, when you consider the equity you’ve accrued in your home, Bank of America says you may be far better prepared for retirement than you previously thought. In fact, your home might be one of your most valuable assets.

That’s why it’s critical you weigh all your options when deciding how your home will play into your post-work finances. Need some ideas? Here are three ways your home can help fund your retirement.

1. Downsize and Convert Your Equity Into Cash

Selling your home is perhaps the most obvious way to use the equity you’ve built to fund your retirement. By downsizing and moving into a smaller—and cheaper—place, you get instant access to your current home’s equity in cold hard cash. You can also start building equity again in your new home.

If you aren’t looking to downsize, you could also consider selling your home and moving abroad or finding a community where you can get the same size house at a much smaller price.

2. Rent Out Your Space

Homes carry a lot of memories. If you’re not ready to sell yours or want to accrue a bit more equity in it before you do, consider renting it out. There are several ways to do this. You could find a long-term tenant or post your home on sites like Airbnb to rent it out to travelers. Don’t want to leave your home? Consider renting out a spare bedroom. Or tap into your home equity to transform the basement or garage into a five-star guest suite.

3. Unlock Your Home’s Equity

Renovating the basement isn’t the only reason to tap into your home’s equity. You could also use those funds to diversify your portfolio, pay off debt, or get help with your bills during retirement. When it comes to accessing your home’s equity, you have options.

Reverse Mortgages

If you’re 62 years or older, Bankrate says you may qualify for a reverse mortgage. This gives you fast cash in exchange for a share of the equity in your home.

Wondering if a reverse mortgage is a smart retirement strategy? Learn when to sign on and when to steer clear.

With a reverse mortgage, you have the option to deed your home to the lender after you pass. This way, your beneficiaries won’t be on the hook for the remainder of the loan. They also won’t have to go through the time-consuming foreclosure process because the home will already belong to the lender.

Before you decide to cash in on your home’s equity through a reverse mortgage, it’s important to weigh all the pros and cons.

Home Equity Investments

HELOC, Home Equity Loans, Cash-Out Refinance—What’s the Difference and Are Any Right for You? See the Breakdown in Our Latest Guide.

If you don’t want to deal with the hassle of a renter and aren’t ready to sell your home, it’s worth considering a home equity investment. A home equity investment allows you to tap into your home’s equity without taking on additional debt or monthly payments. Before the end of the term, you can settle by refinancing or buying out the investment with savings.

If you’re curious how much money you could receive from a home equity investment partner like Hometap, get an Investment Estimate from us today.

See if you prequalify for a Hometap investment in less than 30 seconds.

LEGAL DISCLAIMER

The opinions expressed in this post are for informational purposes only. To determine the best financing for your personal circumstances and goals, consult with a licensed advisor.

May 13, 2019November 9, 2022

How to Get Out of a Reverse Mortgage

At the time you took it out, a reverse mortgage seemed like the best way to fund your financial goals. But perhaps circumstances have shifted or you’ve changed your mind. It’s not too late to back up (and out) before or after you sign your reverse mortgage paperwork. Regardless of what stage you’re in, yes, you can get out of a reverse mortgage.

How a Reverse Mortgage Works

Before we get into the different ways you can exit a reverse mortgage loan, let’s review how these types of loans work. In a reverse mortgage, the lender is paying the homeowner in exchange for the equity in the home. In other words, the borrower receives payments from the lender (usually monthly) and does not need to make payments back to the lender as long as he or she lives in the home. As time goes on, the loan balance and interest grow, while home equity decreases.

There are many reasons why you may change your mind about this option: You’ll need to pay back the reverse mortgage loan if you’re out of your home for twelve months or more (even if it’s an unexpected stint in a nursing home), and the fees are typically greater than a standard mortgage.

Read more about the disadvantages of a reverse mortgage >>

So you’ve decided this wasn’t the best financing option for your needs. There’s good news.

How to Get Out of a Reverse Mortgage

Scenario 1: You haven’t signed.

There’s a time and a place to trust your gut. This is one of them. There are two important questions you should consider (or reconsider) when you’re thinking about backing out of a reverse mortgage.

Is a reverse mortgage really the best fit for your financial needs? Pinpoint why you’re making this decision in the first place and research other ways to overcome your financial challenge. For example, if paying off debt is your motivation, look into low-interest personal loans, home equity loans and home equity investments.
Can you keep up with your home’s maintenance? Letting home maintenance slide is not an option once you’ve signed up for a reverse mortgage. Although reverse mortgages don’t require monthly payments, this loan does require homeowners to meet other requirements, such as paying property taxes and insurance and keeping up with maintenance. Forgoing these expenses could result in a foreclosure.

Scenario 2: The ink isn’t dry yet on your signature.

Nothing is final with a “cooling-off” period clause. Otherwise known as the right of rescission, this exit option gives homeowners three business days after signing the paperwork to reconsider without penalty, no questions asked. Make sure you didn’t inadvertently waive your right of rescission. In certain circumstances, such as if the property is in foreclosure, homeowners opt to waive their right to rescission to speed up the paperwork.

To opt out, put pen to paper. Your lender must receive your decision in writing within the permitted three days. Once the cancellation is set in motion, your lender must terminate the loan and return fees, closing costs, and any unused funds within 20 days.

It’s important to note that the three-day rescission doesn’t apply to a Home Equity Conversion Mortgage (HECM) for Purchase. This type of reverse mortgage, available to those 62 and older, allows homeowners to use the funds from a reverse mortgage to purchase a new home. Unfortunately, once you’ve signed the documents on a HECM for Purchase, the transaction is final.

Scenario 3: It’s a done deal—or is it?

After all is said and done, you still have options to back out of a reverse mortgage.

The most expedient course of action is to repay the balance in full. The good news is reverse mortgages don’t typically have prepayment penalties. The not-so-good news is if you pay the loan back ASAP, you miss out on having that extra cash on hand.

How to Buy Out of a Reverse Mortgage

Paying off a reverse mortgage in order to get out of it is possible. There are at least four reliable ways to extricate you from this situation.

Sell: If a large lump sum isn’t sitting in your bank account, consider selling your home. Talk with your reverse mortgage lender and ensure you know the full payoff amount. You can ask them to put this amount in writing. Use the proceeds from the sale of your home for the reverse mortgage payoff. Ensure the loan is paid off in full and that your account is closed. You can use the remaining equity to put a down payment on a new house. Reconsider this option if the sale of your home won’t cover the cost of the reverse mortgage.
Refinance: Refinancing is a good option if you’ve already made a dent in your reverse mortgage debt but monthly payments have set you back. Talk with your lender about your options; you may find you can rework the terms of your reverse mortgage so they work better for your current financial situation.
Take Out a New Loan: You can take out a conventional mortgage or another type of loan, like a personal loan, to pay off your reverse mortgage. You may find a new loan offers more favorable terms or monthly payments (or both). How much money you need to pay off your reverse mortgage will dictate what type of loan makes most sense. Talk to your lender about your options.
Consider a Home Equity Investment: If monthly payments and interest don’t entice you, home equity investment products like Hometap may be a smart solution. This option enables you to tap into your home’s equity to pay off your reverse mortgage. In exchange, an investor gets a share of your home’s future appreciation. Best of all, you can stay in your home.

Do What’s Right for You

Homeowners have the right and resources to change their minds. Exercise yours if that reverse mortgage—or lender—seems too good to be true. No matter what stage you’re at, there are options to get out of a reverse mortgage get your financial situation back on a track that works for you.

While you can always talk with your lender about your options, you may also find it’s worth consulting an unbiased financial advisor who can listen to your needs and provide a course of action tailored to your current situation and end goal. You may find the upfront cost saves you money in the long run and prevents you from taking a financial misstep.

Take our 5-minute quiz to see if a home equity investment is a good fit for you and your financial goals – access your equity with no monthly payments and no interest.

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April 30, 2019June 22, 2022

Aging in Place: A Choice or a Lock-In Sentence?

Aging in place, otherwise known as staying in your home as you get older, is becoming the norm, especially among baby boomers. According to a recent study from Chase and Pulsenomics, more than half of boomers plan to age in place. However, 88% say their homes need renovations with increasing bathroom safety at the top of the remodel list.

Many homeowners looking to age in place are tapping into their home equity to get the cash they need to make necessary home improvements or supplement their retirement savings.

But for some homeowners, aging in place isn’t a choice, can be dangerous, and may feel more like a lifetime prison sentence. How can you ensure you have a choice—and can make the right one for you?

Beware: The Rate Lock-In Effect

The so-called “lock-in effect” occurs when homeowners don’t want to give up their mortgages because they have favorable interest rates. When it comes to the housing market, older homeowners are feeling the greatest impact from the rate lock-in effect.

As HousingWire explains, there’s no incentive for homeowners to sell when borrowing the same amount of money at today’s mortgage rates will lead to higher monthly payments.

That’s what happened to Waltham, Massachusetts residents Joe and Suzanne. The couple purchased their two-family home in the 1960s for $19,000. While the couple, who both just turned 90, are in relatively good health, the home has caused some trouble.

Most homes don’t come equipped with features that go hand in hand with aging, such as ramps, wheelchair-accessible bathrooms, and safe showers. For Joe and Suzanne, the steep steps to their second-floor home are a challenge, and Joe even had a fall earlier this year carrying up a bag of groceries. “I’m just too old to risk getting up and down those stairs alone in the winter,” explains Joe. “So, I end up staying here with nothing to do.”

Higher Home Values, Higher Taxes

Plans to age in place can also fall apart when residents are forced out of the homes and communities they love due to factors like increased property taxes and expensive renovations.

Skyrocketing home values aren’t helping either. Property owners in Mecklenburg County, North Carolina received revaluation notices at the start of 2019. Many residents, including those who have paid off their homes, are concerned about the increase in property taxes. While some people may be willing to move to certain neighborhoods despite the costs, folks that have been living in a neighborhood for decades feel the impact more sharply.

The Good News: You Have More Equity

The plus side to increasing home values is having more equity in your home. For many homeowners, tapping into their home’s equity to supplement income is a smart way to continue to age in place.

Rising interest rates means moving to a more senior-friendly home is out of the question for Joe and Suzanne. The couple, who have significant equity in their home, have instead chosen to rely on home equity lines of credit (HELOCs) to help supplement rising taxes and home maintenance fees.

Choose your method for tapping into your home equity wisely. Many equity loans come with monthly payments and interest rates—which are not ideal for homeowners trying to limit their monthly debts or living from Social Security paycheck to Social Security paycheck.

Reverse Mortgages in Retirement: When to Sign On and When to Steer Clear

Equity sharing programs, like Hometap, are another option. Hometap was created to provide homeowners access to some of tomorrow’s home value to cover today’s needs—without interest or monthly payments. Unlike a reverse mortgage, you know exactly what Hometap’s share will be at the time you sell or buy out the investment.

Whether retirement is several years down the line or you’re already planning on aging in place, start planning for what’s next. By being aware of potential pitfalls and opportunities now, you can better position yourself for a thriving future.

Take our 5-minute quiz to see if a home equity investment is a good fit for you.

LEGAL DISCLAIMER

The opinions expressed in this post are for informational purposes only. To determine the best financing for your personal circumstances and goals, consult with a licensed advisor.

April 25, 2019June 17, 2022

Help! I’m 50 and Have Nothing Saved for Retirement

Mention the word “retirement” and many Americans break into a cold sweat—or laugh as though you’ve made a joke. Retirement, in the comfortable sense, may be a distant goal for many. According to a new survey from GOBankingRates.com, 42% of Americans will “retire broke,” meaning they have $10,000 or less saved for their retirement. If you’re one of this group, don’t despair: Even if you’re close to retirement age, it’s never too late to start saving.

Let’s say you’re 50 and you’ve got nothing saved for retirement…so far. What should you do? Here’s a road map to get going with your retirement savings plan.

Start Saving for Retirement Today

If you’re 50 and hope to retire around age 65, that means you have a solid 15 years to build a retirement savings. If you have an employer-sponsored retirement plan, start there.

“The maximum for people 50 and over [to save for retirement] is currently $24,000 a year,” says Alexandra Baig, an Illinois-based CFP®. “At the very least, contribute the amount the employer will match. If you can live without the current tax deduction and your employer offers a Roth 401(k) option, contribute to that instead of the traditional.”

If you’re self-employed or your employer doesn’t offer a 401(k) plan, look into individual retirement accounts (IRAs) where you can contribute on your own. While you won’t have a match, you’re still building your savings—and moving in the right direction.

To make up for lost time, experts recommend individuals starting to save for retirement at 50 should aim to save 30% of their income each year.

But if saving the maximum of $24,000 or 30% of your income annually is too steep, don’t worry: Saving something is better than nothing. To find out what you can start putting away for retirement savings, it’s time to start budgeting.

Make a Realistic Budget that Prioritizes Retirement

Take a look at your monthly earnings and spending, and see what can be repurposed toward retirement savings.

“Create a realistic budget to determine how much cash you have left from your take-home (after-tax) income after paying your other required expenses, such as mortgage, property taxes and insurance, utilities, food, clothing, personal bills, and medical bills,” says Baig. “Look very hard at any optional expenses such as recreation or eating out that you can cut down or eliminate.” Any unnecessary spending that can be reallocated toward retirement will not only be saved with tax benefits but it will grow from compound interest over time.

Speaking of interest, Baig recommends cutting back on credit card usage and/or never carrying a balance. “Don’t put anything on a credit card that you cannot pay off in the same month to avoid wasting money paying high interest,” she says. “This will maximize how much money you can commit to retirement investments.”

If You Can, Plan to Work Longer

The longer you can work, the better your retirement savings will be. By deferring tapping into your savings, you’ll let that larger pool of money continue to grow. You’ll also maximize your Social Security earnings by waiting to start collecting (especially if you wait to retire until age 66 or older). Additionally, your continued earning potential means you’ll continue to add to your savings while also (most likely) requiring fewer lifestyle changes.

Diversify and Adapt Your Investments over Time

While it may sound like a stuffy financial term, diversification simply means not investing everything you have in one area. You’ve probably heard the phrase “don’t put all your eggs in one basket” many times in your life. That applies to investing. You want not only a mix of assets but a mix of asset classes: individual stocks, mutual funds, bonds, real estate.

Unfortunately, the typical retirement-age couple does not have a diverse portfolio. Most have too much of their money tied up in equities, like their homes. Since markets can become volatile at any time, diversifying your portfolio now can help safeguard—and grow—your retirement savings.

“Pick an investment portfolio that allows for some growth,” Baig says. If you begin investing for retirement at age 50 and plan to work until your mid- to late-60s, “then you still have a long- to mid-term time horizon,” she says, “which means you can tolerate some market swings. To the extent possible, do not invest in any fixed-income instrument that yields less than the average expectation for long-term inflation (generally 2%).” To mitigate the risk for late-starters of outliving their money, Baig recommends portfolios that favor equities. To maximize the returns for the investor, she suggests low-cost investments such as index funds.

“As you get closer to retirement, divide your money into ‘buckets’,” she adds, “one for use in the first 10 years of retirement, one in the next 10, one in the final 10. Move only the first bucket into the more conservative investments. Keep the other two in more aggressive investments until it gets closer to the time to tap each.” This way, you’ll balance out your risk for the money you need soon while enabling the money you’ll need later to continue to grow.

Tap into Your Largest Asset

For many homeowners, tapping into their largest asset – their home – can be a smart way to supplement income during retirement.

If you don’t like the idea of having to take on another monthly payment that comes along with traditional loans, a Home Equity Investment product, like Hometap, could be another option for you.

Hometap can help you comfortably age in place through a home equity investment – a smart new loan alternative for tapping into your home equity without taking on debt. With a Hometap Investment, you get access to your home’s equity today so you stay in the home you love with no loans, monthly payments, or interest.

Take our 5-minute quiz to see if a home equity investment is a good fit for your retirement strategy.

YOU SHOULD KNOW…

April 20, 2019November 5, 2020

4 Hidden Retirement Costs—and How to Reduce Them

If you’re saving for retirement, you’re on the right track compared to most Americans. A recent Bankrate survey found that 20% of Americans aren’t saving any money. If you are saving, are you saving enough?

Common advice dictates saving 10 to 12 times your current income for that nest egg. Sometimes the formula isn’t that simple, especially when you take into account hidden costs.

The good news? With a little extra planning, you can combat these hidden costs.

Cost #1: Retirement Account Fees

When you’re saving, a little money can add up over the long term. Unfortunately, the same holds true for retirement account fees.

Most fees range from 1–2%, which may sound insignificant. But according to CNBC, someone with “2% in fees will run out of money 10 years sooner” than those with 1%.

How to Reduce It

There are two steps to saving more of what’s yours.

Step 1: Read the fine print. Ask for a copy of your prospectus. It’s in this tedious, but telling, document that you’ll find your expense ratio or how much your investment company charges to manage your account.

Step 2: Determine your tolerance. If you’re happy with the returns, perhaps the fees are manageable. For most, however, the risk outweighs the rewards. Business Insider recommends dumping that actively managed fund for an index. The latter matches with the S&P 500, for example, to give you broad exposure and lower operating expenses.

Cost #2: Health Care

Your health is essential to truly enjoying retirement. The fact is we’re living longer as a nation—and need to plan accordingly. Fidelity Investments estimates a healthy 65-year-old couple retiring in 2018 will need close to $300,000 solely for health care costs.

How to Reduce It

Health care costs will rise. Accordingly, add a line item in your budget for those unpredictable under-the-weather days. If you plan to retire before 65, consider adding a little more padding to cover health insurance premiums pre-Medicare.

Cost #3: Transportation

From gas to insurance, maintenance to repairs, your car expenses add up. It’s likely you’ll spend 12% for transportation in retirement.

How to Reduce It

Your car is an extension of your identity—and freedom. Downsizing to one car may be a difficult decision but cuts your expenses in half. If you’re already in a one-car house or are looking for cheaper ways to supplement your one car, look to public transportation and car-sharing services like Zipcar or car2go.

Cost #4: Housing

Roof replacement, boiler maintenance, appliance servicing: Housing costs weigh in at a hefty 33.9% of expenses for those 65 and older. Just as we age, so too does our dwelling. Regular upkeep is part of owning your home.

How to Reduce It

If you plan to stay in your home, pay off as much of your mortgage as you can. The less you have in monthly payments without a steady income, the better. If you’re open to moving, set the stage to sell by doing some surface upgrades. This can help flip your house more quickly when the time comes to relocate.

The Upside to Asking for Help

Planning for retirement is personal, but you don’t have to do it alone. Talk to retired friends, family, and colleagues for advice and guidance.

If retirement seems closer than you realized and you’re having doubts about your finances, your equity can help you save for and fund your retirement. A reverse mortgage alternative, Hometap gives you access to the equity you’ve built up in your home in cash—without interest or monthly payments.

Take our 5-minute quiz to see if a home equity investment is a good fit for you.

LEGAL DISCLAIMER

The opinions expressed in this post are for informational purposes only. To determine the best financing for your personal circumstances and goals, consult with a licensed advisor.

April 10, 2019June 17, 2022

How to Fund Retirement by Diversifying Your Portfolio

While it may sound like a stuffy financial term, diversification simply means not investing everything you have in one area.

Unfortunately, the typical retirement-age couple does not have a diverse portfolio. Most have too much of their money in equities, like their homes. Since markets can become volatile at any time, you need to diversify your portfolio now to safeguard—and grow—your retirement savings.

When to Diversify

You’ve probably heard the phrase “don’t put all your eggs in one basket” many times in your life. That applies to investing. You want not only a mix of assets but a mix of asset classes: individual stocks, mutual funds, bonds, real estate.

You’ll want to vary assets and classes based on where you are in your retirement journey. For example, as Investopedia notes, if you’re closer to retirement, you don’t want to risk a downturn in the stock market just before you’re set to cash out.

When to Reconsider Diversifying

If you’re more than 30 years from retirement, you can afford to invest all your savings into stocks. You have more time to take—and recover from—risks.

You may also want to reconsider diversifying if you’re investing a relatively small amount of money. The Motley Fool warns that with commission costs and other fees, you’re better off buying one or two stocks to begin and then adding more as you have more capital.

How to Diversify by Decade

Whether you’re in your 40s, 50s, or retired, your age is going to dictate your retirement strategy. But one thing remains the same: You’re never retired from retirement planning.

Portfolio Diversification in Your 40s

In their 20s and 30s, some people believe they can avoid getting serious about retirement. No matter where you stand in that argument, if you’re in your 40s, you need to get serious. Life events (like sending the kids to college!) may require the majority of your paycheck, but putting off investing will only make it harder later.

Forbes suggests a tax-deferred account: “Money directed into a 401(k) or traditional IRA goes in before the IRS takes a cut and lowers your annual taxable income on a dollar-for-dollar basis. If you’re eligible to max out both your workplace retirement account and an IRA, you’ll shield $23,500 from income taxes this year.”

Portfolio Diversification in Your 50s

In your 40s, you may be getting up to speed or making up for the lost investment time in your 20s and 30s, but your 50s are the time to hit diversification hard. According to NerdWallet, that means a mix of large-, small-, and mid-sized companies; established and emerging markets; and real estate.

Diversify Your Portfolio in Retirement

The good news: Americans are living longer than ever before. The bad news: You need to rethink traditional retirement advice. Financial planners say the percentage of your portfolio to keep in stocks is now equal to 110 or 120 minus your age (versus the previous accounting of 100 minus your age). CNN Money offers a handy tool that calculates where you should allocate your assets to reach your goals.

No matter if your retirement is fast approaching or years away, you need a financial plan for your post-work life. Diversifying your financial portfolio is a smart way to achieve your retirement financial goals throughout every stage of your savings process.

Take our 5-minute quiz to see if a home equity investment is a good fit for you.

LEGAL DISCLAIMER

The opinions expressed in this post are for informational purposes only. To determine the best financing for your personal circumstances and goals, consult with a licensed advisor.

April 1, 2019February 16, 2022

How to Jump-Start Your Retirement Savings at Any Age

One in three Americans has less than $5,000 saved for retirement. Whether you’re counting down the days until retirement or it feels far, far away, you need to take a closer look at your retirement strategy, and there’s no better time to do so than at the start of a new year.

Here are our hassle- and headache-free strategies you can implement today to add significant value to your savings.

Actively Retired

You made it! Just because you’re no longer working doesn’t mean you can’t add significant value to your retirement savings.

Save Social Security for 70: If you have savings, an IRA, or other sources of retirement income, see if you can delay withdrawing Social Security. You can start collecting at 62—but at 25% less than your full benefits. As Merrill Lynch advises, if you can hold off, you stand to increase your overall Social Security benefit. Benefits, and full retirement age, vary based on the year you were born. For example, if you were born in 1950, the full retirement age is 66. This means you’ll get 100% of your Social Security benefit at 66. However, if you wait until 70, you’ll receive _132% _of your benefit.
Change Your Scenery: If you don’t need “all that house,” downsizing or relocating can save thousands. Explore other neighborhoods and areas, near or far, and compare the cost of living. Lower property taxes and reduced home maintenance can make a big difference to your budget.
Lower Your Tax Burden: After you stop working and before you start withdrawing from Social Security, you may benefit from being in a lower tax bracket. As Sarah O’Brien reports for CNBC, converting a traditional IRA or 401(k) to a Roth IRA, cashing in savings bonds, and selling off long-term investments are all worth exploring while you’re in this lower tax bracket.

In Your 50s

It’s not hyperbole that 50 is the new 40. Many people feel they’re just hitting their stride, with more doors opening rather than closing. As such, you need to keep your retirement savings aggressive.

Diversify your portfolio: Putting all your eggs in one investment basket isn’t the safest bet. A rich mix of stocks, bonds, and other funds may prove healthier down the road. How to Diversify Your Retirement Portfolio at Any Age
Work longer: The longer you stay active in the workforce, the more your retirement balance will rise and the fewer lifestyle changes you’ll have to make. Another bonus to waiting is your Social Security earnings will continue to grow, especially if you wait until age 66 or older.

In Your 40s

Now is your time to maximize your potential for future payout. Whether you started early or need to make up for lost time, your 40s are the decade to make a concentrated push toward your retirement goals.

Let go of debt once and for all: Shake free of credit card, student loans, and other debt to accelerate your savings. Clearing those accounts now also minimizes monthly payments tomorrow. One way to get rid of debt and jump-start savings is via a low-rate balance transfer credit card, suggests Bankrate.
Put your paycheck to work: If your employer offers a workplace retirement plan—e.g., a 401(k)—carpe diem. Personal finance guru Dave Ramsey says this is the easiest and often most effective strategy for saving. What makes him so sure? Well, if your employer offers a match, you’re doubling your savings potential. Even if they don’t, a 401(k) can provide a set-it-and-forget-it approach to saving that will slowly add up.

In Your 30s

Retirement feels like a long way away, but by starting now, you’ll have less of a catch-up game to play later.

Turn up your 401(k) contributions: Giving up part of your paycheck to a 401(k) may seem scary at first. Start small and try increasing your contribution every six months to a year. Many providers offer an “auto increase” option online so you don’t have to set reminders or psych yourself up.
Open an investment account: A diverse portfolio is important at any age. In your 30s, you can venture to take on more risk than other age groups. NerdWallet advises putting 70–80% in stocks and stock mutual funds as you’ll have more runway to tolerate risk and reap the rewards.
This is the time to understand what alternatives to 401(k)s you should consider investing in, such as an HAS account or variable annuity.

No matter what age you are, it’s never too early (or late) to grow your retirement savings. If you’re a homeowner, you have the additional option of tapping into your home’s equity to accentuate your savings and achieve your retirement goals.

A Hometap Investment helps fund your financial future without monthly payments or interest.

Take our 5-minute quiz to see if a home equity investment is a good fit for you.

LEGAL DISCLAIMER

The opinions expressed in this post are for informational purposes only. To determine the best financing for your personal circumstances and goals, consult with a licensed advisor.