Facing Your Biggest Retirement Fear
For fans of classic horror movies, there’s nothing like the Halloween season for a good, old-fashioned scare-fest. From Stephen King’s demon-possessed Plymouth, Christine, to Alfred Hitchcock’s smiling sociopath Norman Bates, classic horror movie viewers have seen it all. But nearly every classic horror movie has a mainstay scene and victim - the clueless casualty.
It's easy to spot the clueless casualty. These characters make horrible decisions that always, every single time, lead to their grisly demise. Classic moviegoers scream to Vivian Leigh on the screen, "Lock the bathroom door, Marion! Don't get into the shower!" all to no avail. Marion Crane is a clueless casualty. She wants nothing to do with Norman Bates but inevitably runs smack into him, and everyone knows what's going to happen next.
A Real-World Parallel
When preparing for retirement, folks often set themselves up to be clueless casualties. They’re not a victim of some fictional, knife-wielding sociopathic madman. But they desperately want to avoid their most overwhelming retirement fear – outliving their retirement savings and investments. Running out of money. In a recent survey by the financial services company Transamerica Corp., 51 percent of respondents said their greatest retirement fear was outliving their savings – an increase from 44 in the previous year.
Like clueless casualties, folk looking forward to retirement, or those recently retired, investors are notorious for making poor choices, that can potentially bring them face to face with that fear. Investors consistently sabotage their retirement savings strategy by ignoring some potentially lucrative options and by making choices based on ignorance and fear instead of reality.
Sometimes poor choices are not choices at all. The Keller Williams The Trembley Group Real Estate Professionals are amazed that many homeowners are unaware of all their options when it comes to one of most retirees’ largest financial assets – their home.
In the past, corporate-sponsored pension programs (defined-benefit pension plans) provided a retiree with a fixed monthly benefit until death or, if chosen, could be considered as a qualified joint and survivor annuity. In either case, the retiree or survivor still needs to worry about the financial viability of the company and its investment decisions over the pension plan. But except for company bankruptcy, they knew their retirement income was safe.
Today, corporate-sponsored pension programs are few and far between. For most folks today, a 401(k) program replaces the defined benefit plans and ultimately transfers more of the market volatility and risk to the retiree. In either case, 401(k) plans have a possibility of depleting their cash values, leaving the retiree and their families without any income in retirement. So, those nearing or early in retirement would greatly benefit from familiarizing themselves with changes made by the financial services industry, in conjunction with Congress, to replace some pension plans.
Most investors are overly sensitive to big market swings—even economic or political news will send them (and the stock market) into a tailspin. They forget all about their long-term investing strategy, and they forget to include all of their financial assets when planning for retirement. Investors are frequently their own worst enemy when it comes to building a retirement nest egg because they don’t consider all of their assets.
Doomed to Their Fate?
Retirement investors have been shooting themselves in the foot for so long, that some of the Keller Williams The Trembley Group Real Estate Professionals believe they are as doomed as Marion meets Norman Bates in Alfred Hitchcock’s Psycho shower scene if they don’t at least educate themselves about all their options.
But they are also more optimistic than that. Most soon to retire, homeowners are just a few smart choices away from successful retirement investing and a safe and secure retirement. In every case, every Keller Williams The Trembley Group Realtor recommends:
Get Great Advice. Isolation is the enemy of sound decisions. Just consider what a few months in a deserted hotel did to poor Jack Torrence in The Shining. Don’t go it alone! Work with experienced and professional advisors who can help maintain a long-term investing outlook – even when interest rates are plummeting, and the stock market’s ups and downs leave them feeling twitchy. What better advice than to keep an open mind to new and unfamiliar options. Experienced Real Estate Professionals know that a home is most retirees’ largest investment, they’ve been through both good and bad market cycles, and they know how to access real estate equity safely. Their objective advice can keep a retiree from reacting in fear.
Ask lots of questions. Any horror-movie aficionado will tell the scariest bad guys are the ones you never really see. Without the full picture, it’s natural to be afraid, so when it comes to retirement planning, leave no detail to chance. Ask questions until everything is understood: How do mutual funds work? How can you invest and still keep your money safe? How do you access investments to meet monthly retirement needs? Retirees need to remove the mystery for the courage to ride the stock market roller coaster even when other investors are jumping off.
Remember, the home owner is in charge. Eventually, in every horror movie, a survivor emerges. They’re the hero who calls the shots in the end and finally gets themselves and their loved ones (at least the ones who’re still around) to safety. When it comes to retirement, no one cares more about the end result more than the investor/homeowner. So even though they’re working with trustworthy investment advisors who have more experience, the final decisions are the homeowner’s responsibility. Use a Keller Williams The Trembley Group Real Estate Professional advisor’s advice and expertise to make a solid retirement investment choices based on facts, not emotion.
Most people consider retirement their own scare-fest. But with the right mindset and an understanding of all their options, retirees can do more than just survive retirement – they can thrive. Don’t be another clueless casualty! Talk to a Keller Williams The Trembley Group Real Estate Professional for some excellent advice on the HECM for purchase and outstanding personal service.
The HECM for Purchase
The HECM for Purchase mortgage program is an extraordinarily powerful retirement planning tool. It can be used to either downsize or upsize a retirement home without monthly mortgage payments. Let’s repeat that – without monthly mortgage payments.
For those downsizing, the HECM for Purchase frees up more assets from the sale of the previous home to be used for other purposes like travel or the grandkid’s education. For retirees upsizing, and have the financial resources to manage the move sustainably and responsibly, the HECM for Purchase allows for a more expensive dream home. They can consider the possibility that obtaining a traditional mortgage might become more difficult after retirement.
During a recent telephone conversation, Larry Reed, manager of the Retirement Funding Solutions office in Myrtle Beach that his biggest job is educating Realtors and home buyers. “One of my biggest challenges is educating Real Estate professionals. The HECM is a product that could be of enormous benefit to them and their customers if they understood it.”
“A HECM for Purchase is not just a mortgage product. It’s a financial tool for retirees,” says Reed. “It gives retirees more purchasing power and doesn’t force them to drain all their assets. It also gives them the option to buy a home with all the upgrades they want and no mortgage payment. All they need is a real estate professional and a mortgage professional that can explain the program to them.”
A HECM reverse mortgage is a loan for senior homeowners that uses a portion of the home’s equity as collateral. The loan generally does not have to be repaid until the last surviving homeowner permanently moves out of the property or passes away. At that time, the estate repays the balance of the reverse mortgage or sells the home to pay off the balance.
Should the retiree live in the home long enough, the loan balance may grow to exceed the value of the home, setting the mortgage’s nonrecourse aspect into motion. In this situation, the retiree participating in the HECM for Purchase program, stays in the home, without mortgage payments provided that the homeowner continues to pay the home’s taxes and insurance. Should the borrower leave the home while the loan balance is still less than the home value, the home can be sold with the remaining equity going to the borrower after the loan is repaid. If the home sells for less than the mortgage amount, the lender has no recourse against the borrower or his estate.
In terms of coordinating the use of debt for housing, not having to make a monthly mortgage payment reduces the household’s fixed costs and provides potential relief of any need to spend down investments. The HECM for Purchase option can be analyzed relative to paying outright for the home with other assets or opening a fifteen-year mortgage if that is still feasible.
Larry is a HECM expert and Retirement Funding Solutions deals exclusively in HECM mortgages. He went on to say, “Educating both borrowers and real estate professionals is vital to the expansion of the HECM for purchase program. As people learn about HECM, they love it as an option whether they use it or not.” The program was first introduced in 2009, but HECM for purchase mortgages only account for a small portion of HECM loans issued since then.
“Of course for several of those years, home sales were not particularly strong,” says Larry. “Through education, attention to detail and quick closings, my company has managed to make HECM for purchase a cornerstone of our business. We led the nation in H4P endorsements last year, capturing a 12% market share, almost twice the market share of our nearest competitor.”
“Retirees are aware they have the same options for buying a home as anyone else. They can qualify for a conventional mortgage with a down payment and regular monthly mortgage payments or pay all cash. However, most of them are not aware they have a third option, the HECM for purchase,” Reed continued. “Using HECM for purchase to buy a primary residence, homebuyers make a one-time down payment of roughly half the purchase price and then live in the house with no mortgage payments. This can dramatically change their purchasing power to buy the home they really want and keep more assets available for their retirement.”
“Often, the initial two purchase options do not work since a 30-year mortgage is either impractical or impossible for folks to obtain. The mortgage payments are required for 30 years, and they are no longer working, which is often required to qualify for a mortgage. As for the cash buyer, the funds may not be available to purchase the desired home outright,” Larry says. And, if the cash is available, it is often set aside to provide income for the homeowner’s retirement years. Making monthly mortgage payments will gradually reduce those cash funds and deplete the homeowner’s assets. “One of the principal fears for older adults is running out of money,” says Larry Reed. “They are often on a fixed income and would like to enjoy their retirement with fewer financial pressures.”
Four Benefits of Purchasing a Retirement Home With a HECM
Homeowner retirees are never required to make monthly loan payments for as long as they live in their new home.
Homebuyers can increase their purchasing power and buy the dream home that perfectly meets their needs.
Retirees can keep their cash reserves to live anxiety-free and maintain a more comfortable retirement.
Retirees can increase monthly cash flow. Since the HECM for Purchase requires no monthly mortgage payments, homeowners can minimize their monthly obligations.
The Home Equity Conversion Mortgage purchase loan is insured by the Federal Housing Administration (FHA) and administered by HUD.
So, there’s no need to be a clueless casualty to a smiling sociopath or a demon-possessed 1958 Plymouth Fury or an uninformed retirement home purchase. Make an appointment with a Keller Willliams The Trembley Group Real Estate Professional to explore all the options to a secure, anxiety-free retirement. And be sure to lock the bathroom door before getting into the shower.
Need help? Call Keller Williams The Trembley Group at 843.945.1880 ext. 1 and we’ll help you look for the perfect listing or buyers agent!
At Keller Williams The Trembley Group, we pride ourselves on being the experts at more than just selling real estate. We are local residents, some of us have been here for a lifetime. The rest of us will be here until the end of time. We love living, working, and playing in the diverse backyard of Coastal Carolina, and look forward to helping you live and love your dreams soon too. Please reach out to us by phone or email for personalized service and one-on-one advice.
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