Many seniors have considered a reverse mortgage to help support them in their golden years, but are not aware of the pitfalls associated with this type of loan.  You may even be surprised to learn that the rules have changed, leaving some elderly homeowners at risk of losing their homes.

Reverse mortgages are supposed to protect seniors from economic hardship, paying older homeowners a regular sum against their property’s equity.  Now, due to a 2008 rule change by the Department of Housing and Urban Development, surviving spouses can be excluded, leaving them at risk of being displaced due to foreclosure upon the death of their spouse.  AARP, the seniors’ organization, recently filed suit against HUD, asserting that recent policy changes are pushing older unsuspecting homeowners into foreclosure.

Reverse mortgages were intended to be non-recourse loans.  This means that the most a borrower can lose is the house itself, even if the value of the property goes down.   In this market, nearly 25% of all homes with mortgages are worth less than they owe, making them nearly impossible to sell.

Lenders sometimes encourage only the elder member of a couple to put his or her name on the mortgage because then the payout is greater.  What they fail to disclose to the couple is that when the older spouse passes, the loan becomes due and payable in full.

In one such case, reported in the New York Times, the Robert and Ophelia Bennett secured a reverse mortgage.  The new mortgage, intended to secure this couple’s future, instead helped destroy it.  They paid $20,000 in fees but received only $1,800 in cash.

Mr. Bennett said he did not realize that his new mortgage had taken his name off the title of the home, which the couple had owned together since 1981.

Mrs. Bennett, who was a decade senior to her husband, died shortly after the new mortgage went into effect. The payments immediately stopped and the mortgage became due and payable.

The lender began foreclosure proceedings and scheduled a sale of the property last month.

If HUD had not changed the rules, the suit says, Mr. Bennett would have been allowed to live in the house until his death.

I can’t stress enough how important it is to work with a team you can trust to avoid such tragedies to your family.   If you have ever considered a reverse mortgage or have questions about any real estate topics, please feel free to contact me.

Every parent wants to teach their children fiscal responsibility, but it’s not always easy to impress upon live-for-the-now youngsters the concept of saving for a rainy day. Certainly teaching by example is one tried and true method; another is practice. But can a 15 to 21 year old really practice saving for retirement? Of course they can! And according to this article in the Washington Post, they can reap incredible benefits.

“Setting up a Roth individual retirement account for your teenager can be a smart and rewarding move to consider at tax time… It makes good sense to set aside money that can grow many times over by the time it is put to use. And establishing an IRA with a teenager’s own cash — perhaps supplemented by the parents or grandparents — can convey a powerful financial message that no pep talk could match.”

If you show your child or grandchild that setting up a Roth IRA is just another milestone—similar to graduation, getting a driver’s license, or getting a first part time job—the lesson comes through loud and clear that saving for the future is a natural and normal part of adulthood. In fact, the attainment of a first job can be the perfect instigating factor for setting up an account because “A Roth IRA can be opened only if the child has income from a job – and allowances don’t count.”

A Roth IRA can be a nice thing for a child to have for another reason… parents or grandparents can support and supplement the child’s investment with their own contributions as well. A retirement account may not be the most traditional of gifts, but it’s never too early to learn the value—and necessity—of saving for the future.

Where you live is a defining aspect of your character throughout your life. Your “hometown” often plays a large part in the formation of your character; as adults we decorate our homes to reflect our interests, hobbies and loves; and the neighborhoods in which we choose to raise our children (city, farm, suburb) tell us a lot about our underlying values and where we feel safe and secure.

The idea that where you live is an important part of who you are doesn’t diminish as you get older—in fact, the longer you’ve lived in a place the more it seems to become a part of who you are, and vice-versa—so it’s no wonder that seniors are as choosy about where they live as any of the rest of us. What follows are some of the options for senior living arrangements. What you and your loved one will choose will depend on health, finances, community support, and of course—your family.

Most seniors would prefer to stay in the home they’ve known and loved. A senior or retirement community may look perfectly nice to a son or daughter; but mom or dad may see the retirement community as a first step toward losing their independence and being forgotten. Many senior citizens can stay in their homes for quite some time so long as they have the support of family and community and perhaps the help of an in-home caregiver.

Another option for housing is a senior or retirement community. These are often independent communities which provide age-segregated living opportunities for seniors who are still active. They usually provide social activities, regular transportation around town, and some personal care or nursing services. These communities can be the perfect solution for a still active senior who is unable to drive anymore, but be very cautious when choosing a community; with no regulation or governing body the non-social services they provide can be suspect.

A nursing home is the most drastic option for senior living, and is usually reserved for chronically ill people who need medical care and regulation in addition to help with the most basic of daily tasks. The decision to use a nursing home is a difficult and emotional one, and should not be put off to the last minute. Not only because nursing homes are expensive, and require as much advance financial planning as possible, but also because finding the right nursing facility for your loved one can take time.

Whatever housing option you are looking for, don’t be afraid to ask for professional help or advice. A Geriatric Care Manager, Elder Care Support Services, or an Estate Planning or Elder Law Attorney can help your family make and implement this tough decision.

January of 2010 has brought with it a lot of change that is keeping financial and estate planners on their toes. In addition to the repeal of the estate tax (discussed in a previous post), we have been presented with new Roth IRA rollover rules that took effect January 1st, and which now allow anybody, regardless of income, to convert their traditional IRA to a Roth IRA. The question now is: Is it worth it?

The answer to that question will be different for everybody, because the amount that will be taxed upon conversion depends entirely on the kind of contributions you have made to your traditional IRA in the past. If you have made more non-deductible contributions than tax-deductible contributions to your traditional IRA you will almost definitely want to take advantage of the conversion opportunity. If you have made fewer non-deductible contributions you may be looking at a higher tax bill. However, the fact that the tax bill can be spread out over two years (but only if the conversion is made this year) should give even those who have made mainly tax-deductible contributions reason to consider the switch.

If you think you may want to make the switch, talk to your advisor. Your financial specialist can tell you the pros and cons of switching based on your personal IRA history. The nice part is that if you do decide to take advantage of the new rules, the decision doesn’t have to be permanent. Those who convert their traditional IRA to a Roth IRA in 2010 will have until October 15, 2011 to change their minds and switch the account back to a traditional IRA.

One of the main concerns of anybody who is retired or nearing retirement is how to pay for medical expenses. Research shows that a healthy 65 year old couple can expect to pay somewhere around $305,000 in out of pocket medical expenses during the course of their retirement—and that’s a healthy couple! With expenses like this staring them in the face, it’s no wonder senior citizens are concerned about Medicare.

For those who don’t know, Medicare is a government administered insurance program providing health insurance coverage to people aged 65 and older, or to disabled persons who meet certain qualifications. The Medicare program has many parts which variably cover hospital insurance, medical insurance, and more recently, some prescription drug costs. The Medicare program has proven to be a valuable resource for senior citizens since it was signed into law in 1965, but the program is far from perfect or comprehensive. This, plus recent developments with the health care reform bill have many people asking questions about the future of health care insurance for retirees.

To help answer these growing concerns about health care costs and the Medicare program, Time Magazine has published a special article about how to navigate the Medicare maze. One of the most valuable portions of this article is “When—and How—to Enroll in Medicare”, but the article discusses other important issues such as:

• Medicare’s Part A, B, D and More
• How Medigap Policies Can Help
• When to Buy Long-Term-Care Insurance

Still, the best way to assure that you are getting the right medical coverage for yourself or your spouse during your retirement is to talk to a professional. Federal and State sponsored health insurance programs offer necessary help and coverage—but they can be fraught with confusing procedures and enrollment difficulties. Your attorney will be able to help you with the process. Don’t wait until it’s too late.