Reverse Mortgages

5 Ways to Supplement Your Income in (Un) retirement

supplemental-income-baby-boomers

Are you among this exulted group? 

Outrageously Cushy Government Pensions…

get income after 65

(“California has one of the worst pension crises in the country—the state’s pension funds are about $500 billion in the red, and over 5,000 retired teachers and administrators receive pensions in excess of $100,000. But that’s chump change compared to one Santa Clara County’s fire chief who retired at the end of last year, was kept on as a consultant beginning in January—that means that for six months he not only took home an impressive consultant salary ($236,691), but a $200,000 yearly pension to boot.”) 

 See the rest of the article at:

http://www.thefiscaltimes.com/Media/Slideshow/2011/09/01/8-Outrageously-Cushy-Government-Pensions?page=0

If you’re in this group congratulations….

But…

… what about those of us in the real world?

Baby Boomers don’t plan to retire…

Let’s face it…

… unless you had a job in the public sector with an annual pension, you missed the gravy train. 

(That train left the station 20 to 30 years ago and you weren’t on it…)

baby-boomers-cant-retire

If you’re among the two thirds of Baby-Boomers that worked in the private sector without a pension and counted on a 401-K to fund your retirement you probably came up short.

That means you’re in the “Un-Retirement” category. 

What we Boomers Earn and Spend:

Average Household Spending by Age Range

 

Category

2007 CE Data

2009 CE Data

 

55-64

65-74

75+

55-64

65-74

75+

 

Persons in Consumer Unit

2.1

1.8

1.5

2.1

1.9

1.6

 

Income (pre-tax)*

$71,048

$47,708

$32,499

$70,609

$47,286

$31,715

 

Total Spending**

$48,054

$40,037

$29,698

$46,116

$40,685

$30,946

 

Food + Alcohol

14%

14%

13%

15%

15%

14%

 

Housing + Related

36%

34%

38%

37%

36%

38%

 

Apparel

4%

3%

2.5%

3%

3%

3%

 

Transportation

20%

19%

13%

18%

17%

12%

 

Healthcare

7%

12%

14%

8%

12%

15%

 

Entertainment

6%

7%

4%

6%

6%

5%

 

Contributions

6%

5%

9%

5%

5%

8%

 

Misc. Other

7%

6%

6.5%

8%

6%

5%

 

* Income does not include retiree withdrawals from personal savings.
** Contributions to Social Security and pensions, which were included in the CE average annual expenditure total, have been removed.

 

 

 

 

 

 

Source: https://www.bogleheads.org/wiki/Surveys_of_retirement_spending

By the time we turn 65 most of us are earning just $47,286 per year before taxes and after taxes (at a 20% tax rate) are netting about $37,829. 

Here’s the problem:

Spending $40,685 per year means  we’re going in the hole by $2,856 each year. 

debt after 65

So… how does that shortfall get made up? 

The answer is simple:

Either we draw down from our savings eroding the principle…

… or worse, we add to our credit card debt.

Since we’re living longer… that can be a problem.

Right?

With that in mind, let’s look at 5 ways to bridge the gap:

 

1. Use a Reverse Mortgage to Get Equity From Your Home

reverse-mortgage-for-boomers

I have written a number of articles in my previous blogs about tapping the equity in your home through a reverse mortgage so I won’t bore you with repetition…

… but if you’re not at least considering the reverse mortgage option you’re not thinking straight.

 A reverse mortgage can allow you to take some of the growth in equity out or your home and let that growth pay for future home costs. 

Let’s think about that for a minute. 

The spending graph above shows housing costs accounting for 36% of total spending or $14,645 per year. 

Now think about what happens if a loan against your house can pay that cost instead of you.

You can add $15,000 to your freed up cash each year.

What could you do with an extra $15,000? 

By the way, remember the $2,856 deficit per year? 

This one move just turned that into an $11,789 surplus…

2. Take Social Security Early

early social security

“Social Security: Why Taking Benefits at 62 Is Smarter Than You Think”

If you’ve been led to believe that waiting to apply for Social Security is always the best thing to do, then you need to read this.

Yes it’s true that waiting to draw on your S.S. benefits will increase the monthly check you’ll receive but you might be surprised at how little the total benefits differ.

(Especially if you live the normal life span). 

Here’s how it works. 

If you were born between 1943 and 1954, you can start collecting benefits at age 62, but you’ll only get 75 percent of what you’d get if you wait until you’re 66.

If you wait until 67, you get 108 percent of your monthly benefit.

And at age 70, you’ll collect 132 percent — the maximum you can get by delaying benefits. 

Keep in mind that this scale is due to the fact that you can begin getting checks at 62, or for 96 months more than if you begin collecting at 70.

Here’s what that looks like:

take-social-security-62

Notice that the inflection point is about 80 years of age.  According to the latest data, the average lifespan of an American is 79.8 years old. And for men, it’s only 77.4 years compared to 82.2 years for women. Thus based on age alone, particularly for males, it may not be as smart as you first think to hold out for larger Social Security checks.

 It’s also worth pointing out that, according to a recent government report:

 “The Social Security benefit formula adjusts monthly payments so that someone living to average life expectancy should receive about the same amount of benefits over their lifetime regardless of which age they claim.”

 Go to the Social Security Administration’s Web site and find out when you’re entitled to full benefits.

If you don’t need the money at 62 imagine how much more comfortable it would be to take that money, turn it into cash and put it in the bank to shore up your savings…

3. Become a Blog Writer or Editor

jobs-after-career-over

Many boomers would like to make money utilizing our skills and education but not at a full time job. 

We don’t want to be tied to a schedule or commitments like our old jobs and we want to be paid well for our expert contribution. 

Unlike today, many of us were raised during an era when grammar and critical writing was actually taught in school. 

It’s said that success is when – “preparation and opportunity meet.”  

Today’s online marketing engine is based on writing content and blogging. 

blogging

A new term – content marketing – has been coined meaning, actually talking about a product or service.

(As opposed to showing pretty people acting like they are enjoying  that product or service in TV ads). 

Today’s consumer wants real information to help in a buying decision. 

Here’s the good news:

Our education and experience make us a perfect fit for communicating that knowledge. 

Consider that many companies today are concerned about writing blogs that will get them noticed on Google and other search engines.

Because of that creative writers are in high demand …

One person that I know writing articles charges $300 for an article about the same size as the one you’re reading now. 

How much could you make doing the same thing? 

Here is just one link and one example of how easy it is to offer your services.      

4. Sell your Life Insurance

life-settlement

Did you know that you could sell your life insurance policy for cash now rather than giving the money to your heirs when you die? 

I know that sounds ridiculous but sometimes it makes sense. 

Here’s a description of the program:

Life settlement:

From Wikipedia, the free encyclopedia

 

A life settlement is the sale of an existing life insurance policy to a third party for more than its cash surrender value, but less than its net death benefit.[1] There are a number of reasons that a policy owner may choose to sell his or her life insurance policy. The policy owner may no longer need or want his or her policy, he or she may wish to purchase a different kind of life insurance policy, or premium payments may no longer be affordable.[1] Policy owners often learn about settling their policies from a financial planner or advisor, insurance broker, attorney, friends or family, or estate planning presentations.

The key phrase is:

No longer needed or premium payments may no longer be affordable.

 Often, a policy that is no longer needed but paid for over a long period of time is abandoned. 

Did you know that insurance companies often plan a huge rate increase right at the 20 year renewal point to encourage that abandonment?

In that case you just lost all of the investment that you’ve made over all those years and the insurance company walks away with a huge profit. 

A life settlement can help you recapture a lot of that investment

You can Google the term “Life Settlement” to learn more about how it might benefit you.

5. Find a treasure in your poor relative’s estate

Family discovers seven rare Ty Cobb cards possibly worth $1 Million.

sell-heirlooms

According to the Associated Press, this family, which prefers to remain anonymous, pulled not one, but seven identical Ty Cobb cards from an old, beat up paper bag. The print period, according to baseball card experts, was sometime between 1909 and 1911. And before this discovery, only 15 copies of this specific card were known to still exist.

Lastly, and this is tongue in cheek, if you’re lucky enough to have a relative who stashed away a collector’s item years ago and forgot about it, you might just find that they left you more than family memories.

The real point is that almost all of us have assets that are greater than we have imagined. 

Many of us have hidden treasures and we should be careful about inventorying and giving value to each. 

We might just have far more than we thought!

reverse mortgage options

 

 

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