Most adults who are approaching retirement or who have reached this stage in their lives are aware that income is a major factor that mortgage underwriters focus on when applying for a home loan. The primary source of income that working adults have usually is from their full-time employment, and some income may also be derived from investments, royalties or other sources. After you retire, however, you do not have a job, and you may think that you cannot qualify for a home loan because you do not have salaried income. The good news is that this is not the case. There are actually several methods that underwriters can use to qualify you for a home loan after you have retired from a full-time job.
The Drawdown Method
Income is a major component that underwriters review for all home loan applicants. This income could come from a full-time job, but it does not have to. You obviously are receiving some type of income after you retire because you have to pay your bills. If this income is a drawdown from your various investment accounts, you can prove this source of income by providing your bank statements. The bank statements should ideally show the same amount being deposited into your account each month. Some underwriters may also need a letter from your financial institution confirming this drawdown arrangement. Keep in mind that this is only one source of income that underwriters may consider. For example, if you also receive rental income from a real estate investment, Social Security income or any other type of income, all sources of regular income that is expected to continue can be counted in the underwriter’s analysis of your loan request.
The Asset Depletion Method
If you are using capital assets to pay for your retirement, the underwriter can consider this as a source of income as well. For example, if you currently have $2 million in liquid assets, an underwriter may take 70 percent of this amount. Then, the underwriter will divide that amount by the number of monthly payments you desire for your home loan. If you apply for a 30-year loan, the figure will be divided by 360 months. If you have additional sources of income, such as from other investments or a pension, this income will also be included in the income calculation. This is a suitable method that can be used for retirees who have a lot of assets but who may not have a significant amount of income rolling in.
Other Important Qualification Requirements
Income is not the only qualification requirement that underwriters review when you apply for a new home loan. Just as is the case if you apply for a home loan at an earlier stage in your life, your credit scores are critical. They can play a role in your approval status as well as what your interest rate may be. Ideally, your credit scores should be in the high 700s to qualify for an excellent rate. Underwriters will also review your plans to live in the house or to lease it out, your down payment amount and your available liquidity after closing. Tax returns, bank statements, documents showing other sources of income, your credit report and other items will all be analyzed closely by the underwriter.
You can see that qualifying for a home loan after you retire is possible, but it also can be confusing. A smart idea is to reach out to a lender or mortgage representative for assistance. Through a consultation and through the pre-qualification process, you can learn more about your ability to obtain a mortgage in retirement.
When a person thinks of retirement, they can have a thousand things running through their mind. They are sometimes met with a mix of emotions about the situation that they are going to be in. On one hand, retiring means that you get to sit back, relax, and enjoy the fruit of your labor. This is what you have been working all those years for; for the time you can live how you want to, and do the things that you have always loved doing. For some people, retiring is a beautiful thing, but retiring for others can be scary. There are fears that can cross their minds, making them wonder if retiring is a good idea after all.
A fear that people can have is whether the money that they have saved will be enough to last them the rest of their lives. What if you live until 100?
You have worked throughout your life, and retirement is now your time to enjoy all that you have worked so hard for. If you were in a stable well paying job, you probably were used to living a comfortable life. Will you be able to splurge as much as you used to? This is a difficult question for some to answer. So what can you do to take care of this fear?
Find A Financial Planner
Budgeting is the best way to ensure that you have enough money to support yourself through this period. Approaching a financial planner is one way to take care of this and to ensure that your questions are answered and you are supported by someone knowledgeable in finances and retirement. A financial planner can help you budget according to your previous income and savings, and can even help you understand how much you would need to keep aside for a rainy day and to take care of any medical expenses that might come your way.
If you are thinking of retiring, and haven’t already ended your work phase already, visiting a financial planner before is always a good option. They will be able to tell you if you can retire now or if you have to wait for a few years to be better situated. We specialize in planning for retirement and are here to answer these questions and more.
Planning For Medical Expenses
Having medical expenses during your retirement is something that can cause some people to hold onto their jobs longer. Often, jobs come with medical care incentives and insurance, which can be a great boon in the case of a medical emergency. However, most companies ask you to forgo these health benefits once you retire, which can make retiring an incredibly scary experience. Planning and budgeting for this can be hard, which is why you should get a health insurance that gives you excellent coverage and which can keep you well situated in these instances.
Keep Yourself Busy
The fear of being by yourself and not having anything to do is something that some people retiring face. You might have been accustomed to getting up early in the morning and heading to work. You might be used to spending your entire day engaged in your job, and then coming home and spending time either with yourself or your friends and family. Retiring means that you have a lot more time on your hands, which can cause some people to get frustrated, bored or lonely. It can be important to find something that you like doing and keep yourself engaged in that. You can take up a small part-time job that lets you work from home, or even take up a hobby that you have always wanted to learn and cultivate that skill. Who knows what new passions you will discover.
There can be a lot to think about when planning for retirement. We are here to answer your questions and help ease your concerns about this new chapter in your life.
As we enter a new year, it is a good idea to consider the resolutions you might be planning. You might want to do things like exercise more often or drink more water. However, you ought to also consider saving for retirement and reaching any other financial goals that you might have as well. Remember, this is the time of year when you get a clean slate and could do better in areas that you may have struggled with in the past.
Think About The Vital Documents You Need To Work On
It is not the most pleasant thing in the world to think about, but part of getting older is thinking about your will. We all know that we will pass away at some point, but not enough of us do anything about making sure our family is taken care of when that time comes. With this in mind, the new year is the perfect time to sit down with an estate planner or any other expert who can help you get some of those documents in order.
Invest In An IRA
An individual retirement account (IRA) can be a great option for the person who is nearing your time to retire (or also for those who are far away from it). It can be a way to save and invest for your non-working years. You cannot allow yourself to fall into the false notion that the government, with its social programs, will be there to bail you out. We can only hope that such programs will exist for future generations. Even if you are lucky enough to receive your full government entitlement benefits, it still may not be enough to get you through retirement comfortably.
Investing in an IRA could help a person increase their odds of having a comfortable lifestyle because it helps them grow the funds that they put into it. To see more about IRA investments and to compare the different types, see the IRS website: Here.
Create An Emergency Fund
Life is far from predictable. You can estimate what your expenses will be for routine things, but it is unlikely that you will plan properly for those things that can sneak up on you. There could be emergency medical expenses, or any number of other issues that you have to face going forward. If you are wise with your planning, you will go ahead and put in some extra budget space for the things that no one sees coming. Every retiree will need a different amount extra based on their situation but planning for emergencies is smart at any age.
Take Stock Of The Health Care Picture
The picture of health care in the United States is a pretty fluid thing. It is not like in other countries where there is universal coverage for a lot of people. Instead, the United States has a hybrid type system that changes all the time. It is a good idea to take a look at the particular mechanics of the health care system as you reach the age when you could retire. Just having some idea of what is or is not covered can help you get a better grasp on what moves you need to make next to protect yourself in this area.
Cheers to a happy and healthy 2018!
The start of a new year can have you thinking about your health. Joining a gym can be a goal for some as we head into 2018 but if you are planning for retirement, there is another side of health that needs to be considered; medical debt. We sometimes forgo the care we need because we do not want to touch our retirement savings. We spend our whole lives planning for retirement, only to have it taken away from us if we do not plan accordingly.
We can feel guilty and ashamed of our debt. We can look at our debt as our inability to be responsible and pay what we owe. Luckily, there are ways you can fight this situation.
1) You need to check for errors in your files. A recent study found that between 7-50% of all patient files have at least one error. Doctors can get their information wrong every so often.
You can ask for a copy of your hospital bills. Compare those bills to the ones you got in the mail. Bills can contain errors. Why did you get charged for their errors? Healthcare providers have a lot of moving parts and mistakes happen, unfortunately, it is often your job to fix them.
You should speak with your insurance company, too. Some insurance companies have a reputation of not putting out any additional money than they need to. You need to go over your records and the insurance records. Did you find any errors? Call them up and speak to someone.
2) You could try to negotiate your bill. Some of the charges might be unfair. Call up your representative and talk to them. If you have shown good faith payments in the past, they might be willing to work with you. You can try asking for a discount. You pay a large amount right away and they give you a 25% discount. A plan like that may or may not work. You could give it a try at least.
3) You can to ask for help. Asking for help is a sign of strength, not a sign of weakness. Talk to a negotiator who works in the healthcare field or billing. You can try signing up for a plan where you make small monthly payments.
Speak with a caseworker. A casework is skilled in that area. They will know what to look for.
The holiday season may be the most wonderful time of the year, but it’s also when there are the most holiday scams. For many some consumers, it can be easy to fall victim to various scams as they attempt to shop for gifts. When you want to protect yourself and your pocketbook, there are a few holiday scams to be aware of and tips to follow to avoid becoming a victim.
Fake Job Postings
Many people are in need of extra cash during the holiday season to afford gifts for family members and friends. As many people look to pick up an extra job, fake job postings can begin to appear online. Be careful applying for positions that ask you to pay money upfront to cover the cost of training costs or start-up kits.
Free Gift Cards
Free gift cards are sometimes offered through scam emails or websites that provide an incentive for submitting personal information. Although you may want to score free money, it can mean submitting your personal information and having it collected by a thief who will attempt to steal your identity.
Avoid Fake Charities
It can be easy to feel generous during the holiday season when many families are in need. Avoid donating to a fake charity by verifying that it’s a legitimate organization and that the funds are used wisely. Read the fine print to determine how much money will go to the actual cause. Writing a check should be considered one of the safest ways to donate money because it’ll allow you to track the funds. Avoid giving your credit card information to solicitors over the phone.
During the holidays, be alert of emails that you receive from DHL, FedEx, or the U.S. Postal Service claiming that you have a package that needs to be picked up. Most courier services don’t have email addresses, meaning that you received a scam email. Clicking on the email can cause malware to obtain sensitive data and have access to your credit card information and passwords.
Online Greeting Cards
Many adults in retirement open cards online during the holidays, which can be infected with malware. Opening any greeting cards from a name that you don’t recognize can put you at risk of being hacked. Viruses are common in ecards or holiday-themed screensavers that you’re offered via email. Legitimate e-card companies require a coupon code to be opened to ensure that you can safely access the website and avoid putting your personal information at risk.
Thieves and criminals also may attempt to steal information through rogue websites that are set up and appear when performing a search for “Christmas gifts.” The sites often promise deals and discounts, which entice consumers. If you make a purchase through websites that are not legitimate, your personal information can easily be obtained once you type in your credit card information and address, according to aarp.org.
If you choose to do online shopping, read the website addresses and look for contact information. The website should include an address and a phone number. You can also visit Whois.net to determine who owns the website. Calling the phone number that is provided will also make it easier to determine if it’s a reputable company that you can trust.
Retirement planning today can ensure you have the funds to live comfortably in retirement without worrying about going back to work. IRAs, HSAs, 401(k)s, and other accounts allow you to multiply your savings with unique tax benefits not available with other accounts. One way to maximizing the amount you have when you retire is contributing as much as possible to your plan. Every type of account has a limit on how much you can contribute each year so it’s wise to make an extra contribution if possible before the tax year ends.
Here are important reminders to help you maximize your savings.
Deposits to a 401(k) plan are due on December 31 every year. December 31, 2017 is a Sunday, which means the last day for a contribution is Friday, December 29. Because 401(k) deposits are usually made through payroll withholding, it can take one to two pay periods for a change to be processed. Make it a goal to increase your deposit 2-3 weeks before the end of the year.
By increasing your 401(k) deposits, you can reducae your 2017 tax bill by lowering your earned income. If you contribute the maximum this year and you are in the 25% tax bracket, you can reduce your taxes by $4,500. For 2017, the contribution limit for a 401(k) is $18,000. Workers who are at least 50 can make an additional $6,000 catch-up contribution, or up to $24,000.
A Roth IRA is an after-tax account. This means your deposits are not tax-deductible, but qualified withdrawals when you retire will not be taxed. A Roth IRA account is completely tax free as long as it’s used correctly.
The contribution limit for a Roth IRA is $5,500 in 2017 or $6,500 for people who are 50 or older. There are income limits to qualify for direct Roth IRA contributions. Deposits are only allowed if your income is below a specific threshold based on your filing status, however. For single filers, the threshold begins at $118,000 in 2017 and ends at $133,000. At this range, the contribution will be limited and eventually reach $0. For couples who are married filing jointly, the income threshold begins at $186,000 and ends at $196,000.
The deadline to make 2017 contributions to an IRA is April 17, 2018.
A traditional IRA is a tax-deferred account which means deposits can be tax deductible, but withdrawals when you retire will be taxable.
A traditional IRA has a contribution limit of $5,500 in 2017. If you are 50 or over, you can contribute an extra $1,000 for $6,500 total. These limits apply per person, not per account. This means your total contribution to all IRAs cannot exceed $5,500 in 2017, even if you have several accounts.
As with a Roth IRA, the deadline to make a 2017 contribution to a traditional IRA is April 17, 2018.
A Simplified Employee Pension (SEP) IRA is an IRA for business owners to give benefits to employees and themselves. Business owners, including sole proprietors, can establish these accounts.
An SEP IRA for a sole proprietor must be established and funded by April 17, 2018 for tax year 2017. If you file an extension, you have until October 15, 2018 to contribute to an SEP IRA for 2017.
For 2017, the contribution you can make to an SEP IRA is the lesser of 25% of compensation or $54,000. Those who are self-employed need to use a special rule for calculating the allowed contribution.
A Health Savings Account is a unique savings account for health care expenses. These accounts are tied to High Deductible Health Plans (HDHP) and allow workers to contribute pre-tax money to be used for health care. HSAs have become popular as a vehicle for retirement planning because the funds can continue to grow and withdrawals will never be taxed as long as the money is used for health care.
The deadline to contribute to an HSA for tax year 2017 is April 17, 2018.
The annual contribution limit for an HSA depends on whether you have a family or individual plan. An individual can contribute up to $3,450 per year. Families can contribute up to $6,750. Adults who are at least 55 can make an additional $1,000 catch-up contribution.
The weather is getting cooler as 2017 is drawing near. We can all feel it. If you’re like many older Americans on a fixed income, you like to do a little planning ahead. If you’re wondering how large your Social Security check will be during 2018, your wait will be over soon.
This month you can go on the web and access your Social Security account to view how this year’s cost-of-living (COLA) adjustment will affect your monthly check in 2018. You can also pull up a future benefits estimate and double check if the amounts recorded are accurate.
A few weeks ago, the Administration announced excellent news for recipients. The 2018 COLA will be an increase of 2 percent. This represents the highest hike since 2012. In practical terms, this means an average of $25 more of monthly retirement benefits for each recipient.
Advocacy groups for those who are retirement age have noted that for approximately 70 percent of recipients, the 2018 COLA increase could be offset by the cost of their Medicare premiums. However, they also say that not all but some retirees have a “hold harmless” provision that will prevent this.
Many people think that checking Social Security benefits on the web just applies to those 65 and older. This is not the case. The Administration suggests that it’s a good idea for anyone to check their account on a regular basis. Even men and women who have not yet started to receive benefits can view their account and do some planning ahead of time. Each American’s online statement provides payment estimates based on the age he or she can begin drawing benefits.
It’s really important that you check your earning history each year to verify its accuracy so that when you are eligible to receive benefits, your monthly benefit amount will be as high as possible. This way, if there is an inaccuracy in your earning history, you can adjust it now by submitting supporting documents to verify your employer(s) and your wages, like your tax return and W-2 form.
It should also be noted that anyone who has established an online account will receive an email around the time of his/her birthday as a reminder to check their account. To assist the elderly, the Administration also mails a printed version of annual earnings estimate to anyone who is 60 years or older if they have not established an online account. This is to especially helpful for those who don’t have a computer or Internet access, or simply prefer to handle their financial transactions by mail.
To look at your statement, go to: SocialSecurity.gov/reviewyourstatement. You’ll be asked to verify your identity by entering your username and password. For the first time this year, as an added security precaution, you’ll also be required to enter a security code sent to you by email or text. You can also set up a new account if needed.
Social Security is just a piece of the retirement puzzle. Let us sit down with you and take a look at your current retirement plan to be sure you are properly prepared for the road ahead.
If you are like many people, you may easily spend hundreds of dollars or more on holiday gifts and related holiday purchases each year. Some sources indicate that consumers may spend more money over the holiday season this year than they have in previous years. The cost of gifts is only one seasonable expense. For example, you may have plans to host a party, to travel or to decorate the house elaborately. When you are preparing to spend a large sum of money within a short period of time, financial planning is necessary. Some people may be thinking about taking money out of a retirement account to cover seasonal expenses, but this is not advisable for many reasons.
The Tax Penalties
When you take money out of your retirement account before the withdrawal date, you face the expensive prospective of having to pay an early withdrawal penalty. More than that, if you are taking money out of an account that used pre-taxed funds, you will also need to pay taxes on the amount of money that you withdraw. In some cases, this extra income that you are taxed on will bump you into a higher tax bracket. This can magnify the impact on your tax liability for the year. As you can see, it can be very expensive to pay for your expenses during the holidays through this type of funding.
The Impact on Your Financial Future
The impact on your finances is more far-reaching than simply having to pay a higher income tax bill. When you take money out of an account that was earmarked for the later years in life, you are decreasing the amount of money that you will have access to at that point. More than that, you miss out on the benefits of compounded interest, dividend reinvestment and other methods for growing your money exponentially over time. The impact on your financial security can be stunning. Because of these factors and because of the tax penalties that you may face, the true cost associated with an early withdrawal may be much more substantial than what you may think.
A Better Solution for Shopping During the Holidays
Because of how expensive it can be to take money out of a retirement account to pay for holiday gifts, décor, travel plans and more, planning for a better solution is important. One idea is to begin setting aside money or even shopping for gifts several months ahead of time. By doing so, you are spreading out this expense over the course of several months rather than several weeks. Layaway is available at some stores as well. You can also consider using credit cards or even different types of loans to pay for the expenses. Loans and credit cards do have fees associated with them, but you may discover that these are more affordable options to consider than dipping into your 401k or IRA. Remember that you can always downsize your holiday experience or buy more affordable gifts if you lack the funds necessary to pay for everything without reaching for your IRA or 401k.
Paying for gifts, travel and more this season can be a burden to your budget, and you need to approach this season with a solid financial plan. Rather than dip into a chunk of money that you have earmarked for your senior years, develop a better plan that may be more affordable for you over the long run. Before you start shopping and decorating your home, create a budget so that you know exactly how much money you will need. Then, create a feasible plan to pay for these expenses with ease.
Cheers to a smart holiday shopping season!
The United States Armed forces will unveil its new retirement planning system January 1, 2018. The new Blended Retirement System, or BRS for short, has so far drawn mixed reviews from those that understand it and puzzled looks by the many that do not. The changes to the system are discussed below and will hopefully bring greater understanding where needed.
The concept behind the BRS is the blending of two income sources for retiring personnel. The current system contains an annuity provision that provides money for retiring military personnel with over 20 years of service. The BRS will add to the mix the Thrifty Savings Plan, a 401K program managed by the government that will allow members to invest their own money in stocks or securities while enjoying a contribution from their employer.
The annuity formula currently in use will be utilized by the BRS. With this formula, an average of a service member’s highest 36 months of pay is determined and then multiplied by 2.5% of the members years of service. The BRS will reduce this from 2.5% to 2.0%.
The reduction in the annuity formula will be offset by the government’s contribution to a member’s TSP. Once reaching 60 days of service, a member is automatically enrolled in TSP. Once this happens 3% of the members base pay will go to the TSP each month along with a 1% contribution from the government. Once reaching 2 years of service the government will offer an exact match of contributions a member makes to the TSP up to 5%.
Benefit to Short Term Personnel
The addition of the TSP is of great benefit to members who are not planning to serve long enough to retire from service. Under the old system, members that served less than 20 years received nothing toward their retirement income. By contributing to TSP, members can receive the money deposited into their TSP account regardless of when they choose to discontinue their military service.
Members With Decisions To Make
BRS guidelines mandate that all members joining before 2006 are automatically grandfathered into the old system. Likewise, all service members to join after Jan 1, 2018, will be under the BRS. What this leaves is a group of service members with 1 to 12 years of service that must decide between the pros and cons of the two systems. These members will have 1 year to make a decision on this matter. Over 1 million United States service members are included in this group.
Payment Options When Retiring
When a member retires he will have options as to how his money is to be distributed to him. A member can choose to take a lump sum and receive all funds at once. Or, a member can opt for a reduced lump sum of 25% or 50% followed by a reduced monthly annuity until the member reaches the age of 67. Once reaching 67, the amount of the monthly annuity will be the full amount.
The Rise of the Machines: “Resistance is Futile”