PerpetualMotion Asked February 2015
Where can I find retirement information about which assets to access first?
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My mother will be retiring soon. She has small invests, small pension, and will be receiving Social Security. I can't seem to find information about which things she should tap into first and the tax liability that goes with it. Her bank says she needs to have a financial counselor. But the people I've contacted charge enormous fees or want her to move her accounts to their company. Where can I access this information that explains these investments in simple English?
Thank you.
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For SS, go to SSA site, its pretty good for info. She has to take SS by 70. You can figure out what the payout difference is for each year. If the amount is with very little difference at 67 vs 69 and they live to 95, take it earlier. The one rule with SS is that the best is to always wait till 66 to start.
Small invests, what do you mean? Cd 's? IRA? Stocks? Royalties? you need to understand what each is, what it does over time and tax issues. This you do for each one. Really do your research to understand so you all don't get taken advantage in or stuck with something that is costly to liquidate. None of this is hard & you need to understand what each is & does. You've already started doing this, right? Just continue doing this. Yiu may find that not doing anything is the action to take.
Then do a reality check on what it costs mom annually to live - right now is a great time as she got all her tax stuff in the mail. Get all her bills & receipts from last year to really really have hard data as to what it costs to run Mom, Inc.
what is moms housing situation? Could she live there another 10, 20 years safely? Or is it just too much house right now? What type of social creature is she - like is she the type to need community projects to do or prefers living alone. Would she be better selling the house and using the $ and perhaps $ from IRA to do a buy in at a CCRC? All the advisors in the world can't tell you what's best unless you do the background on as to what works for mom.
Personally I hate annuities & reverse mortgages - I'd leave the free chicken dinner or seminar if those were bring touted.
Mom needs to have a will, DPOAs done by elder lawyer. If she doesn't have a prepaid funeral & burial done, get that done. If its the situation, that it's just you & mom for the future, get all these done for the both of you & let mom pay. Good luck in all this, you can do it!
RM’s can work for some….like a healthy couple 63 & 65 which own 300K appraised home outright & plan 10 - 20 years there; home in an area of increasing value; & have guaranteed income to pay taxes, insurance, maintenance for 10 - 20 years; & they do line of credit RM. So when they move, home is now 500K which repays RM & leaves $$ for downsized home or CCRC buy-in. But if that’s you, really you don’t need an RM as you can get HELOC or personal loan. Too often, RM is done by those in financial or health crisis who don’t understand what an RM involves. If RM’d home is lower value, the $ received (may be less than 50% of value) is just a band-aid on a bigger $$ problem. They can’t pay for what is required for the RM; or they are ill & end up moving to a NH. Either way RM default & foreclosure.
As of 2013 significant changes happened to FHA backed RM. Now you have to show ability to pay the “required” on the house, like insurance, taxes, etc for years. If not, then have an escrow-like account to cover these costs. If you are low income and struggling, you just can’t do this. No federally backed RM for you. Also now value & condition on house has to be verifiable.
If you live with elder who gets the RM, you have no protection in all this. Only the spouse who was over 62 at the time of the RM is. Most excellent article in New York Times, October 14, 2012 by Jessica Silver Greenberg: “Reverse Mortgages Costing American Their Homes”nytimes/.../reverse-mortgages-costing-some-seniors-their-h...
An immediate annuity can be “Medicaid compliant” if it is actuarially sound, irrevocable, non-assignable, has equal payments, and names the state Medicaid program as the primary or contingent beneficiary to the extent of Medicaid benefits provided to the institutionalized individual. The problem for most insurance companies is that they cannot offer an immediate contract that is irrevocable as to the parties and also is non-assignable and subject to state requirement for commission & fees.
If you withdraw early you can lose 10% plus fees on the invested principal. Also they have sales commissions that are higher than other investments. Remember it's an insurance product sold on commission.
If anyone has gone through this lately, I would certainly appreciate specific websites or trusted advisors who would be willing to work with us long distance if necessary. Thanks again!
Mom will retire at 66 sometime this year. She owns her home and plans to stay there. In addition to SS she has a savings acct., IRAs (both trad. and Roth), and a small pension. I know of the minimum dates to start taking payments on all the investments, but what I can't help her with is which to take first and which to delay. For example, I understand that delaying SS until 70 is better. She can do that, but then which other investments should be tapped first? This is the information I can't seem to find. btw, we've done all the other planning.
Also, why do you not like annuities and reverse mortgages?