There are people who assume that when they reach retirement age as defined by the Social Security administration they no longer need to work because all their needs will be taken care of via their benefits. So they really do not consider planning for retirement to be a personal responsibility. Thinking like this is a huge mistake, and it is a mistake that you can’t learn from and correct because it is a long-term error and the time simply doesn’t exist to correct it.
If you doubt that many people think this way, the proof lies in the results of a recent AP-LifeGoesStrong.com poll that was conducted in an effort to get a feel for how financially prepared baby boomers are for retirement. Some 24 percent of the people polled said they did not have any retirement savings at all, and 64 percentof them said that they were expecting Social Security to be the centerpiece of their retirement income.
Social Security benefits are not enough for most people to live on. In 2017 the average monthly check was $1342. Of course, you can cross your fingers and hope for massive increases in Social Security by the time you retire. But given the federal budget deficit and the political mood in Washington it would seem as though porcine flight is more likely.
All the above underscores the reason why it is important to take full advantage of your 401(k) plan at work. A 401(k) is a retirement savings account, and with the traditional 401(k) your contributions are made before taxes are taken out of your gross pay. So you gain a tax benefit because your taxable income is reduced by the amount of your contributions into the account. Many employers match contributions made by their employees, and this is nothing more or less than free money and it is something to take full advantage of if you can.
Beware of Reverse Mortgages
The federal government insures reverse mortgages called home equity conversion mortgages. With these loans you accept payments from a lender. This can be through monthly payments, a line of credit, or a combination of both.
In return the entity that provides you with the loan obtains equity in your home. At the time of the death of the owner or whenever he or she chooses to move or sell the property the loan becomes due.
The wise course of action is to take pause before taking out one of these loans. If you do not consider yourself to be a financial expert you would do well to discuss all of your options with an experienced financial planning attorney before taking out a home equity conversion mortgage.
There are considerable expenses that go along with taking out one of these loans. These would include interest, closing costs, loan servicing fees, payment of reverse mortgage insurance premiums, and appraisal expenses.
Depending on the exact nature of your circumstances other options may be available to you. One of them would be the possibility of selling the home and downsizing to something smaller. You could walk away with the cash difference and you would have the financial flexibility you are seeking without paying a premium price to extract the equity from your home.
When you tap into expertise before making big financial decisions there may be a modest cost involved, but the money that this consultation may save you in the long run certainly makes it a worthwhile proposition.
We Are Here to Help!
If you take the right steps along the way, your golden years can be some of the best years of your life. You can spend quality time with your family, travel, enjoy leisure activities, and cross things off your bucket list. This being stated, you should be aware of the eventualities that you may face after your active retirement years. Many seniors need long-term care at some point in time, and Medicare will not pay for it.
Medicaid does pay for long-term care, and our Mount Clemens nursing home attorneys can explain all the details to you with regard to the strategies that can be implemented to obtain eligibility. If you would like to schedule a consultation, give us a call at 586-493-7661.
Another option exists if you would like to learn more about retirement planning, elder law issues, and estate planning. Our Mount Clemens nursing home attorneys are holding some free seminars over the next few weeks, and you can learn a lot if you attend one of the sessions. To get all the details, visit our seminar schedule page.