The surprising way to stretch your retirement savings

(BPT) – The temptation to start collecting monthly Social Security checks at age 62 is hard to resist, but claiming the benefit too early can have damaging consequences for your overall retirement funds. According to Kiplinger.com’s October list of “Financial Decisions You Will Regret in Retirement,” taking the money as soon as you are eligible at 62 is actually considered one of the worst mistakes you can make in your lifetime by many advisors.

That’s because the longer you wait to claim benefits, the more money you are eligible to receive in your monthly check. The Social Security Administration says the increases from delaying your benefit can be large and explains that a worker would receive $750 a month if she starts her benefit at age 62, but $1,000 a month at her full retirement age of 66. Or, if she delays until age 70, she would receive $1,320 a month.

There are obvious advantages to waiting until age 70 to claim Social Security, but for individuals who can’t or don’t want to continue working that long, it might not be so easy to defer the monthly cash benefit.

Certified financial planners Neil Krishnaswamy and Tom Davison say older adults do have options for filling the financial gap until they are eligible for their maximum benefit at age 70. Both experts outlined strategies that incorporate housing wealth early on in retirement instead of using home equity as a last resort option, which has been the conventional wisdom until recently.

This can be achieved by either selling the home and downsizing or, if you plan on staying in your current home for many years, using a reverse mortgage to convert part of the home’s value into a liquid asset.

“Setting up a reverse mortgage with a term payout that lasts eight years is one idea to consider in this scenario,” Krishnaswamy wrote in an article posted to Forbes.com on Oct. 12. He explained how the loan proceeds can help bridge a homeowner’s finances by replacing all or a portion of the income Social Security would have provided during the interim.

A reverse mortgage can also make sense for affluent retirees in high tax brackets seeking to maximize their Social Security benefit. Davison, a wealth manager and researcher in Columbus, Ohio, wrote a 2014 case study, “Delay Social Security: Funding the Income Gap with a Reverse Mortgage” that showed how using a reverse mortgage line of credit to bridge the gap can dramatically improve a retirement financial plan.

Instead of spending down an IRA or other investments where withdrawals are taxed, withdrawals from the line of credit, which are not taxable income, can be used to pay expenses. This allows the investment portfolio to grow until the first required minimum distribution at age 70, the same year the retiree can claim the maximum Social Security benefit.

Davison emphasized the long-term benefits of the reverse mortgage line of credit if the borrower is able to put money towards voluntarily repaying it over time. The reverse mortgage line of credit will grow at a reliable rate and can be used to support spending later in life when fewer borrowing options are available.

A reverse mortgage is a loan that enables homeowners that are generally 62 or older to use part of their homes’ equity to obtain cash proceeds that can be used in many ways, without giving up ownership of the house. Borrowers may choose to draw their funds as a lump sum, as a monthly term or tenure payment, or they may choose to create a line of credit that can be drawn upon on an as-needed basis; borrowers may also choose a combination of a monthly payment and a line of credit.

The loan does not have to be repaid until the last surviving borrower or remaining eligible non-borrowing spouse passes away or permanently leaves the home, or fails to meet loan obligations that include paying property taxes and insurance, and keeping the home maintained.

There is no penalty for repaying all or some of the loan early, and as Davison stresses, repaying the line of credit when expenses are low will enable it to grow and make funds available later on when you need it.

To learn more about reverse mortgage loans and how using home equity can fit into an overall financial plan, visit www.reversemortgage.org/equity, a consumer education website hosted by the National Reverse Mortgage Lenders Association.

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An affordable way to qualify for a home loan without that big down payment

(BPT) – For many Americans, the biggest hurdle in buying a home is the 20 percent down payment they think is required for mortgage approval. According to a recent survey by the National Association of Realtors, 34 percent of respondents believe they need more than 20 percent. Meanwhile, low down payment mortgages account for a significant amount of home buying annually.

Families with down payments as low as 3 or 5 percent have been able to purchase a home thanks to private mortgage insurance (MI) for 60 years. Since 1957, MI has helped 25 million families become homeowners. In the past year alone, MI helped more than 795,000 homeowners purchase or refinance a mortgage. Nearly half were first time homebuyers and more than 40 percent had incomes below $75,000.

How MI works

Mortgage insurance is simple. In addition to the other parts of mortgage underwriting process — such as verifying employment and determining the borrower’s ability to afford the monthly payment — lenders traditionally required 20 percent down to ensure the borrower had some of their own money committed before the bank would provide a loan. This is where MI enters, bridging the down payment divide to qualify borrowers for mortgage financing.

Benefits of MI

* It helps you buy a home, sooner. For the average firefighter or school teacher, it could take 20 years to save the typical down payment. Private mortgage insurers help borrowers qualify with as little as 3 percent down.

* It’s temporary, leading to lower monthly payments. MI can be cancelled once you build 20 percent equity, either through payments or home price appreciation — typically in the first five to seven years. This is not the case for FHA loans, the federal government’s form of MI. The majority of which require MI for the life of the loan.

* It provides several flexible payment options. Your lender can offer several options for MI payment; the most common is paid monthly along with your mortgage.

* It’s tax-deductible. Subject to income limits, MI premiums are tax deductible — similar to interest paid on a mortgage. In 2014, 4 million taxpayers benefited from this deduction with the average being $1,402.

MI is a stable, cost effective way to obtain low down payment mortgages, and offers distinct benefits to borrowers. It’s been a cornerstone of the U.S. housing market for decades, providing millions the opportunity to own homes despite financial barriers. Ask your lender for low down payment options using MI. Visit www.USMI.org for more information.

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7 Social Security facts you need to know

(BPT) – Planning ahead and getting an accurate picture of your options may be key to getting the most out of your retirement. However, a survey commissioned by Massachusetts Mutual Life Insurance Company (MassMutual) aimed to better understand how much Americans know about Social Security retirement benefits suggests many may be leaving Social Security retirement benefits they’re entitled to on the table, or incorrectly assuming what benefits may be available in retirement. Here are some the most common questions and answers for people of all ages:

My spouse can qualify for Social Security retirement benefits, even if he or she has no earnings history. True! Many spouses choose to stay at home to raise children or otherwise spend extended periods of time outside the paid workforce. This can affect a spouse’s ability to qualify for Social Security benefits. In such cases, the spouse who earns less may be eligible for a Social Security spousal benefit. A spousal benefit can be as much as 50 percent of the higher earning spouse’s full retirement age benefit. The exact percentage will depend on whether or not each spouse has reached his or her full retirement age.

As a divorced person, I can collect Social Security retirement benefits based on my ex-spouse’s earnings history. True! You may be eligible to receive retirement benefits based on your ex-spouse’s earnings record, provided your marriage lasted at least 10 years, you are currently unmarried, you are at least 62 years old and the benefit you would receive based on your personal earnings history is less than the benefit amount you would receive if you filed for benefits based on your ex-spouse’s earnings record. If your ex-spouse has not yet applied for retirement benefits, but qualified for them, you can collect benefits based on his or her record provided that you have been divorced for at least two years.

Under current Social Security Law, full retirement age is 65. False! Your full retirement age is based on the year you were born. For people born between 1943 and 1954, the full retirement age is 66. If you were born in 1960 or later, the full retirement age is 67. For anyone born between 1955 and 1959, the full retirement age increases gradually.

Once I start collecting Social Security, my benefit payments will never change. False! The Social Security Act of 1973 included a provision for cost-of-living adjustments (COLAs) to help Social Security benefits account for inflation. Each year, the Social Security Administration uses specific indexes and formulas mandated by this legislation to determine whether a COLA will apply to benefits paid in the coming year and if so, how much the increase will be.

If I file for retirement benefits and have minor dependent children, they also may qualify for Social Security benefits. True! When you file for Social Security retirement benefits, your children may also qualify to receive benefits based on your record. An eligible child can be your biological child, adopted child or stepchild. A dependent grandchild may also qualify. Normally, benefits stop when children reach age 18 unless they are disabled. However, if the child is still a full-time student at a secondary school at age 18, benefits will continue until the child graduates or until two months after the child becomes age 19, whichever is first.

I must be a U.S. citizen to collect Social Security retirement benefits. False! You do not have to be a U.S. citizen to qualify for Social Security retirement benefits. Resident aliens who pay into the Social Security system may qualify to receive retirement benefits, assuming they earn enough credits and meet additional criteria. To become part of the Social Security system, non-U.S. citizens must have lawful alien status, permission by the U.S. Citizenship and Immigration Services (USCIS) to work in the U.S. and a Social Security Number.

I can continue working while collecting my full Social Security retirement benefits — regardless of my age. False! You can work and receive Social Security retirement benefits. However, if you have not reached full retirement age, your earnings will be subject to the retirement earnings test. If your income exceeds the test limit, Social Security may withhold all or a portion of your benefits. Withheld benefits are repaid over your lifetime once you reach full retirement age.

Final decisions about Social Security filing strategies always rest with you and should always be based on your specific needs and health considerations. It is important to acquire as much information as possible in order to make an informed Social Security claiming decision because one year after the Social Security claiming decision is made, it cannot be changed.

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These online tools can help you find a mortgage that fits

(BPT) – Whether you’re a first-time or experienced homebuyer, chances are a good portion of your real estate journey will take place online. In fact, four in 10 homebuyers start their house-hunting with an online search, according to the National Association of REALTORS. It’s easy to understand why: Online tools and apps can make the homebuying experience — including finding a mortgage — easier and more enjoyable.

If you’ll be shopping for a home, use the tools homebuyers find most useful, according to the Bank of America Homebuyer Insights Report:

* Mortgage calculators — It’s important you’re as comfortable with your mortgage terms and lender as you are with the home you’re paying for. An affordable mortgage helps homebuyers reap the full benefits of home ownership, including building equity and long-term financial security. A mortgage calculator can help you understand what you would pay each month, as well as estimate monthly mortgage payments and rate options.

* Finance websites — Home shoppers can learn a lot about mortgage options and a bank’s customer service through websites that feature reviews of mortgage loan officers and lending institutions. More than a third (36 percent) of first-time homebuyers and more than a quarter (28 percent) of experienced homebuyers use bank apps or websites to research reviews of lenders and loan officers.

* Loan status portals — Applying for a mortgage can sometimes be overwhelming, but real-time loan status information is transforming the process. For example, Bank of America’s Home Loan Navigator allows mortgage applicants to securely upload, submit and sign documents, get real-time status updates on their application and loan, receive important documents and disclosures and communicate with experts via secure messaging.

* Mobile real estate listings — With many home listing websites available, it can be difficult to narrow down online searches to homes that meet all your criteria in your location of choice. Using a bank’s online real estate center can help you refine your home search or, if you’re selling, it can help you determine your home’s estimated value.

* Down payment sources — Saving for a down payment can be one of the most challenging tasks of buying a house. Tools like Bank of America’s Down Payment Resource Center offer a searchable database of more than 1,000 local and national assistance programs that may be able to save you money on your down payment.

* Home design apps — With inspiration in hand, homebuyers can use home design apps to put their ideas into virtual reality. These apps allow you to take and store room measurements, make notes on design ideas and see virtual representations of what your decor plans will look like in your home.

To learn more about home buying and mortgages, visit Bank of America — Home Loans.

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Autumn and early winter: The best times to be a homebuyer?

(BPT) – The long-held belief that summer is the only time to buy a home is fading fast. Savvy home-buyers are learning that when temperatures drop, numerous benefits emerge that simply aren’t available other times of the year.

“With warm weather and many homes on the market, summer is generally the busiest real estate season. However, autumn into early winter can be opportune times for people who are serious about buying a home, too” says Geoff Lewis, RE/MAX, LLC President. “This time of year has big advantages — like motivated sellers and less competition — that simply can’t be ignored.”

If you’re in the market to purchase a home, there’s no need to hang up your house-hunting hat until spring or summer. Lewis offers eight reasons why now might just be the best time to purchase a home.

Year-end tax breaks

As long as you close on the property on or before Dec. 31, any property tax and mortgage interest paid are tax-deductible for that year. This can dramatically impact the amount of money you owe Uncle Sam, or increase your refund.

Less competition

The National Association of Realtors(R) recently noted that, in an average year, nearly half of all home sales occur from May to August. Although most people wait until the hustle and bustle of the spring selling season, you’ll likely encounter less competition during fall and winter. That means less stress and a reduced chance you’ll be involved in a bidding war.

Eager sellers

Sellers become more motivated the longer their home is on the market, especially now that the summer rush is over. If a home has been listed for a while, it may allow buyers more room for negotiation and potentially a better deal.

Quicker transactions

Motivated sellers paired with less-busy title companies may mean a faster closing in fall and winter. Do you want a new home in time for the holidays or new year? It’s entirely possible when you house hunt now.

Cheaper moving prices

You’re probably planning to hire a moving company in some capacity, whether you’re moving across town or across the country. In the fall and winter moving companies tend to be less busy, which means you might have the options of more flexible schedules and lower prices.

Easier to outfit your home

Need a new couch, cutlery or curtains for your home? Year-end sales are perfect for scoring a deal on these otherwise expensive items. Plus, if you move in around the holidays, there are plenty of deals on house-warming gifts.

“In addition to all these benefits for buying post-selling season, interest rates for home loans are still at record lows,” says Lewis.

If you’re thinking of purchasing a home, find more helpful information at www.remax.com.

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