Financing Your Golden Years

Ah, the Golden Years. What image do those words conjure for you? Rocking chairs on the front porch, traveling the globe, learning to paint, or tinkering in the garage?

Americans are living longer, making planning for those golden years more important than ever.

Motley Fool reminds us that “Americans are retired on average almost 17 years for men and 21 years for women”. And according to the American Association of Retired Persons (AARP), “48% of households headed by individuals ages 55 and older need to do more to prepare for retirement. Additionally, 29% of people in the US who are retired or nearing 65 years old have no retirement savings or pension.” Forbes adds, “When it comes to saving for retirement, most Americans fall short. According to the Federal Reserve, about a quarter of Americans have no retirement savings at all, and almost two-thirds of non-retired adults are concerned about being able to meet their retirement savings goals.”

These statistics painfully point out that many folks are not financially prepared for their future retirement and this could tarnish the vision of those golden years for many. Planning on how you will finance your golden years can’t begin soon enough. It is never too early, nor too late, to begin. The earlier you begin your retirement planning, the more options you will have.

How can you prepare now to finance your Golden Years?

A plan should be personalized based on individual needs and priorities in retirement. Some clients might plan to leave a legacy for their family, others might enjoy their savings themselves, some may want to leverage their assets to supplement their monthly income or leave their real estate to their loved ones, while others might want to donate to charities. Paying off debt or developing an income-producing real estate portfolio are options, too.

1. Meet with a Financial Advisor and Set Some Goals

If you are saving for your retirement, setting a goal based on the income you anticipate needing to cover expenses multiplied by the number of years you plan to be retired is a great place to start. There are retirement calculators available on the internet and a Financial Advisor can offer advice a well.

A trustworthy Financial Advisor will bridge the gap between an unprepared retirement or a strategically prepared retirement. Working with a reputable Financial Advisor will help with decisions that align with your financial goals and avoid some costly mistakes such as failing to consider taxes, underestimating longevity, or not considering future medical costs.

The idea of meeting with a Financial Advisor might seem intimidating but the process can be made easier by understanding what to expect. A common myth is that individuals need a certain level of income or asset portfolio or high net worth to qualify to work with a Financial Advisor, but the truth is there are great Financial Advisors who have no such requirement. If you are looking for a Financial Advisor consider talking to your bank or credit union or ask friends for recommendations.

2. Start Saving

Then open a retirement account or two and begin regular contributions, increasing the amount you are contributing annually. Catch up amounts are available, the IRS sets the limits every tax year.

Savings Options:

• 401k and company matches – tax deferred, taxable withdrawals
• Roth IRA’s – tax free withdrawals
• SEP IRA’s – self-employed IRA
• High Yield Savings accounts and CD’s – taxable interest earnings, tax free withdrawals

3. Consider Your Real Estate Assets

If leveraging your real estate during your Golden Years is an option you want to consider, there are new tools in the financial planning tool box. According to an article on NationSwell, backed by studies published in the Regional Science and Urban Economics Journal, from 2000 to 2022
the use of mortgages by those ages 65 and older has been steadily increasing. There was a 28.5 percent rise in mortgage use among older homeowners during this time frame. It may seem inadvisable for retired adults to take out a mortgage, yet there are circumstances in which
taking out a mortgage can be a smart move for seniors.

Circumstances when it might make sense for homeowners to take out a new mortgage:

• A new home purchase to downsize, right size, or relocate to reduce maintenance and
  expenses.
• An investment strategy when mortgage rates are low by taking the equity and investing
  that capital elsewhere versus having it tied up in the property.
• The need to access equity and liquidate some assets for seniors on a fixed income to
  pay living expenses
• Maintaining a mortgage for tax advantages and allowing other assets to remain
  undisturbed and growing.
• Remodeling an existing home to better allow for aging in place, adding safety features
  in bathrooms, creating single level living, or adding an ADU (auxiliary dwelling unit) for
  caregivers or family.

The best financing option depends on your specific needs, goals, dreams, and financial
situation. According to the National Association of Realtors SRES magazine, June/July issue,
there are several options available.

Home Equity Finance Options:

• Traditional Home Equity Line of Credit – borrow money as needed for expenses
• New mortgage -typically lower rates or payments
• Cash Out mortgage – consolidate debt, lower payments or rates, cash to supplement
  savings for emergencies
• Home Equity Conversion Mortgage – no required monthly payment, a reverse
  mortgage, allows homeowners ages 62+ to convert part of their home equity into cash
  without selling their home.
• Home Equity Conversion Mortgage – can finance the purchase of a new home,
  downsize, relocate etc and also may provide some additional cash for savings all with no
  monthly mortgage payment required

Ah, the Golden Years. Do you see a different picture now? Achieving security and peace
of mind whether you are saving for your retirement or planning on leveraging assets such as
real estate that you have acquired along the way, get a plan started as soon as possible and
know there are many ways to make sure those retirement years stay golden!