section 1 - The American College Online Learning Center

More documents

Recommendations

Info

(1) A conventional strategy is to take out a reverse mortgage to increasemonthly income.(a) If this is the objective, an individual may elect what are calledtenure payments—in which a monthly benefit is paid as long as theindividual is living in the home.(b) Another strategy that may use less equity but could increaselong-term income would be to take a reverse mortgage beforeSocial Security benefits are paid as a bridge to defer (and increase)Social Security benefits.b. To pay for long-term care costs(1) It is generally not appropriate to take out a reverse mortgage to pay forlong-term care insurance premiums.(a) Expensive—as this requires payment of the premiums whileinterest charges accrue on the loan(b) Risky—because the individual may run out of available equity andbe unable to continue paying the premiums(c) Purchase insurance too late—a reverse mortgage is not availableuntil the individual attains age 62, rather late for purchasinglong-term care-insurance (LTCI)(2) Home equity can be an appropriate part of the long-term care plan.c. To manage debt(a) A client can purchase an affordable policy with a limited daily limitand retain home equity as a way to supplement the insurancepayments.(b) A client can purchase an LTCI policy that only pays for care in anursing facility (which lowers the cost of the policy) and uses areverse mortgage to fund care that is provided in the home.(1) A newer trend is homeowners transferring unsecured debt into a reversemortgage.(2) Way to defer a home mortgage or other debt payment(a) Someone with existing debt on the house may not be able to makethe monthly payments, so they take out a reverse mortgage.(b) Take the proceeds of that loan to pay off the existing debt on thehouse and roll that over into the reverse mortgage and then defer(c) Taking a lump sum benefit can use up the equity in a home quicklyas the interest charges on the loan will accumulate rapidly.(d) Using up home equity in this way means that it is not availablefor other purposes.d. As an emergency fund (financial buffer)(1) It may be an advantage to use the home “asset” in a more proactive,preventive way.(2) Take out a reverse mortgage line of credit(a) Have those resources available so you do not have to wait untilan emergency.3.26
5. Planning considerations(b) Keep up with needs and expenses.a. The first step in planning is simply bringing home equity into the retirement incomeconversation. For the client that has an income shortfall, home equity may bepart of the answer.b. If the goal is using home equity to create a regular income stream, there are anumber of options:(1) One option is to downsize—that is, sell the home and buy a less expensiveone or rent to create additional assets that can be used to generateadditional current or future income. This may be the simplest way to freeup equity but may not meet the client’s retirement objectives or there maynot be adequate cheaper housing in the desired neighborhood. On theother hand, for some clients this may be a great way to free up equity,possibly lowering living expenses and finding more appropriate housing forlater in life as well. This also may be part of a relocation plan—choosingan area with lower housing and living expenses.(2) For the client wanting to stay in the home, another option is to take areverse mortgage and elect a tenure option to generate a steady stream ofadditional income over the time that the individual stays in the home. Theadvantage of this approach is that it allows the client to stay in the home,uses up the home equity more slowly as the amount borrowed buildsslowly. The limitation is that the income will stop when the client leaves thehome, and the outstanding loan amount may use up a significant portion ofthe equity if income payments continue for many years.(3) A third option is to take a reverse mortgage with a line of credit distributionoption and take withdrawals for a limited period of time to defer SocialSecurity benefits. This strategy requires borrowing at a young age andinterest may accrue for many years, but it gives the client the ability toincrease income as deferring Social Security from 62 to 70 increasesbenefits by 76 percent.c. Another way to use home equity is to reduce expenditures by retiring outstandingdebts.(1) Some debt can be removed by downsizing—especially for those whochoose to rent instead of purchasing another home.(2) Another option is to use a reverse mortgage to retire a conventional loan.This can reduce current expenses—which is clearly one way to improve aretirement income plan. The limitation of this approach is that it requiresreceipt of a lump sum payment—which if the client is going to stay in thehome for many years may wipe out most—or all—home equity.d. Long-term care planning(1) For the individual who wants to stay at home and receive care, a reversemortgage can clearly be used to pay for care. The primary limitation is thatequity may be used up, if later institutional care is required.(2) Maybe a better approach is to use the reverse mortgage in combinationwith a less expensive LTCI insurance policy or other funding approachesto long-term care planning.e. Emergency fund3.27
Page 1:
Huebner School SeriesHS 353 STUDY O
Page 6:
THEAMERICANCOLLEGE.EDUThrough The A
Page 10 and 11:
c. But it is more comprehensive bec
Page 12 and 13:
(3) Work part-time during retiremen
Page 14 and 15:
SECTION 2: UNDERSTANDING RETIREMENT
Page 16:
d. Solutions(1) The model considers
Page 19 and 20:
. Other sources of retirement incom
Page 21 and 22:
c. Another option for solving cash
Page 23 and 24:
(b) Net worth statements that ident
Page 25 and 26: d. Be ready to reengage with the cl
Page 27 and 28: (b) In financial planning(c) In inv
Page 29 and 30: j. Planning Point: Planners can use
Page 31 and 32: e. We also need them to have a bett
Page 33 and 34: Assignment 2IDENTIFY RETIREMENT INC
Page 35 and 36: (2) Income4. Determining risk toler
Page 37 and 38: collaborative experience which focu
Page 39 and 40: 6. Asset allocation and risk tolera
Page 41 and 42: c. How long will the income last?d.
Page 43 and 44: . Durationc. Reliabilityd. Other6.
Page 45 and 46: c. Supplemental Security Income (SS
Page 47 and 48: . An unused emergency fund can supp
Page 49 and 50: 5. Inflation(2) The expense method
Page 51 and 52: Assignment 3CHOOSE APPROPRIATE STRA
Page 53 and 54: . Save as a percentage of income an
Page 55 and 56: (1) Note that 38% of second income
Page 57 and 58: (4) The AARP website has a national
Page 59 and 60: 4. Contributions to IRAs and Roth I
Page 61 and 62: carve out the nondeductible contrib
Page 63 and 64: (2) Plus salary deferrals (for an i
Page 65 and 66: a. Example:(1) Save $10,000 in 25%
Page 67 and 68: (a) This requires knowing four fact
Page 69 and 70: . Solution(1) Li and Lin Lin are bo
Page 71 and 72: (1) The increase in dollar amounts
Page 73 and 74: 9. In some circumstances, an indivi
Page 75: 2. Reverse mortgage basicsa. Almost
Page 79 and 80: (2) Some funds that are promoted as
Page 81 and 82: (1) Berstresser, Chalmers, and Tufa
Page 83 and 84: RESOURCES FOR COMPETENCY 3: CHOOSE
Page 85 and 86: (2) From the previous employer(s) p
Page 87 and 88: 8. IRA funded plans (IRAs, SEPs, SI
Page 89 and 90: . Does the distribution election fi
Page 91 and 92: 6. Net unrealized appreciation rule
Page 93 and 94: a. Tax-exempt plans include Roth IR
Page 96 and 97: 8. Calculating required distributio
Page 98 and 99: (2) Exception: If there are separat
Page 100 and 101: 5. Impactc. Tax rates are low in ea
Page 102 and 103: (7) Based on ordering rules, identi
Page 104 and 105: 7. A married couple who file jointl
Page 106 and 107: (1) Needed to provide the appropria
Page 108 and 109: 13. Transfers at deatha. Wills(2) A
Page 110 and 111: (1) The Retirement Equity Act manda
Page 112 and 113: (2) Beneficiary designation of bene
Page 114 and 115: 13. Overview14. Types(2) The donor
Page 116 and 117: (1) Charity needs only to payout in
Page 118 and 119: c. Access should be granted to an a
Page 120 and 121: nightmare of living probate might h
Page 122 and 123: (6) Powers to represent their princ
Page 124 and 125: c. If the policy is term coverage w
Page 126 and 127:
e. Factoring personal and family he
Page 128 and 129:
problem. On the other hand, we can
Page 130 and 131:
d. Adding a cost of living adjustme
Page 132 and 133:
g. Planning Point: Sometimes a high
Page 134 and 135:
(2) Clients may not be able to “a
Page 136 and 137:
c. Ensure that the client is receiv
Page 138 and 139:
a. Example: Because of physical and
Page 140 and 141:
options about where to get his/her
Page 142 and 143:
(2) Facilities, monthly fees, and s
Page 144 and 145:
8. Other strategies that help to co
Page 146 and 147:
standard deviations of the returns
Page 148 and 149:
a collapse in the real estate marke
Page 150 and 151:
a. In a later competency we will di
Page 152 and 153:
years of service with the employer)
Page 154 and 155:
a. Planning Point: Planners should
Page 156 and 157:
(2) If you have locked in food, ren
Page 158 and 159:
(4) Loss-of-spouse risk—Deferred
Page 160 and 161:
(1) Excess withdrawal risk—The us
Page 162 and 163:
(5) Frailty risk—Managing assets
Page 164 and 165:
7. Practice good career management:
Page 166 and 167:
Assignment 6CHOOSE APPROPRIATE STRA
Page 168 and 169:
c. Example: Chuck and Sarah divide
Page 170 and 171:
e. The bucket approach can be thoug
Page 172 and 173:
3. Understanding systematic withdra
Page 174 and 175:
(1) The time horizon used in the ca
Page 176 and 177:
12. Four percent is not the number.
Page 178 and 179:
markets have declined by a specifie
Page 180 and 181:
(2) Annuities and long-term care an
Page 182 and 183:
anticipates ramping down her activi
Page 184 and 185:
c. Each of the three portfolios wil
Page 186 and 187:
SECTION 4: THE ESSENTIAL VERSUS DIS
Page 188 and 189:
d. Clients give up investment contr
Page 190 and 191:
geared toward long-term growth. Thi
Page 192 and 193:
. Trade-offs involve:(1) Irrevocabl
Page 194 and 195:
(1) Rate at which banks lend to the
Page 196 and 197:
. Dollar-denominated liabilities of
Page 198 and 199:
(a) Dividend taxed in year paid out
Page 200 and 201:
4. Taxationtheir return generating
Page 202 and 203:
. Close ended(1) IPO style launch(2
Page 204 and 205:
(3) Tax control17. Conversations in
Page 206 and 207:
(3) Mutual funds provide lower cost
Page 208 and 209:
way to obtain increasing payments t
Page 210 and 211:
protection from the downside risk w
Page 212 and 213:
6. Today’s annuitization rates ar
Page 214 and 215:
h. Planning Point: Markets are very
Page 216 and 217:
a. The client may not be clear abou
Page 218 and 219:
a. Problems with implementation are
Page 220 and 221:
c. Product solutions work together
Page 222 and 223:
(1) A problem is that if the client
Page 224 and 225:
(b) A traditional fund company(c) A
Page 226 and 227:
d. Evelyn is in great health and he
Page 228:
RESOURCES FOR COMPETENCY 7: INTEGRA
show all

section 1 - The American College Online Learning Center

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?