'N Touch News Magazine Issue #67, February 2010

your FiNANCeS
Like many homeowners, your house is
probably the biggest investment on your
personal balance sheet. So you might
wonder, with all that’s changed in the
economic turmoil of the last few years—the
Wall Street collapse, the housing boom and
bust, cuts to employee pensions and 401(k)
accounts—what your house is worth now and
if you can rely on it as a retirement nest egg
in the future. Here are a few things to keep
in mind.
Counting on your home to provide a source
of income in retirement is not without risk.
Though home values historically have risen
over time, they sometimes fall unexpectedly,
leaving you at the mercy of the marketplace.
The recent real estate crash is evidence enough
that home values are subject to fluctuation.
In general, however, once you pay off your
mortgage, and assuming your property is
well-maintained, your home will be a valuable
asset. To get a feel for its current worth,
do an honest assessment of it relative to
houses that are for-sale in the neighborhood.
Take note of resale rates and other neighborhood
trends that could affect home values.
If you’re looking for a more precise figure,
consider hiring a professional to assess your
home’s value.
If you do decide to use your house as a source
of income when you retire, then you have two
basic choices:
You can sell your home at the current market
value. With the proceeds, you can invest
and draw a monthly salary. This is probably
only a good option if you are looking
to downsize from a large or expensive home
into something more modest. Even in that
scenario, however, you should keep in mind
that expenses related to renting or buying a
new place to live could take a heavy bite out
of the sale.
You can consider taking out a reverse mortgage
(if you qualify). A reverse mortgage is a
government-run program that allows homeowners
to stay in their homes while accessing
a portion of the value of their property. You
can choose to receive a lump sum, monthly
Can you rely on your home
as your retirement nest egg?
YoUr lGBt news AUthoritY
By Jarrod L. Dill
payments or open a line of credit based on
available equity. The cash you receive can be
used as you wish (whether to pay for daily
expenses, make home improvements or whatever
else). As long as you and your spouse
are living and remain in the home, the reverse
mortgage does not have to be repaid, so you
are not at risk of losing your property. There
are several downsides however. First, reverse
mortgage loans are expensive, with relatively
high closing costs and interest rates. Second,
your heirs will not receive the full value of your
home when you leave the property or die and
they may be required to sell the home to repay
the mortgage. While you are not required to
make payments on a reverse mortgage during
your lifetime, you are still responsible for
homeowner’s insurance and property taxes.
Generally speaking, if you plan to stay in
your home less than three years, the cost of
a reverse mortgage may outweigh other more
affordable options, including a home equity
loan.
Using your home as a source of retirement
income is a last-resort option and shouldn’t
be the cornerstone of your retirement plan
if you still have time to change course and
actively save for your retirement. Enlist the
help of a financial advisor to assess your
personal financial situation and take steps to
aggressively save for the future. With regular
contributions to a tax-advantaged retirement
account, you can make steady progress toward
your financial goals, especially when you have
time on your side and can reap the benefits of
compounding. Whether or not you eventually
need to tap your home’s value to make
ends meet, your efforts to plan and manage
your finances today will be a reward in itself
and equip you with the information you need
to take control of your financial future.
Jarrod L. Dill, Financial Advisor, Amerprise
Financial Services, Inc., 4835 E Cactus
Rd., Suite 230 Scottsdale, AZ 85254, (602)
996-7355 x11. This communication is published
in the United States for residents of AZ only; and
this advisor is licensed only in the state(s) of AZ,
NM, NE, MO, KA & IL. Neither Ameriprise
Financial nor its affiliates or representatives may
provide tax or legal advice. Consult your tax or
legal advisors concerning your situation.
Brokerage, investment and financial advisory
services are made available through Ameriprise
Financial Services, Inc. Member FINRA and
SIPC. Some products and services may not be
available in all jurisdictions or to all clients.
©2009 Ameriprise Financial, Inc.
All rights reserved.
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