Paid family and medical leave are long-overdue in this country

What do the United States, Papua New Guinea and Oman have in common? Those are the only three countries in the world that do not legally obligate employers or taxpayers to pay for maternity leave. Many American businesspeople will hide behind a knee-jerk response to the above statement. “We are a free-market society,” they will argue, “and paid leave is paramount to just another form of socialism.” Good try, but that old argument is no longer based in facts. Free markets have given way to corporate socialism in this country, while corporations are now legally considered to have the same rights as individuals. As such, individuals have a moral responsibility to protect and care for future generations. They have an obligation to society. Giving paid leave to American workers, not only to deliver and care for their young, but also to provide income during serious medical conditions, cannot be left to the whims (and greed) of our corporate community. As it stands, after decades of waiting, a mere 15% of companies have voluntarily instituted paid leave to their workers, according to a 2017 Bureau of Labor Statistic report. The fact that for the last several years, corporations have banked stupendous profits and now carry more cash on the books than ever before just makes their failure all the more apparent, if not disgusting. To be fair, there are some companies such as Microsoft, IBM, Netflix, American Express, Citigroup and, of course, Berkshire Money Management that do pay for parental and medical leave. Take my own case as an example. As many readers are aware, I have had some serious...

FHA approval is critical to elderly condo owners

Ever hear the expression “cutting off your nose to spite the face?” That’s exactly what the vast majority of condo owners are doing by not pursuing a Federal Housing Authority approval of their condos. Here’s why. Over the past few weeks, I have written several columns on the subject of reverse mortgages, Home Equity Conversion Mortgages (HECMs), the marketability of your existing home, etc. More and more Baby Boomers are opting to down-size (sell their empty nest and buy something smaller, like a condo) in order to reduce expenses, prepare for retirement, or simply take advantage of a rising housing market. While down-sizing makes economic sense, many elderly retirees have ignored a critical factor in the process–the ability to be able to tap into their new housing asset in a time of need. As readers now know, the potential market of buyers for your dwelling is considerably expanded if you have FHA approval. In addition, mortgage rates are lower, and banks are willing to lend more. Bottom line, it is easier to sell your home or condo with FHA insurance approval. However, only a handful of condo dwellings across the nation actually apply for FHA approval. For most potential buyers, approval doesn’t seem to be an issue at first. Builders and management companies often discourage it as well since the approval process requires time, effort, and some money. But as the owners age, some retirees encounter unexpected difficulties (health issues, sudden, but necessary, draw-down of retirement savings, etc.). Since many retirees are living on a fixed income, they don’t have the additional income they need to weather these emergencies....

How to tap your home equity to pay for long-term care in retirement

A home equity conversion mortgage (HECM) might simply be a fancy term for a reverse mortgage, but there are an increasing number of advisors and planners who are using them for an entirely different strategic planning purpose.   If you ask most couples in their sixties and beyond what is one of the greatest fears for their future, I’m betting that going bankrupt and/or losing their home and life savings as a result of nursing home bills would be right up there near the top. We all have horror stories to tell of how one or both spouses needed to go into a nursing home and the costs drained all their assets and then some. Before they could apply for Medicaid, they had to go through everything they own—their home, their retirement and savings accounts—all gone. Only then could they qualify for government assistance, which usually means and ending up on a Medicaid waiting list for a remote, tiny room in a facility for the remainder of their lives. That, my dear reader, is not the kind of “living the dream” Americans have in mind when they think of their future retirement years. Now, of course, the knee-jerk answer to this ever-present nightmare is long-term care insurance Any financial planner worth their salt will tell the average consumer to buy insurance, but there is lots of downside in following that avenue. Let’s take a sixty-five-year-old couple shopping around for this insurance. For the male, it will probably cost him double what it will cost his wife. A premium per month of $4,543.76, while the wife pays $2,825.97. That comes...

Reverse Mortgages

Some Baby Boomers have found themselves financially between a rock and a hard place. Rising costs, insufficient retirement savings and, in some cases, health issues, have forced seniors to consider taking out a reverse mortgage on the only asset they own. Is it a good idea? For those who don’t know, a reverse mortgage is a loan that uses a primary residential dwelling as collateral. It provides an option to generate cash by borrowing money against their home equity. Funds can be drawn as a fixed monthly payment, or a line of credit. In order to participate, at least one owner must be over 62 years old. The bank or financial entity figures out what the house is worth at the time of the loan and lends the borrower a percentage of that number. As an example, if the market price on the home is $350,000, the bank or mortgage lender may front you $275,000. The borrower then receives a payment (usually monthly) until the amount of equity (in this case, $275,000) in the loan is gone. Unlike a traditional mortgage, however, the amount a borrower owes on a reverse mortgage increases over time. No repayments are required during the borrower’s lifetime. Payment is only due when the homeowners die or are no longer living in the property (over the past 12 months). Over one million reverse mortgages or Home Equity Conversion Mortgages (HECM) have been sold since the government program started back in 1990. The program is run by HUD and over 90% of these mortgages are insured by the Federal Housing Administration (FHA). One important reason reverse...

Why FHA loans are so popular

Federal Housing Authority Loans have long been one of the most popular types of mortgage loans available. Roughly 20% of all mortgage applicants will choose an FHA loan because it makes total economic sense to do so. And the older you are, the more important having an FHA approved dwelling becomes. To many, that may appear to contradict your understanding of the FHA loan market. Most believe it is a program to assist younger folks, who need a hand to purchase their first home. You wouldn’t be far wrong from a historical perspective, but times have changed. The FHA loan was originally designed during the Depression years to help home buyers, (usually first-time applicants), with low credit scores and a small bank account, to afford a home. But the FHA doesn’t make the loan; the bank does. The Federal Housing Administration, however, guarantees the loan, and as such, provides mortgage lenders an added degree of confidence and security in lending to the prospective home buyer. If the borrower defaults on the loan, the FHA will reimburse the lender the amount due. Some of the benefits to the borrower include lenient credit scores, much lower minimum down payments (as little as 3.5% down), and lower mortgage rates, usually 0.10%-0.15% lower than the average rates on conventional loans. The Veterans Administration’s Home Loan Program is also available to qualified vets and works like its FHA brethren, guaranteeing the lender a portion of the loan if the vet defaults. An added benefit is that there is usually no minimum down payment required, and much lower credit scores, interest rates, and income requirements...

The Suburban Dilemma

Over the last decade, the percentage of Baby Boomers, those aged 65 to 74, living in the suburbs increased by almost 50%. Over the next 20 years, that age group will double in size, and by 2040, 1 in every 5 Americans will be age 85 or older. The majority of them will continue to live in the suburbs. Older adults, it appears, move less frequently than any other age group. Over the last ten years, only 6% of persons over 65 years of age moved, according to AARP, compared to 17% of those under 65. It’s called “aging in place,” which is a standing trend that describes how older Americans prefer to stay in their homes and never move. They are attached to their dwelling, their neighborhoods, even to the corner deli (if it still exists). These adults have lived in their homes for the greater portion of their lives. They are the result of an enormous and long-lasting American socioeconomic trend that began after World War II. It was an age when Americans abandoned the inner city. By the hundreds of thousands per year, they embraced the tract home, the white picket fence, and quarter-acre of lawn or backyard far from the busting crowds of the city. And as they migrated to greener pastures, shopping malls, and garages, restaurants and other businesses followed, catering to this new suburban lifestyle. The good life in the suburbs became so much a part of our culture that it generated dozens of movies, television shows and novels celebrating this new America. The problem is that times change. Back in the day,...