Recently they conducted a survey regarding how more people are tapping into their retirement accounts even though in some cases, doing so could be a bad financial decision. And the results were interesting.
With the meltdown of the financial markets and the high unemployment rates, more people are starting to pull money from their accounts to pay their mortgage payments and other bills that they are obligated to met each month. And if they are younger than 59 and a half, taking an early distribution could result in a 10% penalty that would be very painful to swallow.
The survey had 378 foreclosure prevention clients respond to it and they answered questions about how the current economic crisis was affecting their lives. Here is what they found:
“Nearly half of foreclosure prevention clients are “very worried” that they will not have enough assets to retire on and 15% say they assume they will not be able to afford to retire.
In contrast, fewer than 15% of bankruptcy clients reported withdrawing money from a retirement plan in the past six months. Retirement plans are among the assets that can be protected in a bankruptcy, so these clients appear to have chosen to protect their nest egg even though the immediate financial consequences of bankruptcy are painful.”
Funds from a Reverse loan could fill the financial gap and provide a safety net for the future. My personal feeling is, that if a person still has a retirement account or any investments, leave them alone. Don’t touch them and possibly be taxed on any withdrawals or pay a hefty 10% penalty.
Funds from a Reverse loan are not taxable, the money can be used for any purpose and if a person finds themself unemployed and stuck with a mortgage payment every month, and they are 62 or older, refinance into a Reverse loan. An easy answer to scary times.
When the person returns to work (If they do) they can always pay the interest that accrues on the loan each month and keep the loan from growing because there are no prepayment penalties on it. Just keep the home insured and the property taxes current. Something a homeowner already does….
Another reason why it’s good to be a senior. There are some great options to make life easier.