December 2010


Following is an ,article that discusses the problems faced by many Americans who will find themselves unable to retire due to the economic issues and failures over the last two years.   More people will find it necessary to continue working longer (if the are employed) and defer their retirement until a later date.  And if they are fortunate to own their home, more will turn to using a Reverse loan to fund their retirement.

Study Reveals Most Americans Unable to Afford Retirement Until Age 73

December 15th, 2010  |  by Kelly Published in News, Retirement, Reverse Mortgage
“Last week, the results of a six-month long study on employee retirement preparedness revealed that the majority of American workers will not be able to afford retirement until 73-years of age.
The “Fall 2010 401(k) Retirement Readiness Study” was conducted by Nyhart. The study reviewed almost 10,000 employee retirement accounts from 110 private and public companies throughout the country, assessing how the employees’ personal 401(k) contributions would affect their retirement age.

The results showed that most Americans will not be financially capable of retiring on time.  Employees over 55-years old will need to contribute more than 45 percent of their salary for the rest of their career in order to retire by 65. According to the study, the average employee, dependent on their 401(k) for financial stability after retirement, will not be able to retire until the age of 73.

By continuing with their current levels of contributions to their 401(k), most American workers between the ages of 60 to 64 will need to work until they are 75 in order to afford retirement.

‘Across all age groups and income levels, the employees who contribute the greatest percentage of income have the best opportunity for retirement,’ said Thomas Totten, senior actuary and lead researcher for Nyhart’s study. ‘The decision of how much an employee contributes to their 401(k) far exceeds the importance of which investment funds they choose. By increasing your contribution by just 2-4% of total income, you can shave years off the age you retire’.

The study found that employees’ 401(k) contribution percentages varied by age, typically increasing as the employee found him or herself closer to the age of retirement. The peak ages of contributions are between 55- to 64-years old.

Employees with higher salaries are more likely to contribute more to their 401(k), however, Social Security benefits decline as a percentage of income for beneficiaries with higher income, counterbalancing the higher contributions.
Ultimately, the study found that only 19 percent of American workers will be ready to retire at 65. Employees earning between $60,000 to $70,000 annually have the lowest projected retirement age at 69.9-years old. Employees who earn less than $25,000 annually have the highest projected retirement age at 77.9-years old”.
Written by Kelly Mellott

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Reverse Mortgages

In the past several months, there have been a number of changes to the Reverse mortgage that is offered by FHA, resulting in less fees to the borrower.   Less start up costs, means more money to the borrower and there are more choices in loan selection as well.   Here is a copy of an article from Bankrate that provides further details to these changes.

“Bankrate is reporting that reverse mortgages are now affordable with the new HECM Saver product.
Peter Bell, president of the National Reverse Mortgage Lenders Association, a group in Washington, D.C., that represents lenders and investors in the reverse mortgage business says the new option empowers seniors to tap smaller amounts of equity in a more affordable way.
“Some changes from the market, from the regulatory side and in the counseling, have really improved the value proposition for a lot of seniors from what has been the traditional perception of reverse mortgages,” he says.
While the adjustable rate product allows borrowers to take out smaller amounts of money initially, Susanna Montezemolo, vice president of federal affairs at the Center for Responsible Lending in Washington, D.C., says it may be a smarter choice because the fixed rate requires that the borrower tap the full amount of equity upfront.
“For the majority of people, it makes more sense to take out a minimum amount upfront and then have access to that line of credit, because they will owe less in interest over time,” she says.”

For more details:

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