Annuities or Reverse Mortgage? Questions answered, by Kevin Parsells

Your Goals, Your Needs, Your Plan.

Planning for retirement isn’t as easy as it use to be. Counting on a company pension, Social Security and Medicare may simply not be enough to cover all of your retirement expenses and protect your financial security.  choices and flexibility you need to help build a retirement plan designed to secure your financial future. So the question is, Annuities or Reverse Mortgages? We will start first with Annuities and the pros and cons and then finish with the details of Reverse Mortgages.

Annuities

An annuity is the only financial product that can guarantee retirement payments for the rest of your life. Companies offer a variety of annuity options to help you grow and supplement your retirement income every year, so you can receive guaranteed income now or at a later date of your choosing.

Fixed, Fixed Index or Variable Annuities

A fixed annuity offers a guaranteed minimum interest rate or guaranteed income payment for a specific period of time. Fixed annuities are generally considered to be low risk and can guarantee retirement income that you can’t outlive.

A fixed index annuity is a product that offers the opportunity for greater interest crediting based on changes of a market index up to a pre-determined cap. Your contract value will not be reduced by market downturns and can benefit from increases in the index. An index annuity may be appropriate for people concerned with securing their retirement without micro-managing a portfolio or dealing with the unpredictability of the days market fluctuations. Today’s fixed index annuities generally may include a broad range of features like:

•Premium Enhancements

•Both Index and Fixed crediting strategies

•Ability to allocate across the different crediting strategies 

A variable annuity allows you to invest your purchase payment into a separate account, which invests in underlying portfolios with varying potential for return. Your earnings will fluctuate over time, and depending on the performance of the investments you choose, your principal may be more or less than originally invested. This gives you the opportunity for higher potential return but at a higher risk.

Deferred or Immediate Annuities

A deferred annuity, which can be fixed, fixed index or variable, means that your guaranteed payouts of income are delayed until you elect to receive them. Many fixed annuities offer maturities as far as 10 - 20 years down the road, which allows your money to grow based on the stated interest rate over the years before your payout schedule begins.

An immediate annuity, which can also be fixed or variable, allows you to turn a one-time, lump sum payment into a guaranteed series of payouts that generally begin within a year of the annuity issue date. All guarantees are based on the claims-paying ability of the issuing insurance company. 

Reverse Mortgages

With a reverse mortgage, qualified senior homeowners age 62+ can convert a portion of their home equity into supplemental retirement cash flow. A reverse mortgage can help provide seniors the financial security they need to stay at home and live independently—without having to sell their house, give up the title, or make monthly mortgage payments.

A Reverse Mortgage is a loan that allows eligible senior homeowners age 62+ to convert a portion of their home equity into a stable source of tax-free supplemental cash flow. A Reverse Mortgage gives you the ability to enjoy financial security and peace of mind, while remaining in your home during your retirement years.

You also have the freedom to use the money you receive however you want—there are no limitations*:

• Supplement your retirement income
• Pay off an existing mortgage or other existing debt
• Pay for medical care, prescription drugs and in-home care
• Cover large or unexpected expenses
• Make home improvements and repairs
• Travel to visit family and friends or take vacations
• Contribute to your grandchildren’s college education
• Live a more comfortable lifestyle

Reverse mortgages turn your home equity into a steady stream of cash. These hotly debated loans come with many pros and cons, however. Our credit experts give you some straight answers about reverse mortgages.

What is a reverse mortgage?
A reverse mortgage is a loan that allows elderly borrowers to access their equity without selling their home. With a reverse mortgage, the lender makes payments to the borrower – i.e. the reverse of a normal mortgage. The loan is repaid from the proceeds of the estate when the borrower moves or passes away.

Reverse mortgages can be extreme helpful for certain kinds of borrowers, but they are not be a good choice for everyone. Before you consider a reverse mortgage, you should fully research the terms, costs, and alternatives. The chart below highlights the main arguments for and against reverse mortgages:

Reverse Mortgage Positives	Reverse Mortgage Negatives
Provides a guaranteed source of tax-free income for the rest of your life.	Reverse mortgages can be very expensive. Costly fees, interest rates, mortgage insurance, and closing costs may apply.
Can choose to receive your money as a lump sum, monthly payment, line of credit, or combination of these ways.	Limited to borrowers 62 years old or older.
Allows you to remain in your home.	Reduces the home equity amount you leave to your children or grandchildren.
You cannot owe more than the value of your home at the time of repayment, no matter your balance.	You still remain responsible for paying property taxes, insurance, and repairs on your home. If you fail to keep up with these costs, you may be required to repay your reverse mortgage early.
You do not have to own your home fully in order to qualify for a reverse mortgage.	Any balance remaining on your first mortgage will be included in the balance of your reverse mortgage.
If the reverse mortgage balance is less than the value of your home at the point of repayment, your heirs get to keep the difference.	The loan has to be repaid when you die, sell your home, or no longer use it as your primary residence.
The loan can be repaid without selling your home.	Your heirs will have to pay off the balance plus interest when the loan term ends.
Reverse mortgage income will not impact your Medicare and Social Security eligibility.	May impact your ability to qualify for Medicaid and Supplemental Social Security benefits.
Ownership and title of the home remain in your name.	There are caps on how much you can borrow with most reverse mortgage programs.
You do not have to worry about making a monthly payment with a reverse mortgage as you would if were to borrow money through a home equity line of credit (HELOC).	A reverse mortgage is more expensive and binding that establishing a home equity line of credit.
Your credit score, savings, and income are not used in the loan calculation. Instead, your age, health, home value, and home equity are taken into consideration.	You are required to meet with a reverse mortgage counselor before obtaining the loan.
You can cancel the loan for any reason (right of rescission) during the three day period after your reverse mortgage closes.	After the three day period passes, the loan is final. Refinancing a reverse mortgage is difficult and costly.

Call for more information: 866-601-3330 Kevin Parsells