How To Support Your Retired Parents

reverse mortgageIt is undoubtedly exciting when your parents reach their retirement. After all, they have worked hard for decades, building their lives, growing their families, and caring for you. They deserve the utmost relaxation and enjoy their golden years to the fullest. While they are now likely eligible for Social Security or their pension, these income streams are not always enough. Indeed, many retirees do not fully plan for this time in their life and can end up struggling financially despite their fixed retirement income. As the child of retirees, you are in a unique position where you can help them assess their financial situation and encourage them to come up with a plan — ideally with the assistance of a financial planner — that ensures they can enjoy their retirement free from money woes and stress. In today’s blog, Family Home Loan Texas discusses what you should consider when helping your parents craft a financial plan.

Assess Their Current Assets

Your first step should be reviewing what assets your parents currently have and what they are expected to receive. You and your folks should have a good grasp on what investments they currently possess and what dividends they continually receive. When many people start investing, they do so with long-term growth in mind, but as your parents grow older, their needs change, so their investment strategy should also evolve. It is advisable to encourage them to meet with a financial planner that can help them strategically evolve their portfolio to better serve their retirement. Overall, they should have a balance of bonds and stocks that is aggressive enough to keep up with their cost-of-living expenses while also being safe enough to maintain a healthy level of security. 

Review Their Income And Debts

Many retirees live on a fixed income, obtaining their money through Social Security payments, their pension, or both. You should all know how much cash is coming in and their existing financial needs. You want to be sure that their incoming money is enough to fulfill any obligations they may have. Moreover, you need to have a firm grasp on any debt they may have. If there is a cash surplus, encourage them to pay off these debts as quickly as possible so they will no longer have interest payments convoluting their financial plan. If you notice that your parents have a lot of money stagnating in savings accounts, you should talk to them about investing the money in accounts that can earn them a higher interest rate. When funds are sitting in savings accounts, it loses value over time due to inflation. Of course, they should still have some liquid, easily accessible funds to cover unforeseen expenses and emergencies. 

Make Sure There Is An Estate Plan

It is essential that your parents regularly review and update their estate planning documents. Things change over time, so everything needs to be up-to-date to accommodate powers of attorney and evolving wishes regarding wills and trusts. Everyone needs to be on the same page when it comes to the estate, so you or any other heirs need to be persistently kept in the loop.

Improving Cash Flow With A Reverse Mortgage

When your parents are on a fixed income, it can be difficult for them to free up extra funds should the need arise. Should they require more money — either for specific expenses or peace of mind — a reverse mortgage can be an excellent option. This type of loan, also known as a HECM, allows those 62 or older to tap into their home equity to receive liquid funds. This is an especially viable option if your parents plan to remain in their home for the foreseeable future.

Reverse mortgages are available to those 62 or older, and it allows them to borrow a portion of their home’s equity as tax-free income. The loan must be taken out on their primary residence and is typically a good option for those who either own their home outright or have at least 50% equity in it. As the name suggests, with a reverse mortgage, a lender pays you rather than you making mortgage payments. A major benefit of a HECM is that you do not have to pay the loan back until you cease living in your home. Even when you do pay it back, it will never be for more than the original loan value or 95% of your home’s value — whichever is lower.

Because your parents do not have to pay the loan (or any accrued interest) back until they move out of the house or pass away, they can rest easy knowing that you are significantly increasing your cash flow. The money they receive can be a lump sum, regular payments, or a line of credit, so they have plenty of flexibility.

Another benefit of a reverse mortgage is that it can supplement your parents’ investment portfolio. When they sell stock to free up cash, they can hit a significant capital gains tax. With a reverse mortgage, the money is non-taxable, so not only are they receiving more money, but they can let their investments keep making them money.

Contact Us To Learn More Ways Your Can Support Your Parents

If you can assist your parents in navigating their retirement finances, you will be doing them a huge service. We are also here to help. Family Home Loan Texas was founded by loan originator and long-time mortgage professional Rob Bramer. Rob has helped clients secure the loans they need both locally and nationally and can help you get the loan you need to live life on your terms. Call 1-800-990-LEND (5363) to speak with Rob about a reverse mortgage loan and to receive a free, no-commitment consultation.