Reverse Mortgage Guide

I like people who speak plainly, so you can imagine that I was interested when I received some information regarding a new book, Eight Barriers to Bypass on the Road to Retirement, by F. Bill Billimoria

Billimoria says “many Americans today are unable to retire at age 65 and have to keep working just to be able to survive. Some statistics indicate that only four out of every 100 people are financially independent when they reach retirement, in other words, they don’t have to work if they don’t want to.”

A reverse mortgage is a financial planning consideration for a growing number of people. However, for those with financial independence a reverse mortgage is an option and not a necessity, a choice and not a requirement.

Billimoria says that to reach financial independence there are “eight great barriers” which need to be overcome. His list is below — and to order his book go to GoldenPondRetirement.com.

1. Lack of a Plan. Until you have a plan, all your dreams and wishes are just that - dreams and wishes. You have to have a specific goal with specific deadlines. For example, “I want to be financially independent at age 65 and be able to live on $3,000 per month.” You have to have a written plan that should be updated as your personal circumstances change.

2. Ignorance. You have to get over your math phobia and decide to become a financially savvy consumer. At the very least, learn the difference between simple and compound interest, or the concept of the time value of money. In less time than it takes to plan your annual vacation, you can pick up knowledge that will benefit you for your entire lifetime. Ignorance can truly be hazardous to your wealth.

3. Too Much Debt. Thanks to the easy availability of credit, a lot of people have maximized the use of credit cards hoping that higher income in the future will take care of their monthly payments. Guess what? That day never arrives and they just get deeper in the hole. The best solution is to use credit cards for convenience and never to buy something on credit that you cannot afford to pay with cash right now.

4. Bad Investments. This could be another term for speculation. Trying to get rich overnight because a neighbor or friend got lucky is never a good strategy and you could be in real danger of losing the entire amount of the investment. Never, ever gamble with your “serious” money.

5. Lack of Protection. Just because you don’t like insurance does not mean you have to go without any. You have to understand the financial implications of a catastrophic event devastating your life and the lives of your loved ones, and take the appropriate action to avoid that.

6. Inflation. Most things will cost more in the future than they do today. That’s inflation and it affects everybody. If it costs you $3,000 per month to retire in 2007, it could very well cost you $5,000 per month by 2017. So if your sources of income can provide for you now, will they be able to do the same ten years from now? This is one of the main reasons why retirees sometimes run into problems in their later years.

7. Income Taxes. By the time you are done paying federal, state, local, social security, and Medicare taxes, you will find that your income has been cut drastically. If you will need to have $3,000 of income per month to survive during retirement, it could very well turn out to be more like $4,000 a month before taxes. Taxes make a substantial difference and even though it is more obvious than inflation, the devastation to your finances is just as real.

8. Procrastination. Most people put off all action until that one magical day in the future when everything will be perfect to start on the road to financial independence. That day is never going to come and they know it. If you are 25 and you want to have a million dollar nest egg by age 65, you will need to invest $2,055 per year at an annual return of 10%. At age 45, the amount increases to $12,392 per year. Time is indeed money.

This entry was posted on Thursday, September 6th, 2007 at 2:30 pm and is filed under Reverse Mortgage . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.