* the bursting of the housing bubble;
* the stock market crash; and
* the ongoing rise in Social Security’s Full Retirement Age

The Index results from comparing households’ projected replacement rates – retirement income as a percent of pre-retirement income – with target rates that would allow them to maintain their living standard.

Even if half of today’s household work until they turn 65, the NRRI shows that in 2009, half of today’s households will not have enough retirement income to maintain their pre-retirement standard of living.

As the study says, ensuring retirement security for an aging population is one of the most compelling challenges facing the nation.

The National Retirement Risk Index: After the Crash

Visit us at www.allwestmortgage.com if you need help in the Los Angeles, CA area.

From the New York Times: http://www.nytimes.com/2009/05/13/us/politics/13health.html?_r=2&hp

WASHINGTON — Even as Congress hunted for ways to finance a major expansion of health insurance coverage, the Obama administration reported Tuesday that the financial condition of the two largest federal benefit programs, Medicare and Social Security, had deteriorated, in part because of the recession.

 
Doug Mills/The New York Times
Treasury Secretary Timothy F. Geithner, with, from left, Michael J. Astrue, the Social Security administrator, Kathleen Sebelius, the Health and Human Services secretary, and Labor Secretary Hilda L. Solis, discussed the financial status of benefit programs.

As a result, the administration said, the Medicare fund that pays hospital bills for older Americans is expected to run out of money in 2017, two years sooner than projected last year. The Social Security trust fund will be exhausted in 2037, four years earlier than predicted, it said.

Spending on Social Security and Medicare totaled more than $1 trillion last year, accounting for more than one-third of the federal budget.

The fragility of the two programs is a concern not just for current beneficiaries, but also for future retirees, taxpayers and politicians. Lawmakers say they would never allow Medicare’s trust fund to run out of money. But beneficiaries could be required to pay higher premiums, co-payments and deductibles to help cover the costs.

The projected date of insolvency, a widely used measure of the benefit programs’ financial health, shows the immense difficulties Mr. Obama and Congress will face in trying to shore them up while also extending health coverage to millions of Americans.

The labor secretary, Hilda L. Solis, noted that 5.7 million jobs had been lost since the recession began in December 2007. With fewer people working, the government collects less in payroll taxes, a major source of financing for Medicare and Social Security.

A resumption of economic growth is not expected to close the financing gap. The trustees’ bleak projections already assume that the economy will begin to recover late this year.

The Treasury secretary, Timothy F. Geithner, said the only way to keep Medicare solvent was to “control runaway growth in both public and private health care expenditures.” And he said Mr. Obama intended to do that as part of his plan to guarantee access to health insurance for all Americans.

But if cost controls do not produce the expected savings, Congress is likely to find it difficult to preserve benefits without increasing taxes.

Just hours before the trustees of Medicare and Social Security issued their annual report, suggesting that the nation could not afford the programs it had, the Senate Finance Committee finished a hearing on how to pay for the expansion of health insurance coverage that Mr. Obama seeks.

Mr. Obama has said he does not want to finance expanded health coverage with more deficit spending. Rather, he says, Congress must find ways to offset the costs, so they do not add to the deficit over the next decade.

Federal deficits and debt are soaring because of the recession and federal efforts to shore up banks and other industries while trying to revive the economy with a huge infusion of federal spending.

“The financial outlook for the hospital insurance trust fund is significantly less favorable than projected in last year’s annual report,” the Medicare trustees said. “Actual payroll tax income in 2008 and projected future amounts are significantly lower than previously projected, due to lower levels of average wages and fewer covered workers.”

In coming years, the trustees said, Medicare spending will increase faster than either workers’ earnings or the economy over all.

The trustees predicted that, for the first time in more than three decades, Social Security recipients would not receive any increase in their benefits next year or in 2011. In 2012, they predicted, the cost-of-living adjustment will be 1.4 percent.

The updates are calculated under a statutory formula and reflect changes in the Consumer Price Index, which was unusually high last year because of energy prices.

If there is no cost-of-living adjustment for Social Security, about three-fourths of Medicare beneficiaries will not see any change in their basic premiums for Part B, which covers doctors’ services. The monthly premium, now $96.40, is usually deducted from Social Security checks, the main source of income for more than half of older Americans.

The trustees said that one-fourth of Medicare beneficiaries would face sharply higher premiums: about $104 next year and $120 in 2011. This group includes new Medicare beneficiaries and those with higher incomes (over about $85,000 a year for individuals and $170,000 for couples).

Seventy-five percent of beneficiaries will not pay any increase, so the remaining 25 percent have to pay more to keep the trust fund at the same level, Medicare officials said.

The aging of baby boomers will strain both Medicare and Social Security, but Medicare’s financial problems are more urgent.

The trustees predict a 30 percent increase in the number of Medicare beneficiaries in the coming decade, to 58.8 million in 2018, from 45.2 million last year.

But the projected increase in health costs and the use of medical care is a more significant factor in the growth of Medicare. The trustees predict that average Medicare spending per beneficiary will increase more than 50 percent, to $17,000 in 2018, from $11,000 last year.

Representative Pete Stark, the California Democrat who is chairman of the Ways and Means Subcommittee on Health, said the Medicare report “underscores the urgent need for health reform.”

WHEN A REVERSE MORTGAGE COMES DUE, THE BANK SELLS THE HOME.

INCORRECT.

When the loan must be repaid, you or your heirs can either pay the balance due on the reverse mortgage and keep the home, or sell the home and use the proceeds to pay off the reverse mortgage.

How much will be owed when my reverse mortgage comes due?

The amount that is owed to the lender typically includes the amount borrowed to date, the amount of accrued interest, accrued mortgage insurance premiums (for the HECM), servicing fees, and any other costs and fees financed as part of the loan amount.  In no event will the repayment amount exceed the value of the home at the time that the loan comes due.  There are no prepayment penalties for the current reverse mortgage products.

What happens if I move out of my house after I get a reverse mortgage?

Once you no longer occupy your home as your principal residence for more than one year, the reverse mortgage comes due and must be repaid.  Similarly, if you sell your house, the reverse mortgage comes due.

What happens when my house gets passed to my heirs?

Once your home is passed to your heirs, the reverse mortgage comes due.  Your heirs may either pay the balance due on the reverse mortgage and keep the home, or sell the home and use the proceeds to pay off the reverse mortgage.  If they sell the home, they get to keep any excess sales proceeds.

This is the final part in our series of questions regarding reverse mortgages.  Please visit us with any and all questions at www.allwestmortgage.com.

THE BANK OWNS THE HOME AFTER YOU GET A REVERSE MORTGAGE.

INCORRECT.

You own your home and retain title throughout the life of the reverse mortgage.  Once you permanently move out of your home or pass it to your estate, the loan must be repaid.

Am I required to receive counseling before I get a reverse mortgage?

Yes. Counseling, one of the safeguards of reverse mortgages, is required for all three current reverse mortgage products before you can obtain a loan.  Counseling is an educational session at which you are informed about reverse mortgages and your other options.

Is the money from a reverse mortgage taxable income? Will it affect my Social Security benefits or other government benefits?

Funds from a reverse mortgage are tax-free; it’s your money, not additional income.  A reverse mortgages does not affect regular Social Security or Medicare benefits.  To assess the impact, if any, on other federal or state assistance or medical programs, you may wish to consult with your local Area Agency on Aging (to locate, call 1-800-677-1116, or visit http://eldercare.gov), a reverse mortgage lender, or a tax attorney.

Who owns title to my home while my reverse mortgage is outstanding – the bank or me?

You retain title to your home during the period when you have a reverse mortgage, just the same as with a regular home purchase mortgage.

Am I required to pay anything during the course of the reverse mortgage loan?

No.  The flow of payments is reversed during the term of the reverse mortgage – the lending institution pays you.  However, you are responsible for keeping up payments for your homeowner’s insurance and property taxes, and to maintain the condition of your home.

Are there any limits on how I can use the funds from a reverse mortgage?

No. Borrowers have spent the funds from reverse mortgages for a variety of purposes.  Among these have been to pay health care expenses, supplemental retirement income, home improvements, home modifications, higher education, gifts to others, and long term care insurance premiums.  Some have used a reverse mortgage to purchase recreational vehicles, start a small business, and travel the Amazon.  Some have used reverse mortgages to eliminate expenses by paying off mortgages and credit card debt.  The only limit on how you use a reverse mortgage is your imagination.

Please visit us at www.allwestmortgage.com with any questions.

Your reverse mortgage professionals, Philip Lipp and Ilene  Fischer are a husband/wife team in business together since 1984.  We are part of the sandwich generation – we have children at home and aging parents that need our assistance. We know first hand the many issues that seniors and their families face, both financial and personal. Every time we meet with a client, family member, or financial advisor, we bring our personal and professional expertise.

We provide individualized solutions to our clients and their families. Be assured that you will be given respect and dignity by members of our firm. We listen to each client’s personal situation and provide options to meet their needs.

Education of our clients is an important element of our business; this ensures you will make the best decisions possible.  You are invited to ask questions and we listen carefully to your concerns.

We strive to make our clients comfortable from the first conversation, through the loan process, and loan closing.  Many of our clients keep in contact with us and continue to use us as a resource – even after the loan is complete.  We encourage and nurture a continuing relationship so we may be of further service to you, your family and friends.

Phil & Ilene are members of the National Reverse Mortgage Lender’s Association. Phil is a founding director and Past State President of the California Association of Mortgage Brokers.  He has been President of the local chapter twice and remains on the Board of Directors in an advisory capacity.   He has served on the Real Estate Commissioner’s Real Estate Finance Advisory Committee (REFAC), providing guidance and input on matters of vital importance to consumers. He and Ilene currently serve on the Mayor’s City of Los Angeles Anti-Predatory Lending  Committee, to help protect consumers , (and especially seniors ) from unfair lending practices . To further protect seniors, they volunteer by going into the community (senior citizen centers, churches, schools, and organizations) to educate seniors on different types of financing options; how to make the best choices and how to avoid being victimized.   Phil and Ilene are members of the National Association of Mortgage Brokers. Both earned their MBAs from Pepperdine University.