I Don’t Like Debt

We join their story where…

Janet completed a Reverse Mortgage with Kim Dodge’s team and promptly told her neighbor Farrah how the loan was changing her life for the better. Knowing her neighbors Farrah and Joels for over 20 years, Janet was adamant that they look into the Reverse Loan possibilities.

Would a line of credit/loan on their house where they didn’t have to make a monthly principal and interest payments finally convince Joel to retire? And really, Farrah was tired of pinching pennies and ‘sitting around the house waiting to die’.

Sounds dramatic of course (and she was not just sitting around, that’s for sure) but Farrah felt the tug of their advancing years and she was afraid that if they ‘didn’t get out to do something now, they never would’. What was top of her list? A cruise to Alaska, conveniently departing from Seattle, a short 3-hour drive away.

But let’s be completely open here – Farrah and Joel did have money. In fact, they had available cash in multiple banks. What they didn’t have was a spending plan in retirement that made them confident that their money would last. So they just didn’t spend any of it.

The Situation

At 74, Joel was still working full time, the house was paid off and they had a “decent” nest egg, they told Kim Dodge. But there were cash-flow concerns and more importantly, Farrah and Joel had to talk through and come to some consensus on how they would spend their remaining retirement years together. They did not have a plan for the time when one of them may no longer be in the home, whether through passing away or needing care outside the home.

The easiest thing was to attack the Reverse Mortgage. ‘I don’t like debt’ Joel repeatedly said. ‘We’ve worked hard to pay off our home, so why would we look at a reverse mortgage?’

Kim’s answer? Maybe the Reverse Mortgage is not the right financial tool at all, but at this point it didn’t even matter. Farrah and Joel had to just start communicating about their money in a more positive way.

Kim recommended that they go speak with a Financial Advisor who could give them different money management strategies and provide a financial ROAD MAP to insure the best possible chance that their money would last their lifetimes.

Getting a grip on the money management:

Farrah and Joel had a mixed portfolio, mainly in conservative choices like CDs and money market accounts. However, their funds were spread out over 6 banking institutions, they had no comprehensive plan. Essentially the money was just sitting out there, earning almost nothing and losing buying power due to the current rise in inflation. They had a budget shortfall of around $700 monthly when factoring in social security income alone.

The Financial Advisor proposed a plan to consolidate savings into a few managed buckets where the return on investment was better than the banks, but still SAFE. They devised a long-term spending plan for those funds when the time came that Joel really did decide to scale back on his work. They had made it essentially. Barring some super emergency, they felt secure in their retirement.

But did their story end there?

No, of course it didn’t. The nuts and bolts of basic retirement budgeting and longevity were fulfilled, but ‘what about the emergency fund and dare I say ‘the fun?’ asked Farrah. The cynical reader may say hey, why isn’t Farrah satisfied? They have a level of financial security; you can’t plan for everything…

Well let’s dig a little deeper.

The retirement assets and income have been addressed, but what about the home equity of $450,000.00? How could that asset work harder for Joel and Farrah? (You guessed it…) in steps the Financial Advisor recommended, Reverse Mortgage Line of Credit for unplanned expenses, emergencies and dare we say ‘some sizzle’ that falls under that often-ignored category of QUALITY OF LIFE.

The Reverse Mortgage Bonus:

The Line of Credit option offered flexibility for withdrawals and did not require monthly payments that would upset cash-flow. It was there for emergencies and a source of money that could be used for fun AND that wouldn’t interfere with their carefully constructed savings and retirement budget. That satisfied both Farrah and Joel’s goals.

Joel can quit work whenever he tires of it. Farrah can visit guilt-free far away friends and we know she is planning that cruise to Alaska. All those years of working and saving are paying off. Happy Retirement you two! You’ve earned it, literally.

What to Do Next:

Kim is happy to sit down with you and your financial planner if that’s the best way to review your options with confidence. Call with any questions about your situation.