Many people ask me whether estate planning is different for the baby boomers than it was for their parents’ generation. Being a boomer, myself, I feel well qualified to answer that question. And the answer is Yes!
It’s different than our parents
Our parents’ lifestyle during their working years differered from ours in many ways. They often had a single job, lived in a single city, sometimes even a single home, for most of their working lives. They had one mortgage and paid it off before they retired. The paid off house was worth many times over what they paid for it. They could sell the home, buy a smaller house or condo, and have substantial funds left over from the sale to invest for retirement income.
Sound a little different for us boomers? Well…we often changed employers, occupations, cities, and often “traded up” our housing several times during our work years. We were less risk adverse than our parents and most of us grew up believing that our government, the most powerful and wealthy country in the world, would always take care of us when we were too old to work. Our children were encouraged, no pushed, to make lives of their own often far far away from Mom and Dad.
How is it going for Baby Boomers?
Well, many of us live by ourselves (the divorce rate is still going strong at 50% for first timers and even higher for second timers), have no equity in our homes, didn’t save enough money (all the kids have college degrees, don’t they?) and instead of playing golf, bridge, majong, in our 60’s and 70’s, we will be at our desk by 9 am until…well, until we can’t anymore.
So what are the successful strategies for retirement and estate planning for us boomers? Is it too late to plan to retire when you’re already at retirement age? What are the options?
Reverse Mortgages
Here is one that I know of that has a bad rap. Reverse Mortgages. These are loans against the equity in your home that need not be paid back until the homeowner no longer lives in the home as a principal residence. The usual requirements are that the borrower must own the home, be at least 62 years old, and have equity in the home. The amount that can be borrowed is based upon your age, the current market rates, and the limit for the area where the house is located.
You can receive the funds under a number of payment plans including a lump sum, a line of credit, monthly payments, or a combination thereof. Besides cash, there are other benefits: the lump sum is not income so it’s not taxed, you can maintain your ability to live independently in your own home, and you don’t necessarily lose the ability to apply for federal and state entitlement programs, such as Medicaid. It’s not for everybody, and certainly not for those who can’t afford to maintain their homes, but it is an option. Just shop around and compare the costs and make sure that it fits in with your overall estate planning goals. That’s where I come in. Plus, I’m a boomer, and I did all that dumb stuff, too.
