What If Your Retirement Plan Falls Short?

It is easy to give advice about making sure that you start your retirement planning efforts early so that you are fully prepared when the time comes, and clearly this is the best course of action. But there is an ideal reality, and there is the real world where many people find themselves residing.  Not everyone is positioned perfectly when their retirement years come into focus, and while it is true that this is sometimes due to a lack of planning there are also forces at work that are out of the control of the individual.  You don’t have to look too far back into the past see one of these circumstances in the form of the 2008 Wall Street debacle that played havoc with many retirement plans.

So what do you do if you find yourself in need of income when you are retired?  If you own your home outright or have significant equity in it one option that is available to you is a reverse mortgage.  With a reverse mortgage, rather than you paying the bank, the bank pays you, and in return it gains equity in your home.  Because you’re not required to make any payments you can’t default, and your credit score and your income are not relevant to the lender.  The only requirements other than having sufficient equity are that you must be at least 62 years of age and live in the home in question as your primary place of residence.

Home Equity Conversion Mortgages are backed by the federal government so you can rest assured that this type of reverse mortgage is totally legitimate.  The term of the loan ends upon your death or when you choose to move out of the residence of your own volition.  At that time you or your heirs can sell the house to pay off the loan and pocket the remainder.  It should be mentioned that you do not have to sell the home; you are only required to pay off the loan and you can do so using any source of funding you choose.

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Paul A. Kraft, Estate Planning Attorney

Paul Kraft is Co-Founder and the senior Principal of Frank & Kraft, one of the leading law firms in Indiana in the area of estate planning as well as business and tax planning.

Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.

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