As we continue our "Cost of Aging" series we cover the possibility of downsizing. Bendix Anderson addresses some of the challenges.
Moving from a larger home to a smaller one may help older adults lower their costs or help pay for their needs as they grow older.
However, moving comes with its own set of challenges and expenses.
Many older adults have an emotional connection to their home and neighborhood – about two-thirds have lived in their current home for over a decade. “Many (older adults) prefer to remain in their current homes and communities,” according to the Joint Center for Housing Studies.
However, if they have raised a family, their current
home may have space that is no longer being used.
A smaller space would probably be less expensive for
older adults who rent. Homeowners may use the proceeds of a sale to help finance other costs of growing older.
Many older adults also live in homes that will become
progressively more difficult to navigate as they age, with too many stairs or narrow doorways that could not fit a wheelchair, if needed. The cost of renovating a home can be high. The neighborhood around a home can also pose challenges, if it is impossible to get around without a car and an older person is no longer driving.
Moving costs money, however. Both renters and owners will need to pay for movers – typically several thousand dollars – and face the challenge of selling or donating furniture and goods that won’t fit in their new, smaller home.
For homeowners, selling a home also involves high transaction costs, eating into the proceeds from the sale. At least the proceeds of selling a home are generally tax- free if you owned the home at least two years and the capital gain – the sales price less selling costs and the price you paid – is less than $500,000, or $250,000 if single, according to Center for Retirement Research.
The total costs of moving typically cost about ten percent of the value of a home, according to the
Under all circumstances, a reverse mortgage should be considered by home owning or buying retirees. It can be a way to hold onto income producing cash as well as lower carrying costs for a home. Thereby dramatically increasing ones quality of life and still leaving an estate for inheritance or donation to a charity. Call me to discuss and analyze these options for you and your spouse.
Many older adults use reverse mortgages to do home renovations. The purpose is to remain in their homes for as long as possible. However they frequently don't take aging in place needs into consideration when deciding upon which renovations to make. This is where a Certified Aging In Place Specialist (CAPS) comes in. The right analysis can save hundreds of thousands of dollars and make for a much safer and enjoyable life style for the home owners and their guests.
The National Home Builders Association recognizes individuals with the CAPS designation as experts in home modification for older adults.
This is what Bendix Anderson in connection with the National Aging in Place Council (NAIPC) has to say about home modifications and aging in place.
As older adults become more frail, they may have difficulty navigating their own homes where they have lived for years. Stairs may become difficult to climb. More frail older adults may use a wheelchair that doesn’t fit through narrow doorways.
If aging persons want to continue to live in their current homes, they may need to renovate them so they become easier places to live.
These renovations or modifications range from simple changes like removing throw rugs that may lead to falls to wider doorways that can accommodate a wheelchair to “grab bars” that may prevent falls in bathrooms. Substantial but basic design and structural modifications average $9,000 to $12,000 per one-story residence, according to an analysis by MetLife.
Homes may need different renovations depending on regional differences in housing stocks. For example, many homes in the Northeast are built on multiple levels and fail to provide a bedroom and bathroom on the first floor, while nearly 84 percent of homes in the South provide single-floor living, according to the Joint Center for Housing Studies.
About 10.3 million households aged 50 and over report having someone at home with serious difficulty walking or climbing stairs, according to the JCHS. More than half – 5.5 million households – live in homes that require them to climb stairs to enter or exit. “Assuming the average outlay for a ramp falls at the midpoint of the range described above ($2,400), the cost of improving the accessibility of these 5.5 million homes would total $13.2 billion,” says the JCHS. That shows a huge unmet need that may force many frail older adults to eventually move.
Aging in place may be more cost-effective for seniors than “downsizing” and moving into formal senior housing.
MetLife deepened its analysis to include some of the costs included in the price of living at a seniors housing community. A typical older adult living in a single-family home might pay:
• $850 per month for costs such as utilities, taxes and maintenance
• $250 per month for food
• $456 per month for three hours of daily assistance, twice weekly at $19 per hour
• $804 per month for three days per week in adult day services.
Even with these costs, it would still take just 14 months to break even on the cost of home health services and the home renovation, compared to the cost of moving into an assisted living community priced at $3,000 month. “By the end of 24 months there is a net savings near $10,000 (if you remain in your home),” according to MetLife.
For the next few weeks we will be addressing the proverbial elephant under the throw blanket in most of our financial housing - the Cost of Aging. If we do not take these points into consideration our golden years could become tarnished.
This week - Housing: The cost of available options - courtesy of Bendix Anderson.
Aging senior citizens often face difficult decisions about where they want to live. Most – more than 90 percent – want to stay in their
current homes as they grow older, according to research from AARP.
Remaining in a single-family home can involve expensive renovations, as seniors become more frail, and potentially even more-expensive home health care services.
Moving to a seniors housing community, like an assisted living property or a nursing home, may be even more expensive. Many seniors lack the financial resources to pay for it, though homeowners typically have more financial reserves than elderly renters.
Selling a single-family home may help finance a move to a seniors housing community – and home prices have recovered much of the value lost in the crash. Most older Americans owned homes in 2012, including 78.4 percent of people older than 80, according to Census data.
Selling a home may also help pay for a move to rental housing, though the cost of an apartment has also risen faster than inflation in many markets. Seniors may also struggle with the transaction costs of selling a home and moving.
Even selling a home may not pay for a nursing home for very long. The typical homeowner aged 65 and over has enough wealth to cover the cost of a nursing home for just 42 months – less than four years, according to the Joint Center for Housing Studies.
Private insurance policies cover 60 to 70 percent of the cost of long-term care – but the cost of premiums are much more expensive than what many older adults can afford, averaging more than $4,100 per year for persons over 75 years old. Just 11 percent of households aged 65 and over had private long-term care insurance in 2010, according to the Congressional Budget Office.
Medicaid is the default option without financial assets or long-term care insurance to pay for long-term care. That includes two-thirds of nursing home residents aged 65 and over, according to the CBO. To qualify, individuals must spend down or otherwise dispose of their assets. Home equity may be excluded for a time, but Medicaid eligibility criteria include home equity limits and most states will try
to recover expenses from beneficiaries' estates, according to the Joint Center.
When you are ready to make some of these decisions give me a call. As an Accredited Financial Counselor (AFC) I am able to assist in your budgeting so that you won't run out of money. Also, As a Certified Aging In Place Specialist (CAPS) I can help you to decide how best to spend some reverse mortgage proceeds on home remodeling so that you can safely stay in your home.
(This is not an all-inclusive list, however, it is a good start)
Topics that often put people on edge are Estate and end-of-life planning. Many people may become uncomfortable or anxious on such topics or these topics may seem too overwhelming and complicated to think about. It does not have to be this way.
Here are a few suggestions that could minimize the discomfort of Estate and end-of-life planning:
1) Make or update a complete list of all assets or interest in assets that you or you and your spouse own, including description, how title is held, location and approximate value.
Additionally, if you have a trust, make sure those assets that should be in your trust have been correctly transferred and are held in the same name of your trust.
2) Make or update a complete list of all your usernames and passwords for digital accounts and close down any accounts that are no longer used.
3) Review any assets for which you have made or should make beneficiary designations (bank accounts, insurance policies, retirement plans, etc.) and make sure you have a copy of the most recent form. Review these designations to determine whether you want the trust, or an individual listed and be sure to list alternate beneficiaries so that the asset does not go to your estate and possibly cause a probate.
4) Make sure you have a copy of the most recent deed to your house and any other property you own and if you have a trust, make sure that these properties are in your trust (Please note that real estate properties held in a corporations, LLC and/or
partnerships should not be in your trust, but your interest in that entity should be in that trust.
5) Review all estate plan documents, including your Will, Advance Health Care Directive, Durable Power of Attorney and Trust to determine whether you need to change beneficiaries, agents, successor trustees, custodians for minor children, and nomination of conservator of your estate or person if that should become necessary, because of death, incapacity, age, marriage, change in your relationship with that individual.
Additionally, review how your estate is to be distributed upon your death to ensure it is still appropriate. Consult your attorney regarding previous documents before shredding them.
6) If your attorney has not reviewed your documents in the last few years, you may want to call your Estate Planning Attorney to discuss the need to possibly revise your documents due changes in law. For example, many older trusts that provide for the trust to be split into a survivor’s trust and a bypass trust may no longer be suitable plan for many couples today.
7) Lastly, if you don’t have a Will, Durable Power of Attorney , Advance Health Care Directive and possibly a Trust you may want to call an Estate Planning Attorney to discuss the need for you to have such documents.
The National Academy of Medicine (NAM) is currently conducting a study over the next decade to encourage “breakthrough ideas, research, and technologies that could extend health and well-being into later life.”
According to NAM, “Aging will be a defining challenge of our time, the rapidity of population aging will change the ways in which families, communities, societies, industries, and economies function. Multidisciplinary, innovative solutions are urgently needed to support and engage our older populations and maximize their years of good health.”
This challenge “will require policies, socioeconomic infrastructure, and innovations that enhance the health of older populations while creating sustainable, health-promoting systems that support longer lives,” the NAM stated “[All sectors will need to] collaborate to promote the lifestyles, behaviors, services, supports, and infrastructure that are critical to fostering effective, affordable, and equitable outcomes.”
While NAM is hopeful for concise data to establish the structure for these goals, there still remain some specific issues facing the aging cohort. Many are outliving their money in retirement due to uncertainty in the retirement planning that was done. In particular, retirement dates and estimated retiree longevity. Advisers need to recognize that their clients don’t necessarily have control over their retirement date, and to plan accordingly.
According to David Blanchett, the head or retirement research of Morningstar, “Ignoring retirement age uncertainty can potentially have a significant impact on potential retirement outcomes.” Furthermore Blanchett states, “Financial planners should consider showing clients the implications of an early retirement to potentially get them to save more than they would using a more traditional approach where retirement age is treated as certain.”
In reference to Blanchett’s award winning paper,“the Rule of 61”,“Individuals targeting a retirement before age 61 tend to retire later than expected,” Blanchett states. While, “Individuals targeting a retirement age of 61 retire when expected; and those targeting a retirement age after 61 generally retire approximately a half-year early for each additional year of work planned past age 61.”
Not only do advisers need to anticipate the risk factors for clients as they approach retirement—sequence risk, market risk, inflation risk, health risk, and longevity risk, etc — but also, the likelihood that a client might retire two years earlier or later than planned.
Clients who retire a few years earlier than expected could result in significant negative implications on his or her retirement savings target. Factor in a shorter saving period, a longer retirement, and a smaller Social Security benefit, an early retiree might need to save 25% more than expected to enjoy the same level of retirement security.
“If the “average investor” is assumed to be seeking a 4% initial withdrawal rate (i.e., a moderate success target) and wants to retire at age 65,” Blanchett wrote, “the impact of retirement age uncertainty would require approximately 25% more savings than suggested by traditional models (28.29% to be exact).”
“Half of your clients will retire earlier than expected. About 24% of those who retire early do so because they can afford to. About 10% retire to pursue other activities. The remaining 66% retire because of ill health, layoffs or the need to care for an ailing spouse,” he said.
Those who can afford to retire early, such as highly educated professionals, tend to work longer and retire later. However, those who need to work longer, who have earned and saved less prior to retirement, are often the ones who are forced to retire early because of poor health or job loss.
Blanchett’s projections varied from person to person depending on several variables, including, health, gender, education, marital status, housing wealth, savings, occupation, income, and remaining years to retirement. His findings are largely based on the Health and Retirement Study, a long-term population study by the Rand Corporation, the Social Security Administration, and the Centers for Retirement Research. Participants in the study have been interviewed every two years since 1992.
Recessions can be hard to predict, but that’s not the case today. The COVID-19 pandemic sweeping the globe has pushed the U.S. economy into recession, with GDP falling 4.8% in the first quarter. While the drop was sizable, an even more pronounced decline is in store for the second quarter, as broad swaths of the country remain shuttered. With the U.S. feeling the sting of a sharp reduction in consumer spending and industrial production, there are five realities to keep in mind.
1) We’ve been here before (sort of).
The largest post-1950 quarterly GDP decline was 10% in the first quarter of 1958.
This sharp drop came amid the 1957–1958 recession, which resulted from a confluence of factors, including a flu pandemic. While the makeup of the present-day economy is much different, the U.S. is not unfamiliar with pandemic-related economic turmoil. The U.S. economy bounced back strongly in the late 1950s, with growth surpassing 5%.
As parts of the U.S. look to ease restrictions, I believe that a bounce back in activity could begin as early as June in some sectors and more broadly in the third quarter.
2) Recessions have tended to be short; the subsequent expansions have been powerful.
The good news is that recessions generally haven’t lasted very long. While this time may be different, a Capital Group analysis of 10 cycles since 1950 shows that recessions have ranged from eight to 18 months, with the average lasting about 11 months. For those directly affected by job loss or business closures, that can feel like an eternity. While there's no way to minimize that feeling, investors with a long-term investment horizon should try to look at the big picture. The average expansion increased economic output by 25%, whereas the average recession reduced GDP by less than 2%.
3) It’s about the consumer.
The U.S. consumer accounts for approximately two-thirds of the economy. With unemployment claims skyrocketing — although many may be temporary — and consumers staying in their homes, a weakening economy is no surprise. The $2 trillion stimulus package will help support some levels of consumer activity, but employment uncertainty is likely to keep many consumers in a frugal mindset.
4) Lower oil prices may be a tailwind for the economy.
A precipitous decline in crude oil prices has put pressure on the energy sector. May oil contracts turned negative in April as producers scrambled to find storage for bloated supply stores, exacerbated by consumers’ sharp reduction in vehicle usage and gasoline consumption. While the negative impact of lower oil prices is likely to be felt in U.S. oil fields, lower energy prices can provide a tailwind for consumers and transportation-heavy industries.
5) Timing may not be everything.
Waiting for the all-clear may leave investors missing out on market gains. Since World War II, in recessions with a corresponding equity correction, the S&P 500 has bottomed, on average, three months before the end of each recessionary period. It’s little solace to investors who have endured market volatility, but even as the economy weakens, there are opportunities to invest in great companies at a discount.
While the adage that the stock market is not the economy is true, market volatility tends to be captured, with a lag, in economic data. So even as financial markets are on a path to recovery, it may take time for the economy to catch up. Focusing on long-term investing can help investors navigate short-term volatility.
Written by Darrell Spence, an economist and research director with 27 years of investment experience, all with Capital. He earned a bachelor's degree in economics from Occidental College and is a CFA charterholder.
With thanks to Dean Catalano, SVP, Capital Group. email@example.com
Thanks to: Albertson & Davidson, LLP | Estate Planning
Under California’s Proposition 13, the County Assessor’s office is not allowed to increase the appraised value of property except a small amount each year, unless there is a change in ownership. Proposition 13 is near and dear to the heart of every California real property owner. It ensures that your real property taxes do not increase dramatically just because the value of your home increases over the years.
For example, if you bought a home in 1995 for $100,000, but that home is now worth $2,000,000; the county tax assessor is not allowed to value your home at $2 million for real property tax purposes. Instead, the value is limited to $100,000, plus a small percentage equal to the consumer price index or 2%, whichever is less. As such, the real property probably has an appraised value of around $125,000. The real property tax is approximately 1% of the property’s appraised value. In this example, the real property tax on a house valued at $125,000 is $1,250. Whereas, the real property tax on a house valued at $2 million is $20,000. Proposition 13 effectively saves the real property owner around $18,750 in tax ($20,000 – $1,250). That’s a huge savings.
When a person dies, and a child inherits the home, the low valuation of the real property can remain intact with the child; provided that, the child files a parent-to-child exclusion form. You see, Proposition 13 allows a child to keep the parent’s tax value of the home. That’s a great benefit to any child. If this did not occur, then the tax assessor would revalue the home to its current value (in the above example, the tax value of the home would go up to $2 million), which then results in much higher real property tax being imposed.
As with most good things, however, there’s a catch. The parent-to-child exclusion must be filed within three years of the decedent’s date of death. Failure to do so will result in a supplemental assessment that will charge the higher tax amount for all years when the parent-to-child exclusion was not requested.
So must a Trustee file this parent-to-child exclusion form, or is that the duty of the Trust beneficiary? That depends.
In the case of a Trust that will distribute real property to the Trust beneficiary quickly (within a matter of a few months) it most likely is the beneficiary’s duty to file the parent-to-child exclusion because the Trust no longer owns the home.
If, however, the Trust terms require the real property to be held in Trust for several years, or if the Trustee holds the real property in Trust for several years against the Trust terms, then the Trustee would have the duty to file the parent-to-child exclusion form.
Whatever happens, if you are set to receive a house or other real property from your parents, be sure someone…anyone…files a parent-to-child exclusion form. Failure to do so could cost you several thousands of dollars in extra taxes.
By the way, if all the children are deceased and real property passes from a grandparent to a grandchild, then the grandchild has the right to the same exclusion. There are certain limitations that apply and it won’t work if the grandchild’s parent is still living. If you are a grandchild set to receive real property from a grandparent, be sure to check with a professional to see if you can obtain these same real property tax benefits.
Thanks to Susan Raff
The coronavirus has been hard on those who are older and trying to stay in their homes. The financial impact on retirement accounts has been devastating, leaving some unable to make payments.
Reverse mortgages are in demand these days and they’ve helped one local family. “The program gives her the necessary funds to stay in her home instead of dipping into her savings,” said Stephen Harris of Farmington.
Stephen Harris was worried about his mother losing her home. Like most people, Ellen Harris’ retirement account has dropped significantly since the COVID-19 outbreak.
“The best move for her was to look at the reverse mortgage program,” Stephen said.Reverse mortgages give homeowners 62-year-olds or older a line of credit. Families can use it to pay for home healthcare, but many are using it to pay taxes.
“They are calling us saying, ‘let me do a reverse mortgage on my home and then I’ll pay myself back once things recover,’” said one loan originator.
With a reverse mortgage, you still own on your home, but the federal government lends you money. As long as you pay your homeowners insurance and taxes, your line of credit grows. If the homeowner passes away, the money has to be paid back by the estate with minimal interest.
“You can take monthly checks and you can put more money in the line of credit,” says another loan officer. Stephen has lots of stress with helping his mom and trying to comfort his brother who is in the hospital struggling with the coronavirus. His brother is a New York City Police officer who served his country on 9/11. “He was one of the first responders that day,” Stephen said.
The coronavirus has certainly taken an emotional toll and a financial one.
Small business owners are also using reverse mortgages to keep their businesses from going under.
By Guest Writer: Emily Hoda, LAc.
Over the years, I’ve worked in many places such as hospitals and in HIV clinics, helping people of all kinds with lowered immune function. During this COVID-19 crisis, the fear levels are high and people are turning to many sources for their information. I’ve been treating patients throughout this outbreak since Acupuncture is considered an essential health care service. Since the beginning of “safer at home” implementation, I have so many emotions about coming into contact with people regularly and even touching when there is still so much unknown about how the virus spreads. I wanted to put together a list of things that I have in place to help combat the stress, anxiety, fear and to make sure my immune system is getting all the support it needs. I hope this helps people as they make the transition from the “safer at home” to a safer new reality.
B R E A T H W O R K
The practice can be done seated or standing with the feet together. Hands are by the sides or on the knees.
1. Deep breathing - 1 minute
Inhale and exhale deeply and rapidly through the nose into the lungs and belly.
2. Square Breath - 3 - 5 minutes
10-20 seconds each, 40-60 seconds per 1 breath.
Inhale / Hold the breath in / Exhale / Hold the breath out
3. Hold the breath out - 1 - 3 minutes
S A L T W A T E R
Gargle with warm salt-water morning and night and anytime you return from being out.
Every morning, dissolve 1 – 2 teaspoons of salt in 8 oz. of lukewarm water. After a few seconds of gargling, spit the water out. Repeat this process three times.
At night soak your feet in warm water with sea-salt several times a week. This will open the meridians that run throughout the body and draw out poisons, you can add lavender and eucalyptus essential oils.
E S S E N T I A L O I L S
Essential oils help clean the air and can be applied topically as herbal medicine. Here are a few recommendations and brands you can work within the house to take extra precautions when you need to travel. Currently, I am working with Thieves Oil, Lavender, and Eucalyptus.
Thieves Oil / Warrior Oil (Arbonne)
Traditionally, the original Thieves oil formula consists of these five essential oils: Clove, Lemon, Cinnamon Bark, Eucalyptus Radiata, and Rosemary. I prefer to add 50% lavender oil to this blend.
Applications - apply a few drops to the following regions before leaving the house.
1. Nape of the neck - DU 16
2. Bottom of your face mask or under the chin.
3. Bottom of feet - Kidney 1 point
4. In the home via a diffuser
H O T W A T E R
6 cups per day
2 am / 2 mid-day / 2 early evening
- Detoxes body
- Keeps mouth and throat hydrated
- Hot water helps regulate
H E A L I N G FO O D S & S P I C E S
Chai Tea with Star Anise
● 1 gallon of water in a 3-gallon pot.
● 1 teaspoon of crushed whole cloves
● 1 teaspoon of whole black pepper
● 3 teaspoons of crushed whole cardamom pods (or 2 tsp of cardamom seeds)
● 3 long sticks of cinnamon, or 6 short sticks
● 1-3 inches fresh ginger root, sliced (add a bit more ginger if you have the flu)
● 7 whole pieces of Star Anise (do not use the Japanese variety).
Once the water is boiling, add the crushed cloves. A few minutes later, add the rest of the ingredients and keep the water at a low boil for approximately 30-45 minutes.
The tea can be refrigerated for up to four days and reheated to drink as needed.
Bring 16 oz water to a boil and add 1 Tbs cloves and turn off the heat. Let steep overnight. In the morning before eating breakfast swish clove tea around your mouth for 15 seconds and gargle before swallowing. Repeat before going to bed. This mixture makes enough for 2 days.
When the body is warm, it is harder to be infected with a virus. In general, it is recommended, for virus prevention, to eat less sweet, sour, and salty foods. It is also a good idea to stay away from cold regions.
Ginger Eating warming foods, such as ginger can help to give the body added warmth and heat. If a person has a fever, they can take ginger in a broth or soup to help increase the body temperature and purify any toxins out through sweat. It helps to cover up with a heavy blanket to increase body temperature.
Here is a list of other foods that will increase the immune function and help with digestion which is the root of digestion. They can be eaten raw if the stomach can tolerate it or added into or cooked with food.
V I T A M I N S
Our front line is our immune system. In addition to taking a regular multivitamin, here are a few vitamins that will help support a healthy immune system. If you are already taking them, I’ve included alternative foods and activities that can increase them naturally in your diet and lifestyle.
Vitamin C - 1000 Mg - Dark Leafy Greens, Peppers, Broccoli
Vitamin D - 5000 IU - Sun exposure 1 - 2 x / day
S L E E P
We all know sleep is important, but lately, people have not been sleeping well, waking up and not falling asleep, unable to fall asleep. Sleep is imperative to restore the immune system function. In Chinese Medicine, the protective function or “wei qi” retreats from the exterior and goes interior. Most people are sleeping in and going to bed late, while this might be fun on a weekend it can upset normal rhythms. Additionally, many people are having more vivid or scary dreams. Sometimes eating before bed can also create insomnia. I advise my patients when possible to work out in the morning and stop eating around 6 pm. This can help restore natural rhythms and help sleep.
Most people are familiar with IRA and 401K plans. Financial planners always advise their clients to contribute to these programs for retirement and many of us have used the tax deferred benefits to significantly reduce our income taxes each year. However, why don’t we hear more about 529 plans?
According to a recent article in the Journal of Financial Planning, American families are leaving an estimated $237 billion on the table by not investing their college savings in 529 plans under normal market conditions. The primary benefit for most families is not its tax advantages; it is the fact that it encourages investing instead of using a savings account.
The article continues that middle and upper-middle-class families stand to benefit the most from increased adoption of 529 plans. The average family saving for college would see a benefit of $4,044 per child.
West-Cal Reverse has a program called a Limited Equity Share System that allows home owning families to diversify investments by transferring from their residential real estate equity into a 529 plan and then invest for maximum effect. This can be a game-changer for college financing.
According to Douglas Solorzano, an advisor with DAS Wells Fargo Advisors in Century City, Los Angeles, CA, a well-managed stock portfolio has returned 9% per annum over the last 30 years. A $100,000 contribution, using a LESS program to create a lump sum, into a 529 portfolio when a child is born, could grow to nearly $500,000 by the time he or she is ready to go to college.
In these difficult times, we ask you to be safe, but to continue to have hope and plan for you and your family’s future. Learn more at www.less.reverseurthinking.com
Marc has 36 years in financial services and 6 years in teaching.
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