By now just about everyone in the country is acutely aware of the economic and personal financial disaster the so-called “fiscal cliff” poses to just about every American household. The looming deadline of January 1st, 2013 draws nearer with every wakened morning, and Congressional members as well as the President are all-consumed in resolving this coming crisis. But many retirees, perhaps readers of this letter included, are asking: what exactly is the fiscal cliff, and why should I be concerned with it? These are simple and reasonable inquiries. But the answer you’ll receive depends on who you ask. But if you’re reading this letter, then you’re asking us. And if you’re asking us, you’re going to get an accurate, straight-forward answer that’s not specifically designed for...

The National Consumer Law Center recently prepared a report on what they call “the other foreclosure crisis.” Every state has a law that allows local governments to sell homes or other property through a tax lien foreclosure process if the property owner falls behind on property taxes or other municipal charges. “Other charges”, in these cases, could be a water or sewer bill, for example. Under this process, a $300,000 home might be sold at a tax lien sale for less than $1,000. Of course the buyer would then be able to quickly resell the property and enjoy a very large profit. The home owner would be likely to face eviction and lose their home. The inability to pay a small bill could lead to a home owner losing hundreds of thousands of dollars in home equity. This equity mi...

In a recent weekend edition of The Wall Street Journal, several financial advisers described ways that their clients could benefit from reverse mortgages. In one example, the adviser explained that a client could receive more in income from a home than the home is valued at when the reverse mortgage is taken. Homes have shown a historical tendency to appreciate in value over time and that is the factor that makes this possible. The adviser takes the example of a 66-year-old with a house valued at $340,000. After subtracting the closing costs on a low-cost, FHA-backed floating-rate reverse mortgage known as HECM Saver, that retiree could get a loan for about $173,000, which translates into a monthly check of $1,006 for the rest of his or her life. By age 86, the payouts would have totaled m...

Taxes continue to be levied even after you stop working, so if you don’t plan for how you’re going to pay your taxes, they can become a large and frustrating expense. As an example, for those making withdrawals from a 401(k) account or a tax-deferred IRA, the entire amount of the withdrawal could be subject to taxes. Sometimes, even with the best planning, taxes can be an unavoidably large expense. Right now, despite anyone’s best efforts, precise planning is nearly impossible. Tax rates are scheduled to rise at the end of the year and no one knows if they will actually go up or how much they will go up by. Some tips for managing your tax expenses If possible, it’s a good idea to keep your tax bill as small as possible by limiting withdrawals to the minimum income tax rate poss...

Many retirees are forced to pay taxes on the money they take from retirement accounts each year. Withdrawals completed from traditional IRAs are taxable as current income and taxed at the regular income tax rate. These tax bills are reducing the value of IRA withdrawals in many cases. With a reverse mortgage, you may be able to avoid those tax bills next year. A reverse mortgage allows you to tap the equity in your home and the proceeds from a reverse mortgage are usually available tax-free. Reverse mortgage proceeds are NOT taxed If you are over the age of 62 and have equity in your house along with an individual retirement account that will be taxed on withdrawals, you have options. By using the equity in your home to access cash for retirement expenses, you could leave the money in your...

It is often said that there only two things that can’t be avoided in life – death and taxes. By taking care of ourselves, we seek to put the first one off as long as possible. But for the latter, we face taxes every day and at least once a year, submit forms to the IRS in the painful process of filing our income taxes. Almost everyone is completely honest when doing their taxes because the large penalties for cheating far outweigh the small potential for gains. However, sometimes we can make mistakes and those who have ended up communicating with the IRS to fix an error would usually rather never to do that again. The fact that the IRS is so tough to work with makes identify theft even more painful if the identify thief uses your personal information to claim an illegal tax refund. And...

Taxes are a factor to consider in retirement. Many retirees want to live where taxes are low so that they can use their retirement income to enjoy living. While taxes are an important consideration, we need to be looking at in context. Sometimes low taxes mean a low level of community services because the local government won’t have the resources to fund quality of life programs. Taxes are a payment for services. If you frequently use parks or libraries or other government services, your tax payments might be a bargain considering what you get in return. Other reasons taxes are important It might help to think about traffic flows. Traffic is heavier in large cities than it is in small towns. That is an obvious statement since there are so many more people in large cities. But the reason ...

A reverse mortgage allows you to stay in your home for as long as you live. After that, there could be some benefits for your heirs as well. Retirement brings the reality of estate planning into sharp focus. Many people put off decisions about how to handle their estates while they are working because it can be difficult to consider these questions. As we age, it is important to ensure that we plan to address some of the financial concerns our survivors will face. A reverse mortgage could be a valuable financial planning too for senior citizens while they are living. Your home could be your largest asset and a reverse mortgage can convert that asset to an income stream. With a Home Equity Conversion Mortgage (HECM), you can access the equity in that asset now and repay the loan later. No p...

Many of our mothers warned us, “If it sounds too good to be true, it probably is.”  Mothers frequently used sayings like this in the good old days, which is why we all know that we should never jump off a bridge, even if all of our friends are doing that. Because economists don’t win Nobel Prizes by repeating wisdom they learned from their mothers, they formalized that concept into what is know as “no free lunch”. They’ve proved mathematically that if something sounds too good to be true, it is. Tax scams typically sounds pretty good This sound advice applies to taxes. The IRS has issued a news release about a new scam that targets senior citizens and offers them money for nothing. This scheme involves scammers promising that they can obtain refunds for people ...

If there’s one thing everyone on both sides of the political aisles can agree on, it’s that taxes should be fair. Everyone should pay what they owe, and that includes corporations as well as individuals. The current debate is simply on whether or not top earners in this pay their fair share. They say they do; liberals say they don’t. Whatever your opinion may be, many people don’t know that some of the nation’s largest companies pay nothing in taxes, even though the current U.S. corporate tax rate of 35 percent is among the highest in the world. That’s because of the many loopholes and deductions that allow almost every business to pay less than the maximum, and in some cases, nothing at all. In fact, according to The Wall Street Journal, the Organization fo...