Many years ago, a friend of mine named Alan, who had spent more than a decade working in Africa, told me this story: A boy came to Alan to say he had found a rope. Alan told him to fetch the rope and when the boy returned, tied to the rope was a cow.
The real issue was the boy had found … a cow.
While none of us may have issues either with ropes or with cows, sometimes we have small problems that are tied to much bigger problems.
This past week I met with a couple who thought they were having cash-flow issues due to in-home health care costs. And here’s the thing: They are having cash-flow issues.
But that’s not all they have. They also have accessibility issues and, perhaps most of all, estate planning issues.
Money is their biggest felt need – it is the rope. The other issues are the cow.
And cows can sneak up on us. In the case of my clients, the wife is 14 years into an multiple scherosis diagnosis and her husband, until this past year, was her full-time caregiver. However, he now is undergoing chemotherapy and can no longer adequately care for her.
They have legal documents, but they are critically outdated. Case in point: The couple’s power of attorney states their son will make medical and legal decisions for them if they become incapacitated. However, 10 years ago he died in a car accident on Interstate 66.
Life is filled with the unexpected. We all know that. We also know no amount of planning will cover all life’s curve balls. But planning goes a long way toward protecting ourselves and those we love best when the unexpected occurs.
As a reverse mortgage specialist, I frequently meet with people who are planning ahead for the unexpected, as they understand that long-term illness, a major accident or the death of one spouse might well put them in financial jeopardy. It’s not that my clients haven’t saved; most of them have both savings and investments. Rather, they have done the math and realize that with care costs often running some $10,000 per month, they eventually are going to need every financial resource available.
And here’s why a reverse mortgage can uniquely fit long-range financial plans during retirement: Each month a small amount gets added to a reverse mortgage line of credit. This growth compounds over time, and is not based upon home appreciation, but rather upon prevailing interest rates. It’s counterintuitive, but if rates go up, the line of credit actually grows more quickly. On top of this, there is never a monthly mortgage payment due.
I will be the first to say there is no one-size-fits-all financial product. Financial needs vary and every homeowner’s circumstances are a bit different. So are long-term financial goals.
But this much is certain: none of us is likely to get by on just our Social Security. Few will survive on just an IRA, a 401(k), or pension – or, for that matter, on a reverse mortgage. But when added together, all these can contribute to financial health in retirement, and a reverse mortgage can play a very important role in financial wellness in the retirement years.
If you would like to discuss your financial needs, or those of a loved one, give me a call. I always love hearing from you.
Laurie MacNaughton [NMLS 506562], President’s Club, is a freelance writer and reverse mortgage consultant with Atlantic Coast Mortgage. Reach her at 703-477-1183 or Laurie@MiddleburgReverse.com