Assuming You’ll Retire Healthy Is an Expensive Mistake

Assuming You’ll Retire Healthy Is an Expensive Mistake. Credit cards: Having a credit card is often a necessity for most seniors – from paying for medications and emergencies to booking vacations. But for seniors living on a fixed income, there are concerns about carrying a large balance from month to month and paying significant interest payments. In the worst case scenario, the debt becomes unmanageable and is a major source of stress for account holders and their families.

Another problem for seniors is having too many credit cards. Indeed, the more cards you have, the more likely you are to get into debt. And that possibility can make it harder for you to get the best deal the next time you apply for a loan, insurance, mortgage, or apartment. Assuming You’ll Retire Healthy Is an Expensive Mistake. Having multiple cards can also make it harder to keep track of your monthly payments or even realize that a thief may have stolen one of your cards.

Equity Loans and Lines of Credit: These are loans that use the equity in your home as collateral and are often tax deductible (check with your tax advisor. ). Equity refers to the difference between what you owe on a home and its current market value.

A home loan is a one-time, one-time loan, usually at a fixed interest rate. A home equity line of credit works like a credit card in that you can borrow as much as you want with a preset line of credit. The interest rate on a line of credit is variable, which means it can increase or decrease in the future.

In general, the best uses for home loans are to purchase goods or services with long-term benefits, such as home improvements to increase the value of your property. The riskiest uses of a home loan include going on vacation or buying a car, as you could end up paying a lot of interest on a purchase that has only short-term value or has declined in value. .

Also, beware that some unscrupulous people or companies (including home repair contractors) offer high-cost, high-risk home loans to seniors and those other consumption.

Reverse Mortgages: These are home equity loans for homeowners 62 years of age and older. Generally speaking, a reverse mortgage is a loan that provides cash that can be used for any purpose, and principal and interest payments are typically due when you move, sell, or pass away. A reverse mortgage is also different from other home loans in that you don’t need income to qualify and you don’t have to make monthly payments.

While reverse mortgages can be a valuable source of money, they also have some serious potential downsides. In particular, you will reduce your principal, perhaps significantly, after adding the interest fee.

“A reverse mortgage can help in certain situations, such as when you have large unpaid medical bills, for major home repairs, or to help people with low fixed incomes.” make a living, “However, you are reducing the percentage of ownership in the home, which means that the inheritance you leave to your heirs may be significantly reduced or you may have much less money available for other purposes. other purposes, such as buying later in a retirement community. This is why a reverse mortgage is often used as a last resort, and not as part of a retirement strategy. “

Also, fees can be high, and that can make a reverse mortgage a bad choice to cover relatively small expenses.
Life Insurance: People mostly think of life insurance as a source of income when someone dies, but they forget that many insurance policies can also be a source of cash at other times.

If you have a cash value life insurance policy, you can borrow against this amount and repay the loan with interest or a corresponding reduction in the death benefit. Example: If you have a $100,000 life insurance policy, but owe $20,000 on a loan from that policy, your heirs will receive $80,000 as an insurance payment.

There are other options available to people who have been diagnosed with a terminal illness and have no other way to pay their costs. An example is a life insurance policy that may pay a “quick death benefit” to a qualified policyholder – typically up to about 50% of the policy’s face value – in the form of lump sum payments or installments. Monthly payments are deducted from the face value of the policy. When the policyholder dies, the remainder of the death capital will be paid.

Another option is to “sell” your life insurance policy for about
0-80% of face value in exchange for the right to be paid the full amount upon your death. This is known in the insurance industry as “settling the viaticum”.