Seniors Faced with More Challenges in Today’s Environment

Many seniors or those nearing retirement are nervous about what the financial markets have done to their retirement nest egg. While it is no fun to watch the markets go up and down, it is even harder to have to deplete accounts in order to pay bills while the market is down. This double dip is worrisome for most but seniors seem to feel as though they are under attack from all angles.

When asked, most pre-retirement age adults (50-62) respond with the deflated realization that they will more then likely be working well into their late 60’s or early 70’s. The average retirement nest egg set aside by this age group is about $140,000 in liquid assets.

There are several steps that most seniors can take to solidify their financial picture.

I urge each and every senior to consider a few facts. Most seniors have assets that can be utilized and tapped to provide a safety net of available liquid funds while actually reducing their monthly debt. The number one asset seniors need to put to use is their biggest asset – their home. First and foremost, empty nester retirees should consider downsizing their homes to something more economical, easier to maintain and less costly. Take this for example, the average real estate tax base in New Jersey is approximately $6,000 to $7,000 per year on a home valued at $200,000 plus. Add to that the average cost of homeownership through upkeep, maintenance, insurance etc approximately $15,000 per year, this assumes the home is owned free and clear with no mortgage. At a cost of $22,000 per year and $140,000 in retirement nest egg, you can see it won’t take long to deplete your retirement. If downsizing is not an option, then serious consideration has to be given to a reverse mortgage. This tool, provided by the government has to be considered in any serious financial plan that takes into consideration the welfare of the senior and not just that of the financial planner. Although there are pros and cons associated with reverse mortgages, many seniors have effectively positioned themselves to benefit from this well known, often irrationally feared and under utilized product.

I also urge seniors to evaluate another useful untapped asset that can be used for a more comfortable retirement. Did you know that over 90% of all life insurance products Never payout. That’s right, although you will not hear too many insurance companies tout this fact it is absolutely true. Consider that a majority of policies issued are term policies and you can easily see why. Term policies are just that, they are issued for a specified term and at the end of that term, the insured is asked to either renew at extremely higher premiums, convert the policy to permanent insurance (often at higher premiums) or simply allow the policy to lapse. In these strained times, most seniors elect the latter and allow it to lapse. Read the periodicals, talk to your insurance company or go online and you will find that many so called experts will gladly point out the evils of selling a life insurance policy to a third party. Consider the source of those articles. Insurance profit models are actually based on a high probability that they will not have to payout on most policies issued. If more seniors begin to realize that they can actually benefit from the sale of that asset while still living, the insurance companies profit models start to shrink as more guaranteed payouts on policies result.

So what does that mean to you? Well if you own a life policy, it may be possible, depending on your age and health status to sell that policy and turn it from a liability (monthly premiums) to an asset by selling it. In fairness, there is no way to tell you in this article how much you could receive by selling your policy, the amount, if any, is based on your individual circumstances. But I can tell you this, if your policy lapses, you won’t receive a penny.

So my dear seniors, its time to relook at your finances with a different set of glasses. Use the assets you spent your lifetime building to make sure that the golden years of your life are spent with financial freedom. Your home and your life insurance policy are worth more then you think, its time to put those assets to work for you.

Anthony Piccone