The most popular reverse mortgage program is the Home Equity Conversion Mortgage (HECM), which is insured by Housing and Urban Development (HUD).
New rules from HUD add protections for certain surviving spouses after the death of a reverse mortgage borrower. Until recently, if the non-borrower spouse was not on the loan, he or she was not entitled to remain in the property following the death of the borrower. But under HUD’s new rules, non-borrowing, surviving spouse can remain in the home if specific conditions are met. These changes apply to reverse mortgage loans in which the borrowing spouse applied for a reverse mortgage before August 2014. In addition, the couple must have resided in the property as their principal residence throughout the duration of the HECM, and taxes, property insurance and any other special assessments that may be required by local or state law must have been paid.
The concern regarding non-borrowing spouses has been a source of many reverse mortgage issues. Here’s why: The amount of money a reverse mortgage borrower can draw is based in part on the age of the youngest borrower—and unless all borrowers are 62 or over, they would not qualify for a reverse mortgage.
For more information:
Reverse Mortgage Information
- Ask students to comment on the statement: “While a reverse mortgage can be used to supplement monthly income, some borrowers may face unintended obstacles and consequences”. What might be those consequences?
- Are the new rules from HUD effective in protecting senior citizens? Why or why not?
- Why should you talk to a qualified professional before deciding to get a reverse mortgage?
- Where can you find HUD-approved HECM Counseling Agencies near you?
“If a bull market must continually climb a wall of worry, then the current bull, which started more than six years ago, should be on the brink of exhaustion.”
As a preamble to Kiplinger’s 2015 Mutual Fund Rankings, this article describes the concerns that investors have about interest rates, corporate earnings, the economy, political upheaval, and other factors that could impact not only mutual fund investments, but all investments and the U.S. and the world economy.
In addition the article also provides links to Kiplinger’s Mutual Fund Finder tool and specific information about the top-performing mutual funds including large-company stock funds, midsize-company stock funds, small-company stock funds, hybrid funds, large-company foreign stock funds, small- and midsize foreign stock funds, global stock funds, diversified emerging-market funds, regional and single-country funds, sector funds, and alternative funds.
For more information, click here.
You may want to use the information in this blog post and the original article to
- Remind students that there are many factors that can affect mutual fund investments.
- Show students how to use the link to the Kiplinger Mutual Fund Finder tool that is described in the article.
- Stress the importance of a long-term investment program–especially when planning for retirement.
- Assuming you believe there is a strong possibility the value of your mutual funds will decrease over the next 12 months, would you sell your funds or would you hold them? Explain your answer.
- Depending on your answer to the above question, what factors did you consider to help make your decision?
- Pick one fund you believe could help obtain your investment goals. Then use the Kiplinger Mutual Fund Finder to research the fund. Based on the information, would you still want to invest in this fund.
About three in ten Americans have no emergency savings, according to a study conducted by Bankrate.com. This number has increased in recent years, mainly due to the lack of growth in household income. Without an emergency fund, people tend to encounter even greater financial difficulties. A person will often use high-interest debt to cover unexpected expenses. In addition to the 29 percent with no savings, another 21 percent have less than three months worth of expenses saved.
For additional information on emergency savings, click here.
- Have students ask several people who their might cope with a financial emergency.
- Have students create a plan for creating a emergency savings fund.
- What are methods that might be used to cope with a financial emergency?
- How might a person be encouraged to create an emergency fund?
To avoid financial disaster, several measurements are available for assessing a person’s personal financial stress:
- The Debt-to-Income Ratio is obtained by dividing your debts by pretax earnings. Generally this number should be less than 28 percent, without your mortgage, or 36 percent, including your mortgage payment.
- Discretionary Expenses involve spending for items other than fixed obligations and variable nondiscretionary items, such as food and utilities. Purely discretionary expenses may involve recreation and vacations. An analysis of these categories will allow you to delay, reduce, or eliminate various expenses to avoid financial difficulties.
- Emergency Savings should be able to cover three to nine months of living expenses. These funds should be readily available in savings or other easily liquidated accounts. Greater financial greater obligations will require a larger emergency fund.
- Additional Income involving wages or tips from a part-time job or selling personal possessions can provide a cushion in times of financial difficulty.
- Total Assets, both liquid and non-liquid, will reduce your vulnerability to financial turmoil.
For additional information on the personal finance stress test, click here.
- Have students calculate one or more of these measurements for their life situation.
- Have students prepare a short creative video with a summary of these measurements.
- Why is liquidity important for reduced financial stress?
- What actions would you recommend to for a person to reduce their personal financial stress?
Each year, America Saves (www.americasaves.org) conducts a survey or its program participants to determine the attitudes and behaviors of savers. The most recent study reports that:
- People save mainly for their emergency fund, retirement, or repaying debt.
- People in formal savings programs, such as America Saves, report saving larger amounts.
- Married respondents saved much more than single respondents.
- Females and males have different saving purposes; females favored saving for an emergency fund, males favored retirement saving.
- Savers involved in America Saves are saving more, are more confident in their ability to manage their money, and are managing their debt better while feeling more optimistic about their financial situation.
The complete Savers Survey report is available here.
- Have students talk to others about their savings habits and goals.
- Have students prepare a graph to monitor their savings activities.
- What actions can help encourage a person to have more effective savings habits?
- Why does being involved in an organized savings program result in more savings and better money management activities?
Many devices are used for effective money management. One is called “the financial flowerpot system,” with each imaginary pot representing an account where you “plant” the funds for achieving a financial goal. When you direct money into this account, it’s like watering and feeding your goal.
To fill up the “financial flowerpots,” start a regular saving and investing plan with the money automatically withdrawn from your paycheck or bank account. This automatic savings plan may be viewed as an automatic watering system for an actual flowerpot.
Three main flowerpots are recommended:
1. The Solutions Flowerpot is the emergency fund. These funds are available to solve problems and have a financial cushion, giving you financial peace of mind.
2. The Retirement Flowerpot is to save for your future financial independence.
3. The College Flowerpot is for those who are saving for their children’s education or for their own advanced studies in the future.
Smaller flowerpots may be used for other financial goals. For each flowerpot, set aside a savings amount each month that will grow to your desired goal in the timeframe you set.
For additional information on financial flowerpots, click here.
- Have students obtain information from others about the methods used to achieve financial goals.
- Have students propose a method they might use to achieve a financial goal.
1. What are the benefits of thinking of savings goals as financial flowerpots?
2. What are other potential savings goals for various household situations?
The average federal income refund for this year was nearly $2,900, resulting in tens of billions of dollars ready for use. Instead of spending those funds, financial advisors recommend saving for an emergency fund, retirement, or other household goals. Currently, these refunds represent an amount larger than the average annual personal savings rate of most Americans. Spending the refund on things you don’t need often results in reduced future financial security.
Also, consider reducing your withholding throughout the year. The refund you receive is only getting back money you lent the government over the past year at zero per cent interest. Instead, have an automatic withdrawal sent to your savings each month.
For additional information on saving your tax refund, click here.
- Have students conduct a survey of people to determine how tax refunds are used..
- Have students prepare an analysis of lost interest/earnings by taxpayers who received a large refund each year.
- What are the benefits of receiving a large tax refund?
- What are the drawbacks of receiving a large tax refund?
Pension advance lenders offer retirees and veterans a loan or cash advances in exchange for all or part of their pension payments. Paying back the advance or loan, plus the high interest and fees that such loans typically include, could threaten older Americans’ retirement security.
If you are considering a pension advance, follow these do’s and don’ts:
- If you are asked to sign up for life insurance with the pension advance, you could end up paying the insurance premium.
- If you are resorting to pension advances due to financial difficulties, consider getting financial coaching or counseling from a professional.
- Don’t be fooled by patriotic-sounding names, logos, or claims of government backing.
- Don’t give anyone access or control over your monthly pension payments.
For additional information, and learn more, click here.
- Ask students to research local non-profit credit counseling agencies and what services they provide.
- Why is it important not to give anyone access or control over your monthly pension payment?
- Why do people resort to pension advance loans?
- What are other alternatives to pension advance loans?
- What recommendation should you take to protect your retirement pension when considering an advance?