The 'Couv'

The 'Couv'

Tuesday, January 24, 2023

Reverse Mortgage? Free and Clear? Mortgage?

Some retirees find themselves sitting on a large equity pool from the family home they no longer need. There are a variety of options in this scenario especially when downsizing the home. Owning a home free and clear is often a goal for people when they retire. This can be an excellent tool for maintaining a similar lifestyle in retirement as enjoyed in the working years. Having a home free and clear is ideal for people that want to leave a legacy inheritance for future generations. If this path is chosen people should be mindful of scams that aim to secure title away from the owner. When a bank has a lien on a property it is much more difficult for title thieves to get at your property. This is one advantage to having a small first position lien against the home.

Some retirees that have strong fixed income may choose to hold on to their cash and carry a traditional mortgage note through retirement. There can be tax advantages to this position if income levels are high enough and other tax deductible schedule A items are present. It also helps to keep title thieves at bay with a lender lien in place.

The reverse mortgage can be a great way to ensure stable living arrangements till death do you part. Sometimes depending on the age of the applicants income can be derived from this method as well. This can be a good way to go for retirees that are house rich and cash poor or are carrying a smallish mortgage of 30-50% LTV. A reverse can eliminate the payment and carry a payment free home until the owner no longer lives there. It is possible to purchase a home with a reverse mortgage as well as refinance into a reverse from an existing free and clear house or even a financed home when LTVs are low enough. Age plays a major role in the value of a reverse mortgage. 

All three of these can be solid options but retirees should be careful to check with a qualified tax accountant and or their attorney to be sure they understand the ramifications of each scenario. Washington State does have favorable programs for senior citizen residents from property tax deferral and reductions to generous terms on reverse mortgages. 

Western Washington remains a great place to retire with year round mild weather and spectacular scenery.

Tuesday, December 27, 2022

Happy New Year!

Yes another year has come and just about gone. With this new year will come another 3.7 million people reaching age 65 in the US. Although retirement age varies widely depending on ones circumstances, 65 is the age that Medicare kicks in. Having stable and affordable healthcare is often the last piece of the "hey we can retire now" puzzle.

Retirees often try and choose a location close to their children and grandchildren. Sometimes the grand kids are in a state unfavorable to retirees. Places with a cold climate or high taxes. But Washington State falls into an interesting category for retirees. Washington has one of the nations strongest economies attracted a wide variety of workers from skilled labor, highly educated professionals, and unskilled labor. Thousands of working age people are moving to Washington every day to capture a high paying job in our amazing economy. 

Washington unlike California and Oregon offers retirees a nice break from excessive taxation. Washington is not the low tax Mecca a la Nevada, but the lack of a state income tax is always very attractive. Washington also offers a nice variety of climate. Although there isn't really a true "warm" climate anywhere in the state, there is the 'sunny side' and the 'rainy' side for sure. On the eastern side there is abundant sunshine but the price is harder winters. On the wet side the climate is mild all year round with four seasons that are all pretty relaxed. Washington remains the best northern state to retire.

So if you are thinking about retiring to a new locale, don't forget to check out the Evergreen State.

Tuesday, November 22, 2022

Why are savings rates not rising too?

This is a valid question that begs for an answer. Traditionally when lending rates rise so then does savings rates. However it seems banks are still not interested in paying any significant interest rate on savings accounts. Sure some 6 month CDs are now paying about 1.75% but compared to mortgage rates in the mid to high 7s it seems savings rates are not keeping pace. 

Retirees typically have incomes fixed to a pension schedule or 401k withdrawal schedule. Increases are limited and large increases in inflation will typically outpace any COLA adjustments on a pension or start draining the values on 401k balances at an unsustainable pace. 

The economy is simply not hot enough to justify these steep inflationary conditions and the shortage of fuel is purely a political mechanism rather than an actual shortage. But oddly the savings rates are not increasing in pace with lending rates and that leaves seniors and fixed income people in a bad situation. 

Retirees should reach out to local elected officials in the house of representatives and your US senator about relaxing limits of US oil production which will absolutely reduce the cost of goods in nearly every sector. Transportation costs are a primary driver in this inflationary cycle. 

Let your elected reps know how you feel and maybe some meaningful policy action will start to balance the inequity in this economy.

Tuesday, October 25, 2022

Inflation Eating Away Retirement Income

With inflation now swinging for the proverbial fences, retirees are watching their budget tighten every month. This past year we have seen inflation pressure the likes of which have not occurred in more than 40 years! Now more than ever, the heavy burden of taxation becomes a bigger thorn in the side of retirement plans. Retirees that live in states with no income tax keep a larger share of their fixed income each month. Even seniors on fixed incomes low enough to avoid state and local income tax, may have to find a job to supplement their income. Suddenly the ugly head of taxation appears. 

Washington State does not levy an income tax and that means retirees keep more of their money. Inflation may still nip at the heels of your bank account but more money will be deposited every month than living in a state with income tax. The diabolical truth about income tax is that is taxes money that people save. At least a sales tax only taxes money your spend on mostly discretionary items. Food in Washington is not taxed for example.  Western Washington State has what could easily be the most mild four season climate in the US. Sure a little snow falls in the winter, but the temps rarely dip below 20º. The summer temps rarely get above 95º and on those rare occasions the humidity is typically very low.

I like a four season climate but I would prefer to avoid those sub-zero affairs where going outside might kill you. I absolutely can't stand temps above 90º and most of Western Washington only sees about a dozen days above 90º each year. For those of you that are a little more climate hearty than I, Eastern Washington is sunnier all year long, It's a bit warmer in the summer and much colder in the winter, a true four season wonderland.

It's time to ditch the income tax and move to a state like Washington where you keep more of your money each month.

Tuesday, September 27, 2022

Is the Sun Belt Really all that?

Retirees still tend to flock to the sunny and warm parts of the country. Most of those areas are so nice in the wintertime, but many are unbearable in the summer. Retirees with enough money to have two houses often spend winters in Arizona and return to a northern climate area in the summer. For people looking to live in one place all year round the decision to ditch winter weather can be very uncomfortable in the summer. 

The annual United Van Lines moving report shows the following states had the highest percentage of inbound moves with retirement stated as the reason for the move.

  1. Florida (39%)
  2. South Carolina (37%)
  3. Arizona (36%)
  4. Delaware (34%)
  5. Idaho (29%)
  6. Nevada (29%)
  7. Wyoming (28%)
  8. Mississippi (28%)
  9. New Mexico (27%)
  10. Maine (27%)
For several years Washington State was the number one state to retire to in the northern latitudes but one can see that Maine, Idaho, Delaware, and Wyoming are ahead of Washington which failed to make the top ten for the first time in quite awhile. Washington's popularity has waned a bit most likely due to the high cost of real estate. The median home price in Washington State is significantly higher than any of the state on this top ten list. It should be noted that this particular list is a percentage and Washington still gets a high volume of retirees but we are also getting a lot of young professionals moving here and that waters down the percentage a bit. 

Here in the west, Arizona is the King Kahuna of retirement spots. They have reasonable priced real estate, but it is rising a bit, they have decent low taxes, and they are undoubtedly warm. I could not live in Arizona year round. I would rather freeze in the North Dakota winter than burn in the Arizona summer. Phoenix Arizona averages 110 days per year at or above 100º and nearly as many nights that failed to drop below 90º. Vancouver, Washington on average has... wait for it... ZERO days above 100º. Now before people freak out and point out each time the century mark was pierce I wrote "on average". A typical year produces about 0.4 100 degree days on average. I have recorded a few summers that had 3 or 4 and I once went 4 years in a row without recording one. 

For retirees trying to avoid the deep chill and heavy snow shoveling, Western Washington is the place. Snowfall is fairly light in most places West of the Cascades at lower elevations between sea level and 500 feet. It does get a bit drippy but the temperatures are comfortably mild 95% of the year.

Washington State remains an excellent place to retiree with no state income tax and mild weather in most areas. What are you waiting for?

Tuesday, August 23, 2022

Vancouver's Urban Retirement Community Under Construction

Workers on Vancouver's wonderful waterfront have been busy the last few months excavating the site of the massive Springs Living High Rise community on Block 18. The 12 story building will cover nearly all of the 1.29 acre site and feature three levels of subterranean parking. The excavation is more than 30 feet deep at this point. 

Retirees looking for the city living opportunity with all the creature comforts of a full service retirement community should look no further than the Springs Living at the Waterfront. The project should complete sometime in 2024. According to the Springs website the facility will provide independent living as well as assisted living and memory care. Its location right on the mighty Columbia will provide residents with breathtaking views of the river as well as city skyline views of Vancouver and the Waterfront.

The location has quickly become the premier Waterfront location int he entire Metro Area. A fabulous waterfront park and pier are just a short stroll out the front door. There are scores and scores of restaurants, tap rooms, wineries and more all within walking distance.

I would expect many Portlanders interested in city retirement living to flock to this as Washington's favorable tax situation will pad their wallets for years to come. The Springs is just one of many reasons to retire to Washington State.

Tuesday, August 16, 2022

With Inflation eating away Retirement, Income Tax is a Killer

Once again the ugly monster of retirement is taxes and income taxes tend to chew up net income. When coupled with the worst inflation since the Carter Administration, retirees should be real careful when choosing a new destination. 

Washington State continues to have no income tax or gains taxations. For retirees pulling income from investments or pensions, the lack of an income tax takes away some of the inflation pain. Income taxes are a bit hidden as they are typically taken out of income checks as payroll deductions. The net check is noticeably smaller than the gross check. Sales taxes are visible, right up in your face every time you buy something. This is why I refer to income taxes as a hidden killer.

Our state neighbor to the south has one of the most aggressive income taxes in the nation. Although Oregon's top bracket is not as brutal as states like California, New Jersey, and New York, it starts the 8.75% bracket at income as low as $9200 a year. Yikes! Income taxes tend to negatively effect savings rates. Since less money is available at the time of receiving income it can be difficult for saving. One can always cut back on expenses to save sales tax, but when your income is being eaten before you receive it, that's impossible to overcome.

During these inflationary times, Washington State again looks attractive for potential retirees. Especially when contrasted with Northwest Oregon.