Tax Season Again

If you are retired and living in a state that has income tax at the state or local level you are giving away money. This means you Oregonians and Californians. Retired persons typically have very few income deductions and having a portion of Social Security and all of one's pension or IRA payments taxed is a hit to the lifestyle. In Oregon it only takes about $8,000 in income to hit the 9% rate. NINE percent! I wrote a post last year that discusses this and other concerns and I have it posted below.

Originally posted on this blog, March 22nd, 2016, by Rod Sager

I have written extensively on this site about the lack of state income tax in Washington State. Many readers may live in another state such as Oregon or California. Unless you live in Washington or one of six other states you will likely be filling out second income tax return this year. Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming have no income tax. New Hampshire and Tennessee have no wage income tax but they do tax dividends and interest which can adversely effect the retired.

Most of the states without an income tax do have a sales tax. A notable exception is the State of Alaska which has neither tax. New Hampshire which has a partial income tax as noted above, also has no sales tax.

Washington State has a sales tax. For retirees and frankly most other people earning legitimate income, a sales tax is better than an income tax. An income tax punishes those that save. A sales tax only effects consumption.

Higher earners get seriously clobbered by an income tax. According to an editorial Oregonian article, Oregon taxes annual income from zero to $3250 at 5% and then 7% to $8150, 9% to $125k, and then 9.9% for the "wealthy". Oregon taxes the poor. That's a special kind of nice; isn't it? According to the Oregonian article 70% of Oregonians fall into the 9% bracket. How is if "fair" that Oregon, one of the nation's "poorer" states ranked 29th in income, has 70% of the people falling into the 9% bracket?

Most importantly, if a retired person diligently saves for retirement and or has a generous pension, states like Oregon will come after you like a hungry lion. Seriously taxing 9% on income over $8150? The compassionate government of Oregon will tax the guy that lives in a tent under a bridge at 5%? Really? That just sucks.

Meanwhile in Washington State the sales taxes do not tax food and medicine and other core essentials so they do not "punish" the poor like Oregon does.

Oregon treats you like you are in the dreaded top 1%, when you are "rich" and make more than a lousy $8151 A YEAR. Oh yes, the state lowers the boom on your decadent lifestyle with a 9% tax on that burger flipping income of $12,000 a year. Please, soak up the full effect of my heavy sludge of sarcasm on this. Seriously Oregon? $8151? 9%, really? According the the Federal government an individual is considered below poverty with an income of less than $11,770 per year. People earning less than $11,770 should pay NO TAXES at all on that income. The Oregon government would have you believe that they are some sort of Robin Hood, but in reality they are just robbers in hoods.

Retirees are well advised to steer clear of states with a heavy handed income tax. Our southern neighbor, Oregon has a tax that brutally offends the poorest among us; and if you are in a more comfortable income bracket, they will plunder you like a 18th century pirate. All the while those vile politicians smile and tell you how well they take care of the poor with your taxes. Oregon's government is a sickening wretch that should be ashamed of that horrendous affront to humanity they call an income tax. That is but one man's opinion; one should do their own diligent research before deciding upon where they shall retire. As always when making any decision that involves taxation consult with your trusted tax professional.

Where to Retire in Washington State

So Washington State is a tax friendly state for retirees but only average on taxes over all. The reason for this is that retirees are most effected by income tax. Having the fixed pension and social security benefits 100% free of state level taxation is a huge plus for the retired. Washington however has other expenses that are average or above average.

The largest and most glaring expense is housing costs. West of the Cascades retirees will find real estate to be very expensive. East of the Cascades however pricing tends to fall at or just above the national median.

East of the Cascades will provide dry weather with 250 or more sunny days a year. This dry weather carries the cost of much colder wintertime temperatures. Not North Dakota cold but sometimes extreme cold sets in on the Eastside in places like Ellensburg, Spokane, and Wenatchee. The Tri-Cities area is the most mild of the bunch east of the Cascades.

The western side of the Cascade range is the iconic Washington State. Lush and green with a steady flow of rain over the course of 5-9 months of the year. But the western half is flanked by the moderate Pacific Ocean climate that keeps snowfall to a minimum in the winter and summertime heat at bay in the summer.

It is truly hard to beat Washington State for scenic beauty.

In Southwest Washington State retirees have the advantage of being adjacent to Oregon. Unlike Washington which has no income tax, Oregon has perhaps the most aggressive income tax in America. But Oregon has no sales tax. Living in Southwest Washington makes playing in Oregon close and easy and grants the retiree the best of both.

Here is my general data for selected cities in Washington State. Included is a rounded population figure, relative location to Seattle, Average temps for winter and summer as well as other climate data  from the Western Climate Data Center. Median home price. The political climate measured as, left, split, right, etc.

Bellevue

• Population : 135,000
• Greater Metro : 3.7 million (Seattle-Tacoma Metro)
• Locale : Lake Washington, Coastal, Forest, and Windward Cascade Mountains
• Elevation : Sea Level - 800 feet
• 10 miles east of Seattle via I-90
• Nearest major city : Seattle, 10 miles west via I-90
• Average January low / high temp : 36 / 45
• Average July low /high temp : 50 /78
• Average annual rainfall inches : 35.6
• Average annual snowfall inches : 8.9
• Median home price : $751,300
• Median household income : $92,942
• Political climate : left
• 2016 Presidential candidate that carried county : Clinton 72.1% (King County)

Bellingham

• Population : 80,000
• Greater Metro : 212,000 (Whatcom County)
• Locale : Puget Sound, Coastal, Forest, and Windward Cascade Mountains
• Elevation : Sea Level - 800 feet
• 89 miles north of Seattle via I-5
• Nearest major city : Vancouver, BC, 54 miles north via I-5
• Average January low / high temp : 30 / 44
• Average July low /high temp : 50 /68
• Average annual rainfall inches : 36.5
• Average annual snowfall inches : 8.9
• Median home price : $348,700
• Median household income : $39,301
• Political climate : left
• 2016 Presidential candidate that carried county : Clinton 54.9% (Whatcom County)

Ellensburg

• Population : 19,000
• Greater Metro : 42,000 (Kittitis County)
• Locale : Leeward Cascade Mountains, Dry Valley, Agriculture
• Elevation : 1,500 feet
• 107 miles east of Seattle via I-90
• Nearest major city : Seattle, 107 miles west via I-90
• Average January low / high temp : 19 / 34
• Average July low /high temp : 54 /84
• Average annual rainfall inches : 8.9
• Average annual snowfall inches : 22.4
• Median home price : $217,900
• Median household income : $26,978
• Political climate : split - lean right
• 2016 Presidential candidate that carried county : Trump 53.7% (Kittitis County)

Everett

• Population : 108,000
• Greater Metro : 3.7 million (Seattle-Tacoma Metro)
• Locale : Puget Sound, Urban Coastal, Leeward Olympic and Windward Cascade Mountains
• Elevation : Sea Level - 600 feet
• 28 miles north of Seattle via I-5
• Nearest major city : Seattle, 28 miles south via I-5
• Average January low / high temp : 33 / 45
• Average July low /high temp : 53 /73
• Average annual rainfall inches : 35.7
• Average annual snowfall inches : 7.3
• Median home price : $303,500
• Median household income : $50,874
• Political climate : left
• 2016 Presidential candidate that carried county : Clinton 54.3% (Snohomish County)

Friday Harbor

• Population : 2,160
• Greater Metro : 16,200 (San Juan County)
• Locale : Puget Sound, Islands, Touristy
• Elevation : Sea Level - 200 feet
• 103 miles northwest of Seattle via I-5 and WS Ferry
• Nearest major city : Seattle, 103 miles southeast via I-5 and WS Ferry
• Average January low / high temp : 36 / 46
• Average July low /high temp : 49 /71
• Average annual rainfall inches : 24.97
• Average annual snowfall inches : 4.5
• Median home price : $439,300
• Median household income : $41,242
• Political climate : left
• 2016 Presidential candidate that carried county : Clinton 66.6% (San Juan County)

Long Beach

• Population : 1,350
• Greater Metro : 58,000 (Clatsop County OR / Pacific County WA)
• Locale : Pacific Ocean Beach, Coastal Mountains, Forest
• Elevation : Sea Level
• 171 miles southwest of Seattle via US 101 and I-5
• Nearest major city : Portland, OR, 112 miles southeast via US 101 and US 26
• Average January low / high temp : 36 / 49
• Average July low /high temp : 52 /66
• Average annual rainfall inches : 79.6
• Average annual snowfall inches : 1.1
• Median home price : $224,100
• Median household income : $27,916
• Political climate : split - swing
• 2016 Presidential candidate that carried county : Trump 50% (Pacific County)

Olympia

• Population : 50,000
• Greater Metro : 297,000 (Thurston County)
• Locale : Puget Sound, Coastal, Forest, and Coastal Mountains
• Elevation : Sea Level - 500 feet
• 61 miles southwest of Seattle via I-5 
• Nearest major city : Seattle, 61 miles northeast via I-5 
• Average January low / high temp : 32 / 45
• Average July low /high temp : 50 / 77
• Average annual rainfall inches : 50.8
• Average annual snowfall inches : 16.0
• Median home price : $258,000
• Median household income : $49,864
• Political climate : left
• 2016 Presidential candidate that carried county : Clinton 53.2% (Thurston County)

Port Angeles

• Population : 19,000
• Greater Metro : 73,000 (Clallam County)
• Locale : Straight of Juan de Fuca, Coastal, and Olympic Mountains, National Park
• Elevation : Sea Level - 200 feet
• 82 miles northwest of Seattle via US 101 
• Nearest major city : Seattle, 82 miles southeast via US 101 
• Average January low / high temp : 32 / 45
• Average July low /high temp : 56 / 75
• Average annual rainfall inches : 35.9
• Average annual snowfall inches : 11.0
• Median home price : $167,067
• Median household income : $40,035
• Political climate : split - lean right
• 2016 Presidential candidate that carried county : Trump 47.6% (Clallum County)

Seattle

• Population : 684,000
• Greater Metro : 4.5 million (Seattle CSA)
• Locale : Puget Sound, Urban Coastal, Leeward Olympic and Windward Cascade Mountains
• Elevation : Sea Level - 300 feet
• Nearest major city : Seattle, 0 miles 
• Average January low / high temp : 37 / 45
• Average July low /high temp : 50 / 77
• Average annual rainfall inches : 36.2
• Average annual snowfall inches : 11.0
• Median home price : $609,100
• Median household income : $70,172
• Political climate : left
• 2016 Presidential candidate that carried county : Clinton 72.1% (King County)

Spokane

• Population : 213,000
• Greater Metro : 698,000 (Spokane-Cour D'lene CSA)
• Locale : Interior high plain, Interior Mountains, Forest
• Elevation : 1,800 - 2200 feet
• 279 miles east of Seattle via I-90 
• Nearest major city : Seattle, 279 miles west via I-90
• Average January low / high temp : 22 / 33
• Average July low /high temp : 56 / 84
• Average annual rainfall inches : 16.3
• Average annual snowfall inches : 45.5
• Median home price : $176,900
• Median household income : $39,385
• Political climate : split - lean right
• 2016 Presidential candidate that carried county : Trump 49.9% (Spokane County)

Tacoma

• Population : 208,000
• Greater Metro : 3.7 million (Seattle-Tacoma Metro)
• Locale : Puget Sound, Urban Coastal, Olympic and Cascade Mountains
• Elevation : Sea Level - 400 feet
• 34 miles south-southwest of Seattle via I-5 
• Nearest major city : Seattle, 34 miles north-northeast via I-5
• Average January low / high temp : 34 / 45
• Average July low /high temp : 54 / 75
• Average annual rainfall inches : 37.6
• Average annual snowfall inches : 6.4
• Median home price : $241,400
• Median household income : $50,807
• Political climate : split - lean left
• 2016 Presidential candidate that carried county : Clinton 49.7% (Pierce County)

Tri-Cities

• Population : 194,000 (Kennewick, Richland, Pasco)
• Greater Metro : 253,000 (Metro)
• Locale : Leeward Cascade Mountains, Columbia River, Interior Lowlands, 
• Elevation : 550-700 feet
• 219 miles southeast of Seattle via I-82 and I-90 
• Nearest major city : Portland, OR, 216 miles west via I-84
• Average January low / high temp : 26 / 40
• Average July low /high temp : 60 / 91
• Average annual rainfall inches : 7.5
• Average annual snowfall inches : 9.5
• Median home price : $244,100
• Median household income : $67,496 (Richland)
• Political climate : right
• 2016 Presidential candidate that carried county : Trump 59.3% (Benton County)

Vancouver

• Population : 170,000 (275,000 pending annexations)
• Greater Metro : 2.2 million (Portland-Vancouver Metro)
• Locale : Columbia River, Columbia Gorge, Urban River, Windward Cascade Mountains
• Elevation : 25-500 feet
• 165 miles south of Seattle via I-5 
• Nearest major city : Portland, 7 miles south via I-5
• Average January low / high temp : 33 / 45
• Average July low /high temp : 54 / 79
• Average annual rainfall inches : 39.6
• Average annual snowfall inches : 6.5
• Median home price : $275,000
• Median household income : $47,379
• Political climate : split - swing
• 2016 Presidential candidate that carried county : Clinton/Trump 46.3% tie (Clark County)

Happy New Year

We are skating to the finish in 2016 and for those of us nearing retirement, it's about to inch a bit closer. This is a time of year for contemplation and reflection. Are you ready for retirement? Have you met with a qualified professional to evaluate your retirement needs? Have you planned which part of Washington State is bets for you? Ah ha, see what I did there?

Winter time is a good time actually to look at the Pacific Northwest. Anyone who comes here in the summer will immediately decide they want to live here. The wintertime however is when those coming from southern locales have to decide is it too cold east of the Cascades and is it too wet and gloomy on the west side?

Some retirees will have the dual arrangement, living here in the Northwest during the summer months and then making like a goose and heading south for the winter.

Whatever may be your plans, planning is required, else you truly have no plan. Qualified financial planners can help you determine how best to prepare with the resource you have. During this end of year reflection one is well advised to evaluate the status of the retirement plan.

Happy New Year!

Fed likely to move rates up next month

Retirees have been wallowing in crummy low interest rates for half a decade now. That is all poised to change as the Fed has indicated the next meeting in December will begin a slow increase in the Fed rate. Retirees generally need to keep money in safe harbors but rates on those types of account have been routinely under 1%. Inflation has spent the last 5 years chewing a hole in the pockets of our retired Americans.

The real estate market has been a huge beneficiary of these record low rates but now the stock market is on a tear and the real estate market seems content so it's time for Feddy to back off the throttle and let rates settle in to market levels.

For retirees it is a good time to consider buying or selling your home or refinancing it if need be while sub 4% rates are still attainable. Any assets in riskier classes should start migrating to safe havens like CDs, bonds and other income bearing investments. Of course any decisions being made in such matters should always be made under the council of a qualified loan officer and/or financial planner.

Buying power is strong right now for anyone thinking about buying a home. As the Fed moves into a less invasive position with rates, we will see a steady quarterly uptick in rates. Where the cost of money will rise, the benefit of saving will improve. Seniors need to be good savers since most are earning less in retirement than they did in the workplace.

Now is the time to consult your trusted professionals to make sure you are in the best position to weather the changes coming down the line.

Election Time, What does it all mean for Retirees?

This is not a political blog, nor shall it be in the future. But we are about to cast our ballots for the next President of the United States and we also will determine the fate of both houses of Congress and the oft underestimated state and local offices. Retirees have much to be concerned about all the way down the ballot.

At the top of this cycle's ballot are the presidential candidates. Our two major political parties both gave us big duds in my opinion and I didn't have to go out on the limb to make this suggestion. But for those of us nearing retirement or already in it, we still have to consider which candidate makes the best case for our situation. Down ballot the same. Although we are all mired in this rather ugly top ticket campaign, do not let that keep you from voting. State and local races are just as important as the big statewide and national seats up this time.

As this is not a political blog, I will refrain from endorsing any specific candidates. I also don't wish to get mucked up in the rhetoric of these politicians. There are many issues in any political campaign especially when looking at national campaigns. A President for example will appoint Supreme Court justices, write budgets, set general policy across the full spectrum of politics from social issues to fiscal management. All of these are very important to most Americans.

From a retirement standpoint, I believe that the fiscal issues have the most impact to retirees and near retirees. Frankly they are the most important issues we have regardless of one's age in my opinion.

If we go back to 1976, Jimmy Carter won the election and became the 39th President of the United States. Mr. Carter surely benefited from the events surrounding the Watergate scandal and the divided Republican party as Ronald Reagan made a very serious nomination challenge to the sitting incumbent, Gerald Ford, that went all the way to the convention. President Carter had a difficult time managing the crisis in Iran and also the economics of the time and ultimately lost his re-election bid to Ronald Reagan in 1980. Mr. Reagan was the last Republican President to truly stand on the traditional Republican platform of smaller government and lower taxes. His tax cuts were approved by congress but his budgets, that were filled with deep cuts in spending, were not. Unfortunately this led to large increases in the national deficit. Although the deficit was a problem, Reagan's policies led to the longest streak of economic expansion in US history that continued all the way through the Clinton Administration. One can only wonder what things may have looked like if Reagan had one party control.

Hillary Clinton. (image from her website)

Unfortunately for all of us, the national party platforms are not what they once were. Republicans had an opportunity in 2000 when Bush defeated Al Gore. President Bush came into office with his party controlling the house of representatives and a 50-50 Senate, the Vice President held the tie breaking vote. Mr. Bush, like his fellow Republican Ronald Reagan managed to get tax cuts passed. Contrary to commonly heard rhetoric his tax cuts were much different than Reagan's. Ronald Reagan slashed the top bracket that was at 70% and brought it down first to 50% then later to 39.9% where it stood till 2003. Mr. Bush lowered the top bracket a bit further to about 36%, an unnecessary move in my opinion. More importantly, the Bush tax cuts were by far the largest income tax reduction for poor and middle class Americans in the 100 year history of the income tax. Opposition politicians focused heavily on the small tax cut for the "rich" and ignored the deep cuts offered to poor and middle class Americans. Herein lies the problem, Mr. Bush did not submit budgets with cuts to offset the the reduced income tax. He had full one party control and yet failed to make the tax cuts pay for themselves. This runs counter to the party platform and in stark contrast to Reagan who did cut the budgets and it was the Democrat congress led by Tip O'Neil that blocked those budgets. President Bush enjoys no such excuse, he got the cuts and didn't bother to try and reduce spending.

Donald Trump, (image from his website)

I am not bringing these issues up to push the right over the left or vice-versa. Rather, I want to bring up the notion that since the departure of Ronald Reagan as President and later, Newt Gingrich as the Speaker of the House, the Republicans have gone off the rails fiscally. Yet the same can be said of the Democrats. Mr. Obama had one party control and in fact he entered office in 2009 with a super majority of Democrats in BOTH houses. His campaign platform was heavy on rhetoric about eliminating the Bush tax cuts, yet once in office and with a filibuster proof super majority, he chose not to do so. He increased government spending but failed to increase taxes to support it. The old Democrat platform was tax and spend, yet Obama chose to just spend. We have two political parties that have both gone off the reservation regarding their traditional party platforms. Republicans are cutting taxes and not cutting spending and Democrats are increasing spending without increasing taxes. This is a fail scenario either way my friends.

All of this is important to consider as 20 trillion in national debt coupled with some 60 trillion in unfunded liabilities weighs heavy on retirees. Our government may not be able to keep the promises of social security, medicare, and medicaid. These are programs that are very import to all but the wealthiest among us.

As someone considering their retirement, voting for candidates with strong fiscal ideas is important. If you support a larger more involved government, Democrats tend to fill that void. But be wary of these modern Democrats that spend, spend, spend but fail to take the unpopular position of paying for it with needed tax increases. Likewise, if you believe that our government should be lean and trim with lower taxes and less intrusion, Republicans are generally the way to go. But be aware of these modern Republicans that like to slash taxes but won't make the tough and often unpopular cuts to the budget to pay for it. This notion of borrowing to pay for services we can't pay for has to stop. All the way down the ballot look for candidates that support the ideal you believe in whether it is tax and spend or small government and don't be fooled by the lies of those new modern politicians that think we can have both. It is one or the other my friends, low taxes and minimal government or high taxes and bigger government.

My personal beliefs are that the federal government should be lean and out of our lives. The old school fiscal ideas of Reagan are true and solid. Unfortunately there are not many Republicans that actually follow those ideas anymore. That said, tax and spend with a balanced budget is better than low taxes with a huge deficit. Are there any Republicans out there willing to make the hard decision to cut spending to support lower taxes? In Congress, yes there are, but at the top level, not since Reagan.

Get out and vote, you don't get to whine about the system if you fail to participate in it. Do not overlook the local and state level races. These are often low paid and even part time positions that are held by everyday people like us, not power hungry establishment politicians with high levels of corruption. Vote down ballot and make a difference in the place that you live and yes try to figure out which one of these two turds we have at the top will best serve your interests and vote appropriately. Remember as the wheels fall off the federal cart, and they will, the lug nuts are very loose; local and state governments will have to carry the load. Down ballot we have great control over how that plays out and the people that run for state legislature and local commissions are accessible unlike our federal level politicians that rarely have time for us lowly commoners.

    

Oregon vs. Washington

Two great states in the mighty Pacific Northwest. Ducks versus Huskies, Beavers versus Cougars, Washington wins in the college football mascot contest, what about retiring? This region is arguably the top non-sun belt place in the country for retirees. What is the draw? The gorgeous scenery? The relatively mild climate for the latitude? The friendly people? All of the above my friends and in the case of Washington State the tax friendly environment is an added bonus.

I have discussed on this very blog numerous times the taxation difference between these two fabulous states, and Washington generally comes out on top. A couple of articles to review, here and here. If you have a strong taxable income from a healthy 401k or a pension, Washington State will save you thousands of dollars in taxes that our neighbor to the south will strip away from your bank account.

But what if you have a predominately tax sheltered income source? When the income tax issue is removed as a problem, Oregon can become competitive with Washington for retirees. Southern Oregon has a few areas that are very similar in climate to Northern California and the Oregon Coast has some breathtaking properties that are well suited to the retired. Oregon has no sales tax and that saves retirees that like to buy cars and other big ticket items more often than average a lot of money.

For Washingtonians, the sales tax issue is generally less a burden than the income tax. Although the state of Washington does have a "use" provision on the sales tax that requires residents to declare items purchased in Oregon but "used" in Washington, it is nearly impossible to enforce on things that are not registered, like vehicles. Many people flock to the stores in nearby Portland to buy TVs and other expensive items and as long as those items are not delivered in Washington the sales tax is generally avoided. Again the tax is technically still owed, it is just not economically enforceable. In principle Washington residents are supposed to pay the sales tax on all taxable items used in state and if items are purchased in Oregon, the store will not deliver to Washington State without charging the appropriate sales tax. In practice those items schlepped across the bridge in ones own private pickup or van are at the discretion of the buyer to report. Sales tax rarely is a larger burden than income tax and in Washington State it is even more prevalent due to the taxation dichotomy between the two states. As always any decisions being made based on taxation should involve a consultation with a professional tax advisor.

Those that might want to live on the lush green third of the two states west of the Cascade Mountains will find Washington and Oregon north of Eugene to be on relatively equal footing. South of Eugene Oregon begins to transition into a more California style topography and weather pattern, albeit a little cooler.

Oregon has well over 300 miles of coastline with charming little hamlets dotting the coast where as Washington is limited to just the Southwest corner of the state since the Olympic National Park occupies a huge chunk of the gorgeous Washington Coastline. Oregon has the advantage on coastal living in volume of properties but Washington has the best deals on coastal real estate so call it a tie, I suppose.

Ellensburg, Washington

Things get real iffy for the Oregon side of the issue when considering a drier climate east of the Cascades. Oregon shares the high desert plateau with Nevada and the elevation of places like Bend and Klamath Falls is well above 3000 feet and over 4000 in the case of the latter. This translates into significant snow in the winter and cold temperatures as well. Generally retirees are looking to avoid bitter cold and heavy snow. In Washington State, the central portion is just barely above sea level at the Tri-Cities and right around 1000-1500 feet at places like Ellensburg and Wenatchee. Although the winter climate is notably colder in Ellensburg than it is in Vancouver it is not as severe as the higher elevations in Central Oregon. Advantage: Washington State.

The state of Oregon does an excellent job of promoting both the Central Oregon communities and the Oregon Coast. So well in fact, that real estate prices in those two places are significantly higher than comparable spots in Washington State. This contrasts with the overall higher prices in Washington State for real estate when compared statewide with Oregon.

The bottom line is that taxation favors Washington State and geography is neutral with the advantage lying purely in the eye of the beholder.

Reverse Mortgage is worth a look, not for everyone but great for some.

Thinking Reverse Mortgage? There is a lot of bad information out there so just take a look. Reverse mortgages are not as good as the sales guys says but they are not the rip-off that some claim they are either. Under the right circumstances a reverse mortgage could be the ideal tool for you retirement needs. Read the article below for more information.

Originally published, May 22, 2014 by Rod Sager

The Reverse Mortgage has been around for quite awhile but many people are unaware that the FHA has made them very viable and affordable in recent years. Early reverse mortgages were burdened with outrageously high fees that made them a poor option for nearly everyone. The feds however cracked down on the less desirable practices and the result is a fabulous opportunity to get paid for living in your own house.

The ideal situation for a reverse mortgage for the retiree looking to downsize that giant house that the kids were raised in. Let's say a homeowner is 62 years old and lives in a house that is worth $300,000 and has a debt owed of $150,000. That homeowner can sell the house and walk with roughly $130,000 in cash. Options include buying a smaller house valued at say $225,000 and putting $100,000 down and making a small payment for the next 30 years which is likely the rest of his life.

What if he were to take that $130,000 profit and put it down on a reverse mortgage for a nice smaller but upscale home valued at $260,000. Now that homeowner has a nicer home say in Fairway Village and instead of making payments to the bank the he lives in the house free of charge until he dies. Each month interest is added to the principle balance.

After the reverse mortgage is over the bank will sell the home. If the home clears more money than is owed after the owner dies, his estate will receive the remaining proceeds. If the balance owed is higher than the proceeds the bank takes that as a loss and no action is due on the part of the heirs.

These programs are not for everyone, but for many they are ideal. Any person nearing the age of 62 should sit down with a qualified reverse mortgage professional and take a look at the options. Although the cost of doing a reverse mortgage is much better than it used to be, they are still a bit more expensive than a traditional loan.

I have seen many happy folks retire right here in the great state of Washington with a reverse mortgage and cash to spend on the things you are supposed to do when you retire. Relax, travel and have fun!