Sometimes life has a way of kicking you when you are down. It is almost expected by the time you retire, but maybe you feel like you have things worked out and you are prepared for the worst.
Unfortunately, odds are that you’re going to feel pinched at least once.
Whether it’s because of a health scare of an unforeseen accident or a new roof needed on your house, you’re going to need money. And while selling your blood to the local blood bank might sound like a feasible idea, it’s not going to get your head above water.
So what do you do?
A Reverse Mortgage
One of the most common ways to gather fast funds could be to take out a reverse mortgage. While this may not sound like an optimal solution, in the event of something almost catastrophic, it could be your only source of quick bucks.
Basically, with a reverse mortgage, you take money against your home. If you own the home, you basically take a lump sum or payments from a financial institution in exchange for a sort of lien.
There are multiple benefits to that, of course.
• You will receive funds quickly and usually in enough quantity to take care of any sudden expenses that could arise without warning.
• You get to stay in your home and enjoy it. It’s not selling your home, but taking a form of payment against it.
• The mortgage companies that specialize in this are easy to find. You really only have to watch television for a limited amount of time before some celebrity is seen parading their sponsor’s product, complete with spiffy toll free number, before your eyes.
However, there are some drawbacks. Not only are they drawbacks, but they are quite major in terms of potential impact.
• It is a loan and it will need to be paid back. There have been horror stories concerning people’s homes being lost to the companies upon their deaths, leaving their heirs with nothing. This could be a drawback if the home is a family home, one with generations of history and memories.
• Like any loan, there’s going to be an interest rate. No one has ever mistaken a loan shark for a dolphin, coincidentally. You have to know upfront that this isn’t free money and that it has to be repaid one way or the other. If you take this loan, or mortgage, know that you will need to budget for payment or a lump sum payout if you want to avoid any potentially greater negative outcome.
If you can deal with a mortgage and feel that your financial predicament is short-term, this sort of reverse type plan could be more than beneficial for you. In fact, it could save your shirt. But if you see a long-term issue, be aware that you are putting your home on the line.
Selling Your Vacation Home
Many people once they have hit retirement age have managed to accumulate assets. Some of them could be large, such as a vacation or rental property. If faced with an unexpected financial obstacle, unloading something could help alleviate the stress.
There are multiple bonuses to doing something like this; several of them could long lasting and more significant than previously thought.
• Selling a vacation home would give you surplus of funds. It would allow you to pad your bank account for a good while or at least offset a sudden, painful financial issue.
• You would no longer be responsible for the upkeep on the property. Saving on homeowner’s associations fees, if applicable, as well as utilities and taxes can help even more. Even a few thousand dollars left over at the end of the year could help you in all aspects of your life, be it paying for insurance or medications that you might need.
• You will also remove some worry you have by having additional property. You won’t have to worry about maintaining it, you can drop the home insurance, and stop worrying about security for an unoccupied dwelling. On top of that, many prime vacation spots lie on the beaches or in areas of bad weather. No longer will you have to watch the hurricane reports and worry that, somehow, your roof is going to end up floating through the center of downtown.
Like all things, however, there are drawbacks.
• If your second home is used for rental income, you have to consider that you will no longer have that additional income per month. If your budget is reliant on the influx of cash at regular intervals, you have to make certain that you can go without the stipend or else your financial windfall will be for naught.
• You are losing a major asset. If you sell your second property, you will be relieved of the stressful side of it, but you will also lose the good things. No longer will you have that snazzy condo next to the beach to fall back on. Your children won’t inherit it, and it can’t be used as collateral later in the event of something else.
Giving up a second piece of property isn’t a decision to be taken lightly. You might find yourself regretting giving up that oasis, especially if you happen to thoroughly enjoy the use of it. You have to consider that, if you do sell it, will the financial results warrant giving up the joy and flexibility that the ownership allowed.
Unload Your Unused Assets
Odds are, you have accumulated more than real estate. Many people hold onto cars well past their prime and that’s a good thing. Antiques are in! That boat of a sedan that you purchased new 25 years prior may actually be worth more now than before, something that could potentially shock and awe your spouse. Even baseball cards or collectibles could net you a quick few bucks. Luckily, at your age, you’ve most likely kept something at some point that you thought might be worth something one day. That day, my friend, has come.
Nostalgia is a growing market. Shows such as Pawn Stars and anything on the History Channel will show that people like to remember days long past. How many times have you passed a shiny 1957 Bel Air and thought of poodle skirts or hot rods? Even if you weren’t alive, or old enough to enjoy, the 50s and 60s, antiques resonate with the public. As a result, things have value. Like a drug or a drink, people want to feel good, to enjoy themselves. If you’re sitting on, or in, a classic car, you might as well cash it in if you aren’t using it. Your pockets could become extremely flush if you do, and that’s something that could help you get over that mid-life hump of a financial crunch.
However, before you sell that signed poster of the Rolling Stones, ask yourself if you can part with it? Really part with it? With obtaining property, collecting things, people collect memories. Selling a baseball card isn’t like selling a newspaper. If you sell a baseball card that your father gave you for your birthday, are you going to be okay with that later? Are you going to miss it? If so, odds are you can’t replace it. You might find another Mickey Mantle, but it won’t be that Mickey Mantle. Like all things, you have to decide if you can live without it. If you can’t, there are other options.
Taking Lump Sum Payments
There are businesses that exist only to give you money–with a catch, of course. If you have a settlement, or even a long lasting retirement account, odds are that some business will offer you cash upfront in exchange for your payments.
Before you go laughing all the way to the phone, then the bank, you need to stop and consider that for a moment. Sure, you’ll have the money in hand, but at what real cost?
• No one gives money away for free, and these companies are no exception. It may be your money, and you might need it now, but they aren’t going to give you all of it. Many companies will give you a fraction of the actual worth, almost preying on your need for assistance. They are not necessarily in the same category as loan sharks, but they are definitely going to get their share of the apple.
• You cannot just undo it. If your $500k annuity just turned into $300k or less, there’s no going back. If you take the payment, that’s what you have. It is gone with no further recourse, no payments, no anything. You have to stop and think about that for the future as well as the present.
• Again, these companies are in it to make money. With hired spokesmen and huge amounts of airtime, you know they have to take their pound of flesh and do so very liberally. Always read the fine print and go with a company only after researching it and making sure they are on the up and up. And remember, just because it’s on the internet doesn’t mean it’s necessarily true.
Like all ways of obtaining fast cash, you have to think it through. Don’t rush, take your time and really make a checklist about what you need, why you need it, and what you’re willing to give up in terms of long term financial freedom in order to acquire a quick fix for your predicament.
If You Just Need a Little Help
There are times when it is not so dire that you are willing to sell your estate to keep above water. There are times when you just need a little help with the bills or with the expenses you might have.
• Consider downsizing your home if you are not truly attached to the place where you live. Shaving off the additional square footage could not only save you in terms of property taxes and utilities, but downsizing could net you a profit that could help finance the remainder of your retirement.
• Snip any unnecessary expenses by strategizing. It’s becoming far more common for people to get their entertainment via the internet rather than cable or satellite. Sometimes those bills alone are 100 or more dollars per month. While it does not seem like much, it could help with a tightening budget.
• If you’re really desperate, don’t hesitate to apply for assistance. Programs were created to help, and if necessary food assistance, even utility assistance can help keep your head above water.
The main point is that, if there’s a will, there’s a way. If you don’t need it, or want it, you should sell it. If it’s too big, downsize and get something more manageable. You should be focused on enjoying your retirement more than anything else and financial woes should be the least of your worries. Strategize about what is truly necessary for you to be happy and work from there. As long as you pay attention to companies that prey on desperation and think three steps ahead, you should be fine.