Real Estate

‘Bucket’ Approach to Spending Reduces Stress of Retirement

Daily Real Estate News - January 16, 2019 - 4:13pm

(TNS)—Anyone retiring in 2019 could understandably be feeling a little skittish.

There’s retirement research showing market declines in the first few years can devastate a portfolio’s chances of providing enough income for life, and recent volatility after a nearly decade-long bull market is worrisome.

Interest rates moving higher could be a good sign, in theory, for someone hoping to build ladders of CDs, for example. On the other hand, if it also ushers in an era of rising inflation, that’s troubling, too. A prolonged government shutdown could have even more of an impact on the economy.

If delaying is no longer an option, either because of health, the job market or simply your own conviction, consider building in a few contingency plans. Several financial advisers contacted for this article say they are carving out cash buckets for retirees’ living expenses. Some of them take spending money directly from the cash bucket, replenishing it with stock gains periodically, while others keep the cash as a reserve to draw from during market downturns.

Either way, they say the cash acts as a volatility buffer, allowing clients to refrain from panic selling into a market decline.

“Creating a bucket strategy can help clients compartmentalize assets designed for certain purposes or periods of time,” says Ashley Folkes, a financial planner in Scottsdale, Ariz. “Having safe money to draw down from for the first few years alleviates some of the stress from the buckets (that are invested in stocks).”

Consider a couple retiring this year at precisely their full retirement ages, as defined by the Social Security Administration. The 66-year-olds will get a combined $3,000 a month in Social Security benefits and they have retirement accounts worth $500,000. Suppose the couple wants to withdraw $21,853 this year from savings, which is the spending rate recommended by BlackRock’s LifePath Spending Tool. Using a bucket strategy, the couple would put $65,559 into the cash bucket while investing the remaining $434,441 in a portfolio of 60 percent stocks and 40 percent bonds.

So, the couple will have about $260,665 invested in the stock market, $173,776 in bonds and the $65,559 in cash. Without the cash reserve, a 60/40 stock/bond allocation would mean the couple had $300,000 in stocks and $200,000 in bonds.

Clearly, the cash bucket creates a more conservative portfolio overall, which is important for retirees to understand as they try to find the appropriate amount of risk to cover their expenses and inflation.

Now, for the cost side of the equation.

Anyone about to retire should know precisely how much they are spending, though advisers says this is sometimes a big area for miscalculations. Particularly in the first few years, travel and hobby expenses can really add up, notes Mike Alves, a financial planner in Pasadena, Calif.

“Every client is different,” he says.

Rather than building in an unsustainable long-term withdrawal rate to accommodate a few trips in the early years, he carves out another bucket for big-ticket items. Clients see that bucket and know that when it’s gone, it’s gone, and they are left with their long-term withdrawal rate that pays the essentials, he says.

Janet Kidd Stewart writes “The Journey” for Tribune Content Agency. Share your journey to or through retirement or pose a question at journey@janetkiddstewart.com.

©2019 Tribune Content Agency
Distributed by Tribune Content Agency, LLC

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Categories: Real Estate

Where You’ll Find the Most Competitive Buyers

NAR Daily News - January 16, 2019 - 1:00am

Find out where home shoppers have the highest average credit and the ability to make large down payments.

Categories: Real Estate

Report Raises Concerns Over Dual Agency

NAR Daily News - January 16, 2019 - 1:00am

Consumers are confused when it comes to dual agency arrangements in real estate, cautions a new report from the Consumer Federation of America.

Categories: Real Estate

The Trending Kitchen Styles in Remodels

NAR Daily News - January 16, 2019 - 1:00am

Find out some of the top styles, features, and finishes in the kitchens that will most catch your clients' eyes.

Categories: Real Estate

2019’s Most Powerful People in Real Estate

NAR Daily News - January 16, 2019 - 1:00am

T3 Sixty releases its rankings of the most powerful leaders in the residential real estate industry. See any familiar names?

Categories: Real Estate

15 Cities That Bedbugs Love to Call Home

NAR Daily News - January 15, 2019 - 1:00am

These bugs are on the prowl. Find out where the thirsty parasites are most common.

Categories: Real Estate

Non-Owners Dream of Ownership, But…

NAR Daily News - January 15, 2019 - 1:00am

About 75 percent of non-homeowners believe owning a home is part of their American dream, but they haven’t made a move yet. Here’s why.

Categories: Real Estate

REALTORS® Help Reopen Key Programs as Shutdown Drags

NAR Daily News - January 15, 2019 - 1:00am

In another win for real estate, NAR successfully pushes the IRS to continue a mortgage program vital to keeping closings on track.

Categories: Real Estate

Top 5 Landscaping Trends for 2019

NAR Daily News - January 15, 2019 - 1:00am

The National Association of Landscape Professionals released its list of outdoor features that will dominate yard designs in the new year.

Categories: Real Estate

7 Signs of a Market Cooldown

NAR Daily News - January 15, 2019 - 1:00am

How to tell if your market is cooling and the ways you can adjust accordingly on behalf of your clients.

Categories: Real Estate

Would Buyers Benefit If Fed Pauses Rate Hikes?

NAR Daily News - January 14, 2019 - 1:00am

Notes from the Federal Reserve's latest meeting indicate it won’t raise interest rates until after March.

Categories: Real Estate

7 Safest, Most Affordable Cities in America

NAR Daily News - January 14, 2019 - 1:00am

These locations boast the lowest crime rates and home prices well below the national median of $300,000. Should your clients consider moving to one of them?

Categories: Real Estate

Sales Slump Forces Builders to Offer Incentives Again

NAR Daily News - January 14, 2019 - 1:00am

Twenty-three percent of builders in December lowered their prices and offered deals such as rebates for appliance upgrades, according to a new survey.

Categories: Real Estate

Homeownership Tenure at Highest Level in 18 Years

NAR Daily News - January 14, 2019 - 1:00am

More than a decade out from the last housing crisis, the trend of homeowners staying put longer is only deepening.

Categories: Real Estate

Where the Most Listings Are Undergoing Price Drops

NAR Daily News - January 14, 2019 - 1:00am

Discounted homes are becoming more commonplace, with 38 of the largest 45 U.S. markets seeing more price reductions in December, realtor.com® finds.

Categories: Real Estate

Household Tools That Cause the Most Injuries

NAR Daily News - January 14, 2019 - 1:00am

Find out which common instrument sends the most people to the emergency room.

Categories: Real Estate

Government Shutdown: Resources for Federal Workers Who Can’t Make Mortgage or Rent

Daily Real Estate News - January 13, 2019 - 1:02pm

(TNS)—As the government shutdown grinds into its third week, more than 800,000 federal employees and 4.1 million federal contractors are caught in the crosshairs. Federal workers will go without paychecks beginning January 11.

Some of these unpaid employees are nervous about their finances, particularly being able to make their monthly rent or mortgage payment on time. That’s not surprising considering a recent Bankrate.com survey found that 23 percent of Americans have no emergency savings in the bank.

Before we cover what specific lenders are doing for these federal employees, here’s some advice for anyone who is having trouble paying their basic bills.

Steps to Take If You’re at Risk of Falling Behind on Mortgage or Rent
If you don’t have any emergency savings or enough of a cushion to get by, here are other options to consider to keep the roof over your head:

Talk to your landlord or lender ASAP. Don’t wait until you’re behind on payments. Lenders may work with you to waive late fees, set up a repayment plan or offer loan forbearance. The key is to explain the situation, says Jeff Cronrod, a founder and board member of the American Apartment Owners Association, one of the nation’s largest residential landlord associations in the U.S. representing 100,000 property owners.

“Not all landlords are rich; they rely on those rent payments to cover their mortgages and property costs,” Cronrod says. “They understand this situation isn’t the tenants’ fault.”

Cut all unnecessary spending and talk to your creditors. Account for every dollar going out. Look at canceling subscription services, recurring home maintenance services and vacation travel—at least until the shutdown (or your own cash crunch) is over. Learn about other ways to cut back on spending and how to create a budget.

Additionally, monitor account balances and, if necessary, pay only the minimum on credit balances until your income is restored, says Mark Hamrick, Bankrate.com senior economic analyst. The Office of Personnel Management posted sample letters on its website that impacted employees can use to ask creditors for leniency on bill deadlines.

“Call and speak with creditors, such as auto loan providers or utilities, to see if they have flexibility on payments for temporary hardship cases,” Hamrick says. “While they will not likely forgive the debt, some creditors might be willing to allow a delay in payment.”

You’ll still owe the money, but it might not be owed immediately—and that can improve near-term cash flow to pay for immediate basic needs, such as rent or mortgage, Hamrick adds.

Explore short-term, low-interest direct deposit loans. Some institutions are offering “furlough” loans for clients who have their paychecks deposited directly into a checking or savings account. These loans don’t require credit checks and are often for a limited amount at a low interest rate. Contact your bank or credit union directly to inquire whether this is an option.

Tap an open home equity line of credit, or HELOC. If you already have a HELOC and are still in the draw period, you could pull out cash from your available line to make your mortgage payment. The average interest rate for a HELOC is 6.52 percent and 5.88 percent for a home equity loan, according to Bankrate.com data. That’s much lower than the average interest rate on credit cards, at 17 percent or more.

Be cautious about using credit cards or borrowing from retirement and 401(k) accounts. If you’ve exhausted all other options, paying for your rent, mortgage or other bills with a credit card can get you by if it’s an accepted form of payment; however, you don’t want to rely too heavily on credit cards because you’ll pay much higher interest rates than other forms of borrowing, making credit cards harder to pay off as interest piles on.

You may need to turn to your long-term savings and investments for emergency cash; however, you should do so with extreme care. Roth IRA holders may withdraw their own contributions—not earnings—without tax or penalty, but traditional IRA holders will pay income taxes and a 10 percent penalty on the taxable amount if you’re under age 59. The IRS reports that 401(k) holders can borrow up to half of their account balance (a maximum of $50,000) tax-free, but funds must be repaid within five years in most cases. The catch is that you have to stay with your current employer for the duration. If you lose your job, you’ll have 30-60 days to repay the loan or face penalties.

Since these options can severely disrupt your retirement plans, consider them as a last resort. Before pulling funds from any long-term investment, read the fine print and consult your tax adviser.

Mortgage Lenders and Financial Institutions Offer Relief
Some of the nation’s largest mortgage lenders and credit unions are offering assistance programs to clients impacted by the shutdown. Here’s a look at some of them:

  • Fed Choice Federal Credit Union lists several relief options for mortgage and banking clients online, including short-term, low-interest furlough loans and mortgage refinancing options. Visit the credit union’s website for more information.
  • USAA is offering a low-interest, direct deposit loan to members who are active duty Coast Guard and National Oceanic Atmospheric Administration, or NOAA, employees only. Call (800) 531-8722 for assistance.
  • Navy Federal Credit Union is offering a zero-percent APR loan up to $6,000 during the government shutdown. The assistance is open to federal government employees and active duty members of the Coast Guard whose pay has been disrupted by the shutdown, and have an established direct deposit account. You can register on Navy Federal’s website, in branches or by phone at (888) 842-6328. Members impacted by the shutdown who don’t meet the eligibility requirements should visit a branch or call to discuss their situation.
  • Bank of America advises its mortgage clients to call its assistance line at (844) 219-0690 or visit one of its branches to inquire about the Client Assistance Program, says spokesman Lawrence Grayson. “We’re closely monitoring the situation and will work with clients on a case-by-case basis,” Grayson says. “Relief options may include late fee refunds or waivers, repayment plans or loan modifications.”
  • Quicken Loans is waiving all late fees for clients who may miss a mortgage payment due to the shutdown. For help call (800) 508-0944 or email Help@QuickenLoans.com. Here’s part of their emailed statement: “During the government shutdown, just like every day, we are fully prepared to accommodate each clients’ unique situation—especially those that may be dealing with any financial hardship—to help them through a period of uncertainty.”
  • S. Bank says it will assist customers who may be eligible for mortgage relief programs, including loan forbearance and deferred first payment dates for new mortgages. Payment plans may also be available for those who qualify, says spokeswoman Cheryl Leamon. For more information, call the U.S. Bank mortgage customer service line at (800) 365-7772.
  • Wells Fargo is offering forbearance or other payment assistance programs to its mortgage clients on a case-by-case basis. Call (888) 818-9147 or visit Wells Fargo’s website for more details.

If your loan servicer isn’t on this list, call your lender directly to find out what assistance options are available. Your current loan servicer may not be the lender that closed your loan; home loans are often resold on the secondary mortgage market to other companies after closing. Check your most recent mortgage statement to find the name and contact information of your loan servicer. 

©2018 Bankrate.com
Distributed by Tribune Content Agency, LLC

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Categories: Real Estate

In Memoriam: 1987 NAR President William M. Moore

NAR Daily News - January 11, 2019 - 1:00am

The widely respected industry leader from Colorado opened REALTORS®’ eyes—and the public's—to the value of the trademark.

Categories: Real Estate

Gary Keller Returns as CEO at Keller Williams

NAR Daily News - January 11, 2019 - 1:00am

The co-founder of Keller Williams is assuming the role of CEO once again. Find out why he’s back.

Categories: Real Estate

Mortgage Rates Fall to 9-Month Lows

NAR Daily News - January 11, 2019 - 1:00am

Lower mortgage rates should help firm up home sales, says Freddie Mac’s chief economist.

Categories: Real Estate