The road map to a secure financial future, and knowing what you can afford to buy or rent after you sell your home, is all about planning.  Meeting with a financial planner is an important step in the process of knowing how long your retirement money will last and what you can afford to spend on your next home.

 

Too often I meet with senior customers who want to list and sell their home, but don’t have a clear picture as to what comes next.  They have no idea how much money they will need in order to live out their life, and they don’t know whether they should buy or rent, or what they can afford.  My next question is always, “have you met with a financial planner?” These folks are trained to review your financials and give you advice.  They can estimate, based on your assets and investments, what your projected monthly income will be for the rest of your life.  You will then be able to see what your income can support in a home or retirement community over the long haul.

 

Additionally, it is important that both spouses know the full extent of their financial picture.  Depression era babies are often of the traditional mindset:  the husband takes care of the bills and everything financial; the wife takes care of the cooking, laundry and the house.  That’s fine, but I believe in cross-training, because if you lose a spouse due to death or divorce, the other is left without a clue.  With seniors, occasionally I see the roles reversed, but not often.  And let’s face it, a good number of women outlive their spouses.  Regardless, it’s always wise for both spouses to know all about their assets, the name of a key advisor to call in case they need to suddenly step into their spouse’s role, where the files are kept, etc.  Read on…

 

We have all heard about shocking revelations where one spouse spends all the money and the other has no knowledge?  Recently, a neighbor had a heart attack and died unexpectedly.  His wife thought the finances were in order because her husband took care of everything.  In the midst of her grieving and dealing with estate issues, she discovered the husband had tapped their retirement and mortgaged the house to the max.  Their assets were depleted.  It was not long before the lender foreclosed on the house and this shattered woman was forced to leave her home.

 

Another scenario which happens all too often:  A newly widowed woman has been “taken care of” all her life and now finds herself alone.  She has never managed the money nor lived on a budget, and since they have always lived well, she thinks there must be enough money to last.  All too soon, the nest egg dwindles, and when it comes time to sell the house and move to a retirement community or assisted living facility, she cannot afford it. 

 

I am told that Savannah’s average annual cost for assisted living is about $45K a year. A good long term care policy should be in your plan, but you still must have the monthly income to support yourself above and beyond that coverage.   And, if you plan to move into a buy-in continuing care retirement community, they often require that you qualify based on your total assets, plus your monthly income.  If either falls short, you will not meet their qualifications to buy-in.  Financial planners can assist in this assessment and guide you accordingly.

 

Planning while both spouses are still alive is the solution to making sure you can live out the rest of your lives in comfort and with the proper finances in place.  Establishing an accurate budget will be an essential piece of the puzzle and your financial planner can provide you with forms to help you establish your budget.  You will be able to see if your income can support the new lifestyle you desire, and if not, how much of a draw from your capital you must take each month to meet your expenses.  That subsequent decrease in assets will be factored into your projections.   Your family longevity will also be a factor.   Your planner can then estimate how much you can spend on a home and project your monthly income for the rest of your life.

 

After your financial plan is mapped out, you can move forward to find your next home with confidence.  Your peace of mind is worth it and you will be ready for the next step.

 

 

 

In response to last Sunday’s article, I received some interesting calls and emails regarding the need for flood insurance, and whether your property may no longer be in a flood zone which requires flood insurance.  Some home owners are being billed yearly for flood insurance they are not required to have.  I felt it necessary to make some clarifications. 

 

Firstly, I believe all of us that live in the low country should consider flood insurance as part of our insurance package, especially those who live on an island.  I am not required to have it, but pay for it every year because I think it is just good, common sense.  The interesting thing about this is, your house may not need it, but the house next door requires it.  Also, you could have the highest house on the block and still be in a flood zone.  So, checking the latest flood map is the only way to determine whether you need it or not.  Then, it’s a personal choice to buy flood insurance, if it is not required by a lender.  I have spoken to some people that “self insure”, which is also a personal choice if you are a high risk taker and have the money to replace your home should a disaster occur.    

 

Secondly, the only real correction a friendly insurance agent made to my last article was in my statement, “If you don’t need it, it’s cheap.  If you do, it’s expensive.”  He explained that if you are in an x, c, or b zone, the cost is only $412 a year.  Again, the FEMA rates are set.  For homes in the a, ae, or ve zone, and built to FEMA code, and the property elevation is higher than others, the rate can be lower than some clients in the non-required zone. 

 

In short, it’s complicated.

 

According to my source, FEMA does not have a mechanism in place to repay over-payments, but will eventually discover any shortages that will have to be paid.  No surprise there!  Companies that write flood policies for FEMA do, however, get notice of a change.  They should be looking at their clients’ policies every time there is a Map revision, but that does not always happen.

 

What happens to the over-payments?  The answer is still up in the air.  FEMA, who retains flood premiums, fills a “pot” which is used to pay out claims.  It’s a government bureaucracy, and I can imagine implementing change is mind boggling.  However, when there is an overage, there should be a way to catch it and send it back to the policy holder.  That is something for Congress to address.

 

Do the insurance agencies always catch it and act on it to reduce your premiums?  They should, but sometimes do not.  If they bill for it and send it in, then it is gone.  Can they keep the difference and send in the necessary payment?  I’m not sure.  This is all about ethics and doing the best for their clients.  You will always find those that are not ethical in every profession, and they do make a small amount of money writing flood policies.  That being said, this subject is not meant for you to doubt your insurance agent or company.  There are many reputable companies to choose from, and lots of great agents to work with, so do your checking and educate yourself about what you should have. 

 

Since I specialize in senior transitions and represent seniors selling their properties, generally, these post Depression babies pay their bills without question.  It is important that if they have been paying premiums for years, they check their policies to make sure they are paying the right amount for their required coverage. 

 

Another point of clarification:  Although I talked about the “new” map, the last map revision was in 2008.  I am told the base Flood Elevation went down by one foot and the relevant data changed accordingly.  Recently, when Realtors are selling a home, we are discovering the change in the flood insurance requirements.  I believe this is because the housing market was in the dumps in 2008, and we are just now seeing that market improve.  As buyers are buying homes and taking out insurance, the flood requirement discovery is made at that time.  The sellers are not happy that they have been paying higher rates than they needed to pay over the last 5 years.

 

Finally, surveyors are supposed to file any updated Flood Level Certifications with the county, but that is not always the case.  They have about 90% of these certificates on file.  You may call the Chatham County Department of Engineering for a Flood Zone Determination and/or an Elevation Certificate at (912) 652-7800.  You can also gather flood map information at www.sagis.org.