Real estate and life insurance today on YMYW: what is a home equity line of credit? Is a HELOC better than a traditional mortgage? What are all-in-one mortgage loans? Does it make sense to ditch apartment living and buy a condo, or keep investing for retirement? Next up, Joe and Big Al spitball ideas on what to do with old whole life insurance policies. Plus, ABLE accounts for individuals with disabilities, and should you claim Social Security benefits before or after moving to a no income tax state?
- (00:49) Can We Get a HELOC Instead of a Traditional Mortgage? (Michael)
- (05:56) What’s Your Opinion of All-in-One Mortgage Loans? (Jim)
- (08:34) Should I Buy a Condo or Invest for Retirement? (Akiko, WA)
- (14:28) What to Do With Old Whole Life Insurance Policies We No Longer Need? (Bob, Monterey, CA
- (20:34) What Should We Do With an Old Whole Life Insurance Policy? (Margaret, Austin, TX)
- (28:58) Can I Open an ABLE Account for Those With Disabilities? (Kenny, Granite City, IL)
- (34:15) Does It Matter Where I File for Social Security When Moving to a No Income Tax State? (Ryan)
LISTEN | YMYW PODCAST #168: 3 Ways a Reverse Mortgage Can Supercharge Your Retirement
Today on Your Money, Your Wealth® podcast #343, Joe and Big Al are talking real estate and life insurance. First, what is a home equity line of credit, and is a HELOC a better idea than a traditional mortgage? What are all-in-one mortgage loans? Does it make sense to ditch apartment living for condo ownership, or just keep investing for retirement? Next up, it seems a few of you have some old whole life insurance policies you no longer want or need, so the fellas spitball some ideas on what to do with them. Then, just to mix things up a bit, Big Al explains ABLE accounts for individuals with disabilities, and the fellas talk about whether to take your Social Security before or after moving to a no income tax state. I’m producer Andi Last, and here are the hosts of Your Money, Your Wealth®, Joe Anderson, CFP® and Big Al Clopine, CPA.
Can We Get a HELOC Instead of a Traditional Mortgage? (Michael)
“Hi, Joe and Al. A great show, really looking forward to your next episode, thank you for everything you do. I have a question about real estate. My wife and I live in a house in the suburbs and before COVID, I commuted into a major metropolitan city. My commute was up to one and a half hours each way, and when COVID is over I’ll have to return to that. And we’re considering investing or buying a second property, like an apartment or a condo in the city, that I would live in 4 to 5 days a week to cut down on the commute. And by the way, we have about $50-100,000 to make a down payment on the property because properties in the city are quite expensive where we live. My question is, I have read that there are HELOC options that can take only 7 to 8 years to pay down a full mortgage versus a 30-year mortgage. Are these HELOC options real, and can I do that, having an existing mortgage on my home in the suburbs? And how would that work or do I have to go with traditional financing? Again, thanks, and look forward to your response.”
What’s Your Opinion of All-in-One Mortgage Loans? (Jim)
Should I Buy a Condo or Invest for Retirement? (Akiko, WA)
“I’d like to know what’s a better strategy to maximize my money either buy a condo ($360k with 50% down payment) or continue to live in the apartment in Seattle, (1 bed, 1 bath, paying $1,600/ month) and invest in stock/bond for retirement. I have $360k (90% stock in Vanguard, plus $24k cash. no pension, no 401k) I can save $300/month either way. Currently, I have $1,350/month for SS. I’m 61 and my income is $45k, planning to work till 70 yrs old. I’d appreciate it if you would give me some advice. Thank you so much!”
In all this talk about home ownership, mortgages, and home equity lines of credit, one option Joe and Big Al didn’t touch is on the reverse mortgage. Dr. Wade Pfau is an expert on putting your home equity to work in retirement, and he explained the reverse mortgage strategy in detail on YMYW episode 168, way back in 2018. Visit the podcast show notes at YourMoneyYourWealth.com and learn 3 Ways a Reverse Mortgage Can Supercharge Your Retirement. But is what you have saved for retirement enough to get you through retirement? Find out. From retirement income and Social Security to investing, taxes, and healthcare, our free Retirement Readiness Guide offers 7 strategies to ensure you’re prepared for a secure retirement. Both the reverse mortgage episode and the Retirement Readiness Guide are free and waiting for you in the podcast show notes. Just click the link in the description of today’s episode in your podcast app to get there.
What to Do With Old Life Insurance Policies We No Longer Need? (Bob, Monterey, CA
“Hi Joe, Al, and Andy – I enjoy listening to the show on morning runs. I’ve submitted a question before, but you all didn’t select it to answer – so I figured I’d try again. I’m not much for small talk, but here’s the personal stuff you enjoy highlighting: my wife and I both are 55 empty nesters (“do it yourself” Vanguardians) living on Monterey CA; 3 adults sons all living on their own; drive a 2016 Mazda MX-5 and a 2004 Toyota RAV-4; have an 11 year old golden doodle named Max; don’t drink much but enjoy a Corona when I do have a beer. Wife is enjoying being at home – I plan to work another 10 years as Federal employee – I’m also retired Army officer with a pension.
We’d like a second opinion about what to do with three old life insurance policies that we longer need – meaning if either one of us dies, the death benefit money would be just added to other savings and investments. Our net worth is about $3.5 million: a home worth $1 million (paid-off), $1 million in a brokerage account (primarily index mutual funds); $800,000 in Roth IRAs in target date index mutual funds; $700,000 in TSP in target date mutual fund. Here are the policy details:
- Mine with wife as beneficiary: $5,000 whole life policy my parents bought for me in 1966. Annual premium is set $51 annually. Annual dividend this year was $178. Death benefit is $10,495 and cash value is $6,000.
- Mine with wife as beneficiary: A 20 year, $50,000 whole life policy my parents bought for me in 1986. The premiums stopped after 20 years, and now the dividend pays for more insurance. Annual dividend this year was $1,067. Death Benefit is $102,534 and the cash value is $52,810.
- My wife with me as beneficiary: $100,000 whole life policy bought in 1996 (at the birth of son #1). Annual premium is $850. Annual dividend this year was $554. Death benefit is $127,868 and the cash value is $33,899.”
What Should We Do With an Old Whole Life Insurance Policy? (Margaret, Austin, TX)
“Hi Al, Joe and Annie, love the show. My husband and i recently decided we want to get out of his whole life policy that his parents set up when he was young. We’ll have 55K of gains when we do this. We currently do 100% Roth into our 401K which puts us right at the top of the 24% tax bracket. My question is if we should wait until next year to break out of the whole life policy and switch our contributions to pre-tax to create 40k of room in the 24% tax bracket. Seems like a good idea but then im having anxiety missing out of 40k of ROTH contributions and starting to doubt if having a few thousand extra in our brokerage account (due to less taxes on the earnings) is worth it. What do you think? A little about us we are in our mid 30s, both engineers, believe tax brackets will only get higher, probably will always be in high tax brackets until we retire (maybe in our early 50s?!). We work for the same company that allows after-tax contributions so we have been maxing those out and converting into the ROTH 401k and we did an out of plan conversion just to get our ROTH IRAs opened. We spend roughly $160k/yr including two kids in daycare, have about $2MM saved with 80% in pre-tax 401K, 12% in Roth 401k/roth IRA, and 8% in our brokerage account. I drive a 2014 forester and love Malbecs and Riojas. Thank you!!!!
Follow up: Andi, i am so sorry i wrote your name wrong in my earlier question!! i totally thought your name was Annie after listening to the podcast! Do you know if they can answer my question on the podcast, thats the only show i can listen to faithfully when im driving. Thank you and sorry again!”
What should you do with old life insurance policies or annuities you were sold? What kind of mortgage is right for you? When should you take Social Security? Does a Roth conversion make sense, given your financial situation? Are you on track for retirement? If you have questions like these and you’re listening to Your Money, Your Wealth® and you haven’t Asked Joe and Big Al On Air yet, what are you waiting for? Your questions are what makes this show. Well, that and the way Joe reads them and how the fellas get completely Derailed talking about your cars and pets and drinks. Click Ask Joe and Al On Air in the podcast show notes at YourMoneyYourWealth.com and send in your questions, comments, suggestions, corrections, or stories to be featured on YMYW. For a free, one-on-one, comprehensive assessment of your entire financial plan from a CERTIFIED FINANCIAL PLANNER™ professional on Joe and Big Al’s team at Pure Financial Advisors, click the get an assessment button in the podcast show notes. There’s no cost and no obligation, so why not sign up? Click the link in the description of today’s episode in your podcast app to go to the show notes and get started.
Can I Open an ABLE Account for Those With Disabilities? (Kenny, Granite City, IL)
“Hello ymyw, Still listening and still loving the show. Primary piece of business: my beer of choice is Stag. Grandpa’s beer is my beer. However, I’ll sometimes have a coors light on hand while listening to ymyw.
A few weeks back there was a discussion of an “ABLE” account and it was the first I had ever heard of such a thing. I am blind. I have the letter from my optomitrist, have the “V2A” on my state ID, and have received SSI in the past. However, I’m currently working and in the 24% tax bracket. Am I eligible to open an ABLE account for myself? What are the rules, details, and benefits of an ABLE account.”
Does It Matter Where I File for Social Security When Moving to a No Income Tax State? (Ryan)
“Greetings, I turn 68 at the end of 2021 and have amassed all my social security benefits living in California. I plan to wait until age 70 to collect and am considering moving to Washington State in part to escape State Income Taxes. I’m seeking advice on how best to make this transition. Does it matter if I file in California, then move to Washington, or is it best to move to Washington, then file? Please advise. Thank you. ”
Voice to text, Malbecs and Riojas and living next to Mexico in the Derails at the end of the episode.
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Pure Financial Advisors is a registered investment advisor. This show does not intend to provide personalized investment advice through this broadcast and does not represent that the securities or services discussed are suitable for any investor. Investors are advised not to rely on any information contained in the broadcast in the process of making a full and informed investment decision.