Wednesday, April 16, 2014

April is Financial Literacy Month


April is National Financial Literacy Month. In Los Angeles, there are many resources out there to help you make smart decisions with your money – and not just in the month of April!


  • Check out the event calendar for the LA County Department of Consumer Affairs. You’ll find free workshops on tax preparation, credit counseling, and tips to avoid financial abuse –throughout the county.

  •   The Los Angeles Public Library hosts Money Matters, a series of workshops covering subjects such as: repairing your credit score, avoiding scams, and much more.  Some of these workshops are also offered in Spanish.

  • Can’t make it to an event in person? The AARP hosts weekly webinars on subjects ranging from Social Security benefits, to job tips for 50+ workers, to advice on starting your own business. Take a look at their schedule of online webinars here.

In honor of financial literacy month this year, the nonprofit organization CENTS (Consumer Education and Training Services) launched a Senior Money Video Series on (1) reverse mortgages and protecting your home equity, (2) scams that target seniors, and (3) identifying theft and estate planning. You can watch all the videos here

Finally, below are 3 Financial Tips of the Day for older adults:

  •  Start Thinking about Long-Term Care. Long-term care refers to the continuum of services, both medical and non-medical, that individuals require as they age (including skilled nursing, toileting, bathing, and dressing). There are many options for long-term care, including In-Home Supportive Services for eligible seniors, personal caregivers, and a variety of residential options including skilled nursing and assisted living. Long-term care can be expensive, and it may be useful to start planning before you’re faced with a crisis. You can read about Long-Term Care Insurance here, and learn about the ways to search and pay for long-term care facilities here.  



Wednesday, February 12, 2014

Court Hosts Training in Elder Issues



While older adults are filing for bankruptcy in growing numbers, the Central District of California Bankruptcy Court hosted a training event introducing the court to financial issues faced by seniors, such as: fraud and scams targeting the elderly, financial elder abuse, and the cognitive changes that affect financial decision-making across the lifespan.

The event took place on January 31, 2014, with panelists Dr. Stacey Wood  (Associate Professor of Psychology at Scripps College), Molly Davies (VP of Elder Abuse and Ombudsman Services at WISE & Healthy Aging), and Debra Deem (Victim Specialist at the FBI).

Dr. Wood opened the program discussing some of the reasons seniors may be susceptible to financial scams and exploitation, providing  an overview of the cognitive changes that can affect financial decision-making, highlighting those that occur in normal aging.

Molly Davies then provided an introduction to the subject of financial elder abuse in the United States, highlighting the reasons why certain individuals may be more vulnerable to abuse than others.

Finally, Debra Deem delved into further detail about common types of financial crimes targeting the elderly, including mass marketing, investment, and foreclosure fraud. Ms. Deem described the heartbreaking impact these crimes have on the victims, noting that many individuals she works with may be forced into bankruptcy.

Over 100 attendees from across the Central District participated in the event, including bankruptcy judges, panel trustees, representatives from the Office of the United States Trustee, chambers and Clerk’s Office staff. The CACB hopes to create an ongoing dialogue surrounding these topics. Please feel free to e-mail julie_pollock@cacb.uscourts.gov with questions or comments. 

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Friday, December 13, 2013

America's Retirement Crisis





How much longer do you plan to work? What do you think is a good age to retire? According to a 2013 Wells Fargo survey, more than a third of middle-class Americans plan to work until they are 80 years old. The “American Retirement Crisis” is no new story today; studies indicate that as a nation, we are collectively $6.6 trillion short of what we’ll need to retire.

What does this mean in tangible terms? By conservative estimates, most people need to save at least 12 times their annual salary to live comfortably in retirement. For someone making $75,000 a year, this amounts to approximately $900,000 in savings. Yet, when we look at the actual numbers, 3 out of 4 Americans on the verge of retirement have less than $30,000 in retirement savings. One third have no retirement savings at all.

We may be entering an era marked by the downward mobility of many Baby Boomers, sliding from middle-class status into poverty in old age. In fact, older Americans are now using credit cards more than ever, perhaps as a financial safety net. Individuals aged 50 and over have the highest levels of credit card debt in the nation, even though they are less likely than other age groups to purchase non-essential items through credit.

The bad news is this: credit cards can be expensive products, and seniors disproportionately bear the burden of high interest rates and fees charged by issuers. Research indicates that after reaching a peak somewhere in our mid-fifties, we become more and more likely to pay higher fees and interest rates as we age. It is unsurprising that seniors, who are managing high debt loads and compounding interest, now comprise the fastest growing cohort of bankruptcy filers in the nation.

These are people who have served our nation as teachers, laborers, technicians, and military personnel. After a lifetime of hard work, they deserve to age with dignity – without relying on credit cards to scrape by in retirement, and without the fear that one unexpected life event could throw them into bankruptcy.

Solving the retirement crisis is no simple task, and I do not attempt to provide a comprehensive solution here. One thing is certain, however: if we are going to rely so heavily on individuals to plan for their own retirements, we ought to be promoting policies that increase savings behavior. We ought to be empowering consumers with the financial knowledge necessary to navigate a complex marketplace, and avoid the traps of unscrupulous lenders. 

Financial Literacy

There is strong evidence showing that people with higher financial literacy are more likely to plan for retirement and accumulate wealth over the lifetime. Yet too many Americans today lack basic knowledge of financial concepts. To illustrate, let me ask you a question, taken from the national Health and Retirement Study:


Suppose you had $100 in a savings account and the interest rate was 2% per year. After 5 years, how much do you think you would have in the account if you left the money to grow: more than $102, exactly $102, less than $102?

                       
More than a third of Americans over age 50 responded to that question incorrectly. (The correct answer is “more than $102.”) Lawmakers across the country are starting to see the need for improved financial training; in 2013, legislation was proposed in 32 states, including California, that would add financial literacy to middle and high school curriculums. This is a great start, but we need the same momentum in support of financial education on retirement planning, reverse mortgages, and other issues relevant to older consumers. Today, and every day until 2030, 10,000 baby boomers will reach retirement age. It's time to push for policies that move older Americans out of the bankruptcy court, and towards financial stability during their Golden Years. 

Friday, November 15, 2013

The Aging Network


In the Greater Los Angeles Area, there is a wide range of programs and services available for older adults. If you or someone you know is going through bankruptcy of having any sort of financial difficulty, some of the resources below might be helpful to you.

The Aging Network

To begin, here's a brief overview of what's called the National Aging Network. In 1965, Congress passed the Older Americans Act (OAO) to address the lack of resources and community-based services for older adults across the nation. The Administration on Aging was established, which oversees 56 State Units on Aging and 629 Area Agencies on Aging (AAA).  

Each Area Agency on Aging is responsible for planning, coordinating, and implementing publically funded programs that promote the well-being of older adults. Click here to check out the Los Angeles AAA, which coordinates programs including: home-delivered meals, caregiver support, health insurance counseling & advocacy (HICAP), long-term care ombudsman, legal assistance, and much more.

In addition to publically funded social service programs, there a variety of programs supported by nonprofit organizations and other entities, serving the older adult population in Los Angeles. Below is a list of links to useful resources.


Community-Based Services in Los Angeles

  • If you’re interested in enrolling in benefits, a good place to start is the National Council on Aging website entitled Benefits Checkup. This site provides comprehensive information on benefits eligibility for seniors, based on geographic region.




o   Medicare

  • WISE & Healthy Aging is a senior services nonprofit providing older adults with free financial counseling, legal clinics, benefits enrollment, mental health services, and much more. 

  • Your local senior center may offer a variety of resources, including home-delivered meals, free home improvements for eligible seniors, and classes. To locate the senior center closest to you, please visit www.css.lacounty.gov/service-centers.aspx

Eligibility for all of the services listed above may depend on your age, level of income, and the geographic area in which you live.

Friday, October 25, 2013

Reverse Mortgages: Friend or Foe?


What is a Reverse Mortgage? 

Reverse mortgages have become a popular income alternative for adults aged 62 and older. In a reverse mortgage, qualified homeowners can convert some of the equity in their homes to cash. Many Americans struggling to make ends meet in retirement may find reverse mortgages to be a useful financial tool.

In short, reverse mortgages allow homeowners to receive monthly, lump sum, or line-of-credit payments from a lender, backed by the equity in their homes. The reverse mortgage must be repaid upon death, the sale of the property, a permanent move out of the home, OR if the homeowner defaults by failing to pay property taxes or homeowners insurance (source: Consumer Financial Protection Bureau).

Although there are a few different types of reverse mortgages, the most common type is called the Home Equity Conversion Mortgage (HECM), backed by the Federal Housing Administration. This blogpost focuses on HECMs.

Eligibility

According to the Department of Housing and Urban Development (HUD), to be eligible for a reverse mortgage, you must:

  • Be at least 62 years of age
  • Own your home
  • Live in your home
  • Be able to pay off the remainder of your mortgage through the proceeds of the reverse mortgage
  • Be able to continue paying your property taxes and homeowners insurance
  • Receive counseling from an agency approved by HUD, prior to initiating the reverse mortgage. 

Advantages

Reverse mortgages are growing in popularity. According to the Metropolitan Life Insurance Company, there are no restrictions as to how borrowers may use the proceeds of a reverse mortgage; they may be used to cover basic living expenses, home repair costs, healthcare, or even pay off the remainder of a mortgage. Moreover, the proceeds of a reverse mortgage are non-taxable, and are insured by the Federal Housing Administration.

Finally, reverse mortgages have a feature called non-recourse. This means that you will never owe more on the reverse mortgage than the value of your home at the time you (or your heirs) sell the home to repay the reverse mortgage. In other words, because of non-recourse, the balance of your reverse mortgage will never exceed the sale cost (or appraisal value) of your home upon closing.


Disadvantages

Reverse mortgages often come with hefty fees and high interest rates. In other words, these loans are expensive! Therefore, they are generally not recommended, other than as a last resort for low-income individuals who need to tap into their equity in order to cover basic living costs. 

Many reverse mortgage lenders run advertisements that falsely depict reverse mortgages as "government benefits" that can be used to go on a cruise, join a golf club, or otherwise enhance one's lifestyle.

The National Consumer Law Center has documented that reverse mortgage brokers often steer seniors towards lump sum payments. Without sufficient cash flow later in life, many will default on the reverse mortgage for failure to pay property taxes and homeowners insurance. In 2012, the default rate of reverse mortgages was at an all-time high of 9.4%

Moreover, if your spouse takes out a reverse mortgage and your name is not on the deed, then based on current law, you will be required to pay the loan upon your spouse's death, even if you still intend to remain in the house. (However, based on a recent court ruling from October 2013, HUD will be required to amend this loophole.)  

Finally, while a reverse mortgage will not affect your Social Security or Medicare benefits, the proceeds will count as assets that can affect your eligibility for Medicaid or Supplemental Security Income (SSI) (source: CNNMoney). If you receive Medicaid or SSI, you should consult your reverse mortgage counselor for more information.

Reverse mortgages can be a useful resource for those who wish to remain at home while gaining access to the equity they've built over the years. However, reverse mortgages are not "free money." If you are considering a reverse mortgage, look at all your financial options and proceed with caution. 



Friday, October 11, 2013

Bankruptcy due to Illness or Injury





In the United States each year, hundreds of thousands of people file for bankruptcy in the aftermath of an illness or injury.

According to a Harvard study:

  • 62% of all personal bankruptcies filed in 2007 were either directly or indirectly related to a medical event.

  • This represents a significant increase from 2001, when only 46% of personal bankruptcies were attributed to a medical event.

  • Medical bankruptcy affects all age groups; however, Americans who file bankruptcy for medical reasons are older, on average, than other bankruptcy filers.


The cost of medical care can be financially devastating for many American families. A 65-year-old couple retiring in 2013 can expect to spend a total of $240,000 in future out-of-pocket medical expenses, even with Medicare coverage.


Wednesday, September 25, 2013

Is Bankruptcy the Best Option for Older Americans in Debt?


Between 1992 and 2001, credit card debt increased by 217% among Americans aged 65 to 69. With rising debt loads later in life, seniors are turning to bankruptcy in record numbers.

Is bankruptcy always the best option for older adults? Research shows that for older Americans, it is more difficult to recover financially after bankruptcy than for other age groups. That being said, there are a number of questions seniors should ask themselves before deciding to file:

1. Do you own a home?  If so, you'll want to protect the equity in your house, and this might make the decision to file more complicated. If you're a homeowner, you should consult an attorney before filing when possible.

2. Is your income "judgment proof"? Income from certain sources is protected from collection by creditors. For example, Social Security benefits, public assistance benefits, and Veteran's benefits cannot be garnished by creditors, even if they sue you and win a judgment. Check out What Does Judgment Proof Mean?

3. Have you tried to negotiate with your creditors? Seniors are about HALF as likely as the general population to negotiate with creditors before filing bankruptcy.  Read about strategies to negotiate your debts through Consumer Reports: Negotiating with your Creditors.  

4. Are you being harassed by debt collectors? You can send a Notice to Cease Contact to stop unwanted phone calls. Visit the Privacy Rights Clearing House to understand your rights in dealing with debt collection.