Seniors Top 10 things every senior should consider Reverse mortgages Planning funerals in advance makes decisions easier

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1 MoTax Missouri Taxpayer Education Human Environmental Sciences missourifamilies.org/money/ Seniors Top 10 things every senior should consider Reverse mortgages Planning funerals in advance makes decisions easier

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3 MoTax Missouri Taxpayer Education Human Environmental Sciences missourifamilies.org/money/ Top 10 things every senior should consider 1. If a deal sounds too good to be true, it probably is. This old saying is timeless. Unfortunately, bad deals are only exposed in the fine print. Check all the terms before you purchase an item or sign a contract. If you still feel uneasy, check with your family and friends. Taking a little time to check out an offer can save you big headaches later. 2. Use direct deposit for your Social Security payments. Having your Social Security check electronically deposited guarantees that the bank receives your payment safely and securely. More than 90 percent of the problems with Social Security payments are associated with mail delivery. Electronic deposit also means you get your money immediately. Direct deposit is safer, faster and secure. 3. At your death, your debts are your own. When you die, your creditors cannot force your family to pay for your debts. The creditors you owe can take assets from what is left in your estate, but they cannot force family members to pay out of their own pockets unless they co-signed the debt. 4. Update your will when your life changes a birth, death, marriage, divorce or other event. Be sure to update your will when your family circumstances change so that someone is not inadvertently left out. Death may be uncertain, but you can be more certain about how your death will affect your family if you plan for it now. 5. Don t be a victim of identity theft. Identity thieves may call you and pretend to be with a company you have a relationship with. If someone from a company you do business with calls you on the phone and asks for important personal information, do not provide it. Instead, call the company s number in the phone book or on the statements they mail you and ask if someone called you. Chances are, it was a scam artist!

4 Top 10 things every senior should consider 6. If you get an unexpected check in the mail, read all the fine print before cashing it. Some companies now send out checks with fine print attached. When the check is cashed, the person named on the check is enrolled in a service with a monthly charge. If you receive a check in the mail, make sure there is no fine print on the check or other materials mailed with the check that will cost you money. 7. Check your credit report (free!). Request your free credit report at least once a year to check for identity theft. Thieves sometimes open credit card accounts in seniors names, charge large amounts and do not pay. This affects your credit report, which influences whether you can be employed, rent an apartment, buy insurance or get a loan. Check your credit report free by calling Don t fall for free credit report services advertised on TV that actually enroll you in a monthly service before you can get your free report. 8. Consider signing up for the national and Missouri do-notcall registries. Registering your phone number with the do-not-call registries will reduce the number of unwanted calls you receive. To register your phone on the national registry, call To register your phone on the Missouri registry, call You can still be called by charities, political parties, pollsters and businesses with which you have a relationship, but telemarketing calls will stop. 9. Read the fine print on gift cards. Gift cards are not all the same. Some cards expire after a certain amount of time. Other gift cards charge fees for transactions or inactivity. If you are going to give someone a gift card, be sure that you understand the fees associated with the card. 10. Know who to contact when you need to complain. You can file a complaint with the Missouri attorney general s consumer protection hot line at about problems with businesses or if you are the victim of identity theft. If you have a complaint about a securities or investment company, you can call the secretary of state s investor protection hot line at

5 MoTax Missouri Taxpayer Education Human Environmental Sciences missourifamilies.org/money/ Reverse mortgages Reverse mortgages allow older homeowners to turn part of the equity in their homes into cash without selling their homes or taking on additional monthly bills. Reverse mortgages sound like a great solution for many seniors, but costs can be quite high and there are some disadvantages to consider. Many older Americans take out reverse mortgages to finance home improvement, pay off a current mortgage, add to retirement income or pay for health care expenses. In a regular mortgage, you make monthly payments to the lender. But in a reverse mortgage, the lender pays you. You don t have to pay the money back as long as you live in your home. Instead, the loan gets repaid when you die, sell your home or no longer live there as your principal residence. Reverse mortgages can help homeowners stay in their homes and still meet their financial obligations. To qualify for most reverse mortgages, you must be at least 62 and live in your home. The proceeds of a reverse mortgage (without other features, like an annuity) are generally tax free and many reverse mortgages have no income restrictions. Types The three basic types of reverse mortgage are: Single-purpose reverse mortgages offered by some state and local government agencies and nonprofit organizations. Federally insured reverse mortgages, which are known as Home Equity Conversion Mortgages (HECMs), and are backed by the U. S. Department of Housing and Urban Development (HUD). Proprietary reverse mortgages, which are private loans that are backed by the companies that develop them. Single-purpose reverse mortgages usually have very low costs but they are not available everywhere, and they can only be used for one purpose specified by the government or nonprofit lender (e.g., to pay for home repairs, improvements or property taxes). In most cases, you can qualify for these loans only if your income is low or moderate. HECMs and proprietary reverse mortgages tend to be more costly than other home loans. The upfront costs can be high, which is quite expensive if you stay in your home for just a short time. They are widely available, have no income or medical requirements and can be used for any purpose. Before applying for an HECM, you must meet with a counselor from a government-approved housing counseling agency. The counselor must explain the loan s costs, financial implications and alternatives. For example, counselors must tell you about government or nonprofit programs you may qualify for and any singlepurpose or proprietary reverse mortgages available in your area. The amount of money you can borrow with an HECM or proprietary reverse mortgage depends on your age, the type of reverse mortgage you select, the appraised value of your home, current interest rates and where you live. In general, the older you are, the more valuable your home and the less money you owe on it, the more money you can get from a reverse mortgage.

6 Reverse mortgages The HECM lets you choose how the loan is paid to you. You can select fixed monthly cash advances for a specific period or for as long as you live in your home. You can also take out a line of credit, which lets you draw on the loan proceeds at any time in amounts you choose. You can get a combination of monthly payments, plus a line of credit if you choose. HECMs generally provide larger loan advances at a lower total cost than with proprietary loans. Owners of higher-valued homes may get bigger loan advances from a proprietary reverse mortgage. Reverse mortgage loan advances are not taxable and generally do not affect Social Security or Medicare benefits. You keep the title to your home and do not have to make monthly repayments. The loan must be repaid when the last surviving borrower dies, sells the home or no longer lives in the home as a principal residence. In the HECM program, a borrower can live in a nursing home or other medical facility for up to 12 months before the loan becomes due and payable. Considerations when shopping for a reverse mortgage As you consider a reverse mortgage, keep in mind that: Lenders generally charge origination fees and other closing costs, and may also charge servicing fees during the term of the mortgage. The lender generally sets these fees and costs. The amount you owe on a reverse mortgage grows over time. Interest is charged on the outstanding balance and added to the amount you owe each month. That means your total debt increases over time as loan funds are advanced to you and interest accrues on the loan. Reverse mortgages may have fixed or variable rates. Most have variable rates that are tied to a financial index and change with market conditions. Reverse mortgages can use all or some of the equity in your home, leaving fewer assets for you and your heirs. A nonrecourse clause in most reverse mortgages prevents you or your estate from owing more than the value of your home when the loan is repaid. Because you retain the title to your home, you are still responsible for property taxes, insurance, utilities, fuel, maintenance and other expenses. If you don t pay property taxes or maintain homeowners insurance, you risk the loan becoming due and payable. Interest on reverse mortgages cannot be deducted on income tax returns until the loan is paid off in part or whole. Getting a good deal If you are considering a reverse mortgage, shop around to compare options and terms. Talk to at least three lenders if possible. Learn as much as you can about reverse mortgages before you talk to a counselor or lenders so you can ask more informed questions, which could lead to a better deal. If you want to make a home repair or improvement or need help paying your property taxes, find out if you qualify for any low-cost single-purpose loans available in your area. Area Agencies on Aging (AAAs) usually know about these programs. To find the nearest agency, visit eldercare.gov or call toll-free, Ask the AAA for information about available loan programs for home repairs or improvements, property tax deferral or property tax postponement programs. If you are interested in a federally insured HECM, know that all HECM lenders must follow HUD rules and that many of the loan costs, including the interest rate, will be the same no matter which lender you select. There are still some costs including the origination fee, other closing costs and servicing fees that may vary among lenders. If you live in a higher-valued home, you may be able to borrow more from a proprietary reverse mortgage but it usually will cost more. The best way to see key differences between an HECM and a proprietary loan is with a detailed side-by-side comparison of future costs and benefits. Many HECM counselors and lenders can help you with this comparison. No matter which type of reverse mortgage you are considering, be certain you understand all the conditions that could make the loan due and payable. Ask a counselor or lender to explain the total annual loan cost (TALC) rates, which show the projected annual average cost of a reverse mortgage, including all itemized costs.

7 Reverse mortgages Be a savvy consumer Be particularly cautious if someone tries to sell you something, like an annuity and suggests that a reverse mortgage would be an easy way to pay for it. If you don t fully understand what they re selling, you re not sure you need it or you get a call from out of the blue, be even more skeptical. Keep in mind that your total cost would be the cost of what they re selling plus the cost of the reverse mortgage. If you think you need what they re selling, shop around before you buy. Get three quotes if you can. No matter why you decide to take out a reverse mortgage, you have at least three business days after signing the loan documents to cancel it for any reason without penalty. You must cancel in writing and the lender must return any money you have paid for the financing. Reporting possible fraud If you suspect that anyone is violating the law, let the counselor, lender or loan servicer know. File a complaint with the Missouri attorney general s office at , the Missouri secretary of state s office at and the Federal Trade Commission (FTC) online at ftc.gov or by phone, toll-free, at 877-FTC- HELP ( ). Whether a reverse mortgage is right for you is a big question. Consider all your options. You may qualify for less costly alternatives. Contact the following organizations for more information: Reverse Mortgage Education Project AARP Foundation 601 E St., NW Washington, DC aarp.org/revmort/list U.S. Department of Housing and Urban Development (HUD) 451 7th St., SW Washington, DC hud.gov/offices/hsg/sfh/hecm/ rmtopten.cfm Federal Trade Commission Consumer Response Center 600 Pennsylvania Ave., NW Washington, DC ftc.gov/bcp/menus/consumer/credit. shtm Click on Mortgages & Your Home 877-FTC-HELP ( ) The FTC works for the consumer to prevent fraudulent, deceptive and unfair business practices in the marketplace, and helps consumers spot, stop and avoid them. To file a complaint or to get free information on consumer issues, visit ftc.gov or call toll-free, 877-FTC-HELP ( ); TTY: The FTC enters consumer complaints into a secure online database and investigative tool used by hundreds of civil and criminal law enforcement agencies in the U.S. and abroad. By Brenda Procter, M.S., state specialist and instructor, MU Extension Adapted from Reverse Mortgages: Get the Facts Before Cashing in on Your Home s Equity, (June 2005), pubs/consumer/homes/rea13.shtm (accessed December 9, 2008).

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9 MoTax Missouri Taxpayer Education Human Environmental Sciences missourifamilies.org/money/ Planning funerals in advance makes decisions easier Americans spend billions of dollars a year to arrange more than 2 million funerals for family members and friends. Consumers who make funeral arrangements in advance can compare prices and services so the funeral reflects a well-informed purchasing decision, honors the deceased, and is meaningful to survivors. When you shop for funeral products and services preneed: 1. Compare prices from at least two funeral homes. Choose a reputable funeral home so you know they will still be in business when the need arises. 2. Ask for a price list. By law, funeral homes must give you written price lists for products and services. You can supply your own casket or urn. 3. Resist pressure to buy goods and services you don t really need. 4. Avoid emotional overspending. You can properly honor a loved one without the fanciest casket or the most elaborate funeral. 5. Recognize your rights. Funerals and burial laws vary from state to state. For information about Missouri funeral rules and laws or to file a complaint, go online to pr.mo.gov/embalmersrules-statutes.asp or contact the Missouri Board of Embalmers and Funeral Directors at Apply the same smart shopping techniques you use for other major purchases. You can cut costs by limiting the viewing to one day or one hour before the funeral and by dressing your loved one in a favorite outfit instead of costly burial clothing. 7. Plan ahead to comparison shop without time constraints, discuss the funeral with your family and limit the burden they will carry when they are grieving. If you are planning your own service, you may want to review and revise your decision every few years. The FTC also offers a consumer guide to funeral planning, complete with a price checklist, glossary of terms, a description of services, information sources and a list of questions to ask. To request a copy of Funerals, A Consumer Guide, or for additional information, call 877-FTC-HELP ( ) or visit the Web site at ftc.gov. By Brenda Procter, M.S., state specialist and instructor, MU Extension Adapted from Pre-Planning Funerals Helps Make Decisions Easier, (Federal Trade Commission), bcp/edu/pubs/articles/naps06.pdf (accessed November 14, 2008).

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