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Question for the Money Doctors

Question submitted on Jun 12, 2012.

Question

I am a retired widow. I sold my previous home and purchased a home nearer my son. I am now in a situation where I am retired, almost 65 years old (in Dec.), and am in need of the equity of my home (it is paid for) to pay my bills. I receive $1700/month in SS and a $350 pension. HELP! Options?

Answer

Unfortunately your situation is not unusual.  If you are not cash flowing, your two basic options are 1) increase your cash in-flow or 2) reduce your cash out-flows.  Your first look should be to reduce your cash out-flows (expenses).  Do you really need the expanded satellite TV service or cell phone service?  Do you eat out often—could this be reduced?  Once you have turned over all of the stones and cut ALL unnecessary expenses, you will then need to look to increase your cash in-flow.  Some options include:

  1. Getting a part-time job—I am finding many people working longer.  The reasons vary from keeping them busy and their minds sharp to needing the extra money.  My mother has done this.  She will be 70 next year and plans to retire when turning 70.
  2. A reverse mortgage—although this is an option, I tend not to favor this option as reverse mortgages are typically quite expensive (fees incurred in doing a reverse mortgage).
  3. Loan from family member or even a bank with the home as collateral.  Loan from a family member would likely be less costly than a loan from a 3rd party/bank as they may charge a lower interest rate and no costs to establish the loan.
  4. Your relatives, if financially ok, can gift you up to 13k per year with no tax consequences.  You could use this to live on and then via your will, leave them the house to repay them for their generosity.

 I do not practice in the low income, Medicaid or Federal/state assistance area, so that may be an option.  However, my guess is that you would not qualify because of your income ---2k per mo.


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