Contact Us Today

When is Home Care for the Elderly the Right Option?

It can be hard to decide what type of care is best for your loved ones as they age. Many older adults don’t want to leave their homes, even if diagnosed with dementia or Alzheimer’s disease. Rather than relocating to an assisted living facility or nursing home, they want to continue living in their home to stay connected to their community and maintain independence. When this happens, senior home care becomes a practical option.

Home care aides help seniors age comfortably in their own homes with services that are personalized to their individual needs. If you’re considering home care for your loved one, there are some things to remember that will help ensure they are happy, healthy, and safe. We put together this guide to help you understand those factors so you can make the right decision for their care and ensure they age in a safe and comfortable environment.

What is Home Care?

Home care is any professional support service that allows a person to live safely in their home. Professional caregivers such as nurses, aides, and therapists provide short-term and long-term care in the home, depending on the person’s needs. They care for aging individuals who have serious medical conditions, need assistance to live independently, manage chronic health issues, recover from a medical setback, or have special needs or a disability. They also provide companionship and assistance with basic household tasks. Home care aids are appropriate for those who want to stay in their home and need ongoing care that family members or friends cannot provide.

Home care aides visit the home daily or just a few times a week, depending on the level of care a person needs. Most home care aides help with non-medical services, but skilled health care services can also be delivered at home, including:

  • Assistance with daily activities such as dressing, walking, bathing, and using the toilet
  • Managing tasks around the home, including light housekeeping and meal preparation
  • Companionship and supervision
  • Therapy and rehabilitation services
  • Medication Management
  • Short or long-term nursing care for an illness, disease, or disability

Home care differs from other forms of elderly assistance, like nursing homes and assisted living facilities. While some nursing homes are designed to mimic a home and not feel like a hospital, they can sometimes remove an individual’s independence and lead to frustration. Nursing homes also have a rotating staff of medical professionals to assist with everyday activities and serve residents three meals a day. Assisted living facilities offer seniors care in a residential setting that isn’t their home while providing social engagement and amenities for a healthy lifestyle. They cater to seniors who can live independently but generally don’t provide personalized care.

Benefits of Home Care for the Elderly

Home care enables safety, security, and increased independence, helping your loved one achieve the highest quality of life possible. Home care is an alternative to full assisted living if they need help with basic tasks or are experiencing memory loss but are otherwise reasonably healthy. It can ease management of an ongoing medical condition and avoid unnecessary hospitalization through care given in the comfort and familiarity of home. For many families, home care is the best solution because it allows their loved one to stay home and continue to live the life they’re used to living. There are many benefits of home care, such as:

  • Comfort: Your loved one can stay in the place where they are most comfortable. They can sleep in their own bed, use their own bathroom, and continue their daily routine.
  • Personalized care: Rather than adjust to a nursing home or care facility’s schedule, a home care plan is personalized and designed to fit your loved one’s routine.
  • Family Involvement: Home care allows the family to be a large part of their loved one’s care plan, with a direct line of communication between caregiver and care manager. It also provides a break for family members maintaining full-time jobs.
  • Independence: Loss of independence is a primary concern for seniors when their family considers care options. Home care allows them to maintain control of their daily lives, choosing when they want to eat, sleep, and socialize.
  • Companionship: Seniors who live alone often feel isolated and lonely, which can lead to a decline in health. Home care aides can provide your loved one with a familiar face, friendly conversation, and a meaningful human connection.
  • Peace of mind: You won’t have to worry about a loved one falling and injuring themselves as they perform their daily activities, such as showering or cooking. You’ll be able to rest easy knowing they are receiving good care.
  • Stay together: Home care allows elderly couples who need different levels of care to continue living together in their home. Separating elderly couples can lead to mental health concerns and poor health.

Warning Signs a Senior May Need Home Care

Noticing the subtle signs that your loved one may need help at home will ultimately lead to a safer and happier environment for them. Hiring a home care aide can help resolve more issues than you might realize. Sometimes, the signs that your loved one may need help at home aren’t so obvious.

In many situations the need for care will creep up on a family. Oftentimes, family members are acting as caregivers without realizing it. As the need for care increases, it can either seem like a normal part of aging or people are just not willing to admit that their ability to live independently is no longer possible—or safe. But there are warning signs people should be looking for that will help them recognize when the time for professional long-term care has arrived:

Physical Deterioration: Look for signs such as significant weight loss, balance issues and falling, loss of strength and stamina, and other losses of “Activities of Daily Living” known as an ADL such as ability to shower or toilet, dress, or eat independently.

Mental Deterioration: Do not blow off loss of memory or confusing names, dates and locations as just a “senior moment”. Cognitive deterioration is an important warning sign to be on the lookout for dementia and Alzheimer’s. These conditions can worsen quickly and can lead to many physical breakdowns and safety issues that are easily spotted.

Lifestyle Deterioration: Is your loved one’s appearance now disheveled? Is the home not being kept as neatly as in the past? Are things oddly out of place (a house plant in the fridge, pots and pans in the bathtub), or are there signs of physical damage (the car crashing into a fence or the wall of the garage, burn marks on the kitchen wall from a flash fire)? Long-term care is both a matter of healthcare and safety.

Memory Loss

It’s normal to forget some things as you age. Forgetting the names of old friends or misplacing your car keys are signs of mild forgetfulness. It’s a normal part of aging and not a serious problem. it’s one thing to walk into a room and not remember what you are looking for but it’s quite another to not know where you are. However, if your loved one’s memory loss gets worse over time, forgetfulness can lead to unpaid bills and missed medication or appointments, which can lead to serious health or financial consequences. Home care can help make these tasks more manageable, especially those who may otherwise be in good physical condition and aren’t ready to move into assisted living or nursing homes.

Aging Partners

When older individuals begin to experience health declines, it can become difficult to care for a partner, who may also be experiencing complex health conditions. Home care is an excellent option for elderly couples, who wish to age together in their home. Home care services can also provide different levels of care, particularly when one spouse develops health concerns and their partner cannot care for them.

Falls

As our loved ones age, they may begin to experience falls as they perform basic tasks— changing a light bulb or going up and down the stairs. Illness, medication, and loss of muscle mass can reduce their steadiness and coordination, so falls remain a top cause of seniors’ accidents. A home care aide can help prevent injury or a long and costly hospital stay by preventing them from engaging in household tasks or activities where they may be more prone to falling.

Loneliness

As individuals age, they can sometimes feel isolated and lonely, especially if they don’t have family members who live near them and cannot engage in social activities outside of their homes. Social isolation can lead to higher rates of depression and anxiety. Many seniors in this situation may be physically able to care for themselves but just need companionship to stay motivated and engaged. Home care aides can provide companionship and transportation for seniors who feel alone.

home care for the elderly

Determining if Home Care Is the Best Option

Each senior’s situation is different and requires different types of care services. Some may need help getting around their home, while other seniors require more complex, medically focused care. Navigating the various aspects of home care can be overwhelming, especially if you’re unsure what type of care is best suited for your loved one. Home care is ideal for those who need companionship, assistance with reminders and household tasks, and a high level of care to avoid hospitalization.

If your loved one needs someone to be with them 24 hours a day, home care may not be the best option. They should consider a nursing home or assisted living facility, depending on their needs. If their mobility is declining and their home isn’t easily accessible for this transition, home care isn’t ideal. In this instance, they should consider an assisted living facility. A care manager or home care aide can assess your loved one’s needs and develop a care plan or alternate care options best suited for them.

Paying for Home Care

Families are often concerned about how much home care services cost and what financial options there are for payment. Costs of home care vary across agencies, regions, and service types. It’s essential to understand your payment options before making the decision about home for your loved one. The popular options for funding your loved one’s home care are Medicare & Medicaid, health insurance, life insurance, reverse mortgages, VA Aid & Attendance, or paying out of pocket.

Medicare & Medicaid

In most cases, Medicare and Medicaid will pay for medically necessary services provided in a home setting, with coverage limits by the agency you choose.

Medicare focuses on necessary medical care and short-term care for conditions that will improve through rehabilitation services. So, in most limited cases, Medicare won’t pay for long-term care such as help bathing, dressing, eating, moving around, or using the bathroom. However, there are certain instances in which Medicare may contribute, such as physical and occupational therapy, short-term hospital stays, and hospice care. Medicare also requires the individual’s doctor to certify that the care is necessary. Medicare will also fund hospice care received at home.

Medicaid is the largest public funder of long-term care services. It covers long-term home care services like help bathing or dressing for those who meet certain eligibility requirements that vary by state. If you’re eligible, the state will also make an additional determination on whether your loved one qualifies for long-term care services at home. But Medicaid funded care received at home is available on a limited basis.

Health Insurance

While there are exceptions, health insurance may have limited coverage for some aspects of long-term home care. Most health insurance policies cover some doctor-prescribed home care for health issues, usually following a hospital stay. However, no health insurance policy will fully cover long-term care. Nonetheless, you should check with your private health insurance to understand what is and isn’t covered.

Out of Pocket

Some families choose to pay for home care privately from their income, savings, or sharing expenses with other family members. If your loved one needs minimal assistance (one or two brief visits a week), helping out yourself or paying out of pocket for home care may be a good option. However, as expenses rise, this may become more and more challenging for those on a fixed income.

Private Pay

Seniors on a fixed income looking to pay for home care may be able to access a variety of options based on assets or benefit programs.

The owner of a life insurance policy can consider selling their life insurance policy for cash using Long-term care (LTC) life settlements and then set up a LTC Benefit Account to make monthly payments towards care. This option is designed for seniors who want to unlock the value in a life insurance policy that they no longer need to pay for any form of senior living and long-term care they may want.

Life settlements are another financially savvy way to free up cash to help you or your loved one stay in your home and pay for your in-home care. As the sale or transfer of the death benefit or ownership of a life insurance policy, your loved one can sell it and use the money they receive to fund their home care.

Veteran’s Aide & Attendance Benefits are for veterans of active combat duty and/or their spouses are eligible to receive monthly benefits paid directly towards qualifying long-term care service. Like Medicaid, the applicant must meet both medical necessity and income/asset level requirements to qualify.

Reverse Mortgage
Homeowners with little to no remaining mortgage balance that are age 62 or older can qualify to take a HUD backed Home Equity Conversion Mortgage (HECM) loan against the home in the form of a lump sum, monthly income or a line of credit. To qualify the home must still be the primary residence and the loan must be paid back with interest and fees after the homeowner dies (typically through the sale of the property).


Home care can provide your loved one with the opportunity to continue living in their home, with help they need with cooking, cleaning, bathing, and performing other parts of their daily routine. You know they will have personalized care that meets their needs. They will have a friendly and familiar face visiting them daily or weekly for continued comfort. The experts at Retirement Genius can guide you through your options and help you decide if home care is the right fit for you and your family, and the best approach. Contact the experts at Retirement Genius today.

Bio: Chris Orestis is the founder and President of Retirement Genius and an expert in strategic retirement planning. Having appeared on CNBC, Fox News, and USA Today, Chris uses his 25-plus years of retirement experience to help seniors transition to the next chapter of their lives with grace and financial security.

Reverse Mortgages Explained: What Are They and How Do They Work?

If you are looking for a way to finance a fulfilling retirement in the home you love, a reverse mortgage is a lending mechanism that can help you achieve your goals without having to sell your home or decrease your spending. As you increase in age, reverse mortgages allow you to channel the value of what could be your greatest asset––your property––into retirement or long-term care financial support so you can spend your later years in your own home.

Though homeowner equity in the U.S. is currently estimated at over $20 trillion, the process of tapping into your home’s net worth can be difficult to navigate. This post breaks down the basics of reverse mortgages, including what they do, how they work, and the importance of doing your research before committing to this major financial decision.

What Is a Reverse Mortgage?

Simply put, reverse mortgages are a type of home equity loan given to homeowners who are at least 62 years old and have considerable home equity, so they can borrow against the value of their property. Unlike traditional loans and mortgages, reverse mortgages do not require borrowers to follow a payment plan with monthly installments (although they do have the option to do so). More typically, when the loan reaches maturity, homeowners pay everything back at the same time. It’s for this reason that reverse mortgages tend to have higher fees and interest rates than bank loans or mortgages.

Reverse Mortgage vs Conventional Mortgage

Though reverse mortgages and mortgages both use your home as collateral, the two differ in one crucial way. With a mortgage, the homeowner pays the lender, whereas in a reverse mortgage, the lender pays the homeowner. Homeowners can receive this payment in the form of a lump sum, monthly income, or line of credit. No matter which form the borrower chooses, because it is a loan, the money they receive is tax-free.

How Does a Reverse Mortgage Work?

Over the life of the reverse mortgage, the amount borrowed accumulates interest. If the homeowner dies, sells their home, or changes their primary residence, they will have to repay the outstanding balance in full, including all of the interest which has accrued on the loan. Due to the age requirement on reverse mortgages, homeowners often trigger loan maturity when they move to receive long-term care.

The 3 Types of Reverse Mortgages

If you are just beginning to explore reverse mortgages, you may be unsure of the difference between the three types available to homeowners: home equity conversion mortgages, single-purpose reverse mortgages, and proprietary reverse mortgages. In this section, each type of reverse mortgage is explained, along with each one’s advantages and the distinctions among the three.

Home equity conversion mortgage (HECM)

The most common and, arguably, most secure type of reverse mortgage is the home equity conversion mortgage or HECM. This is a federally-backed home equity loan— it is insured by the U.S. Federal Housing Administration, known as the FHA, and HECM homeowners can only borrow from FHA-approved lenders. Under a HECM loan, homeowners can borrow up to a fixed amount called the principal limit which is capped at $970,800 as of 2022 and calculated using the borrower or non-borrowing spouse’s age, current interest rates, and the home’s value. For example, an older borrower with a higher property value and is quoted a lower interest rate could expect to receive a larger principal limit and reverse mortgage loan amount.

Before choosing this option, be sure you understand all of the fees and payments associated with an HECM. If you choose this type of reverse mortgage, you will have to pay mortgage insurance premiums, an origination fee, servicing fees, and third-party fees for services like home inspections and credit checks. This loan also gives you the option of a fixed or variable interest rate. A fixed interest rate limits the borrower to lump sum payments, while a variable interest rate allows you to receive a monthly payment, line of credit, or some combination of the two.

Single-purpose reverse mortgage

Considered the most economic type of reverse mortgage, single-purpose reverse mortgages are backed by government agencies and nonprofits. These loans are often best for those who need help funding medical or disability-related home accommodations. The homeowner won’t have to make monthly payments, but they will have to continue to pay homeowners’ insurance fees and property taxes. These loans do not have to be repaid until the homeowner’s death, a change in homeownership, or a change in the homeowner’s primary residence. Unlike the HECM, borrowers do not have to pay mortgage insurance premiums when they choose this type of reverse mortgage.

Proprietary reverse mortgage

Proprietary reverse mortgages are a strong option for homeowners with high-value properties. Because this type of reverse mortgage is the only one of the three not backed by the federal or local governments, its private lenders are not bound by lending limits and can offer larger principal balance loans based on the home’s value. In addition, this lending mechanism does not require borrowers to pay mortgage insurance premiums.

Though each of the above reverse mortgages offers its own advantages and drawbacks, it is important to note that, regardless of which one you choose, your loan amount will not equal the full value of your property. A portion of the loan will be used to pay for reverse mortgages’ various fees and any loans, tax liens, judgements, or other mortgages attached to the home.

Who Qualifies for a Reverse Mortgage?

Reverse mortgages are typically used by seniors to help supplement retirement incomes, pay for health and home care, or fund home improvements. For seniors, the main requirement for a reverse mortgage is that the primary property owner be at least 62 years old. If you are interested in the most common type of reverse mortgage, the HECM, you will have to meet additional requirements which include:

  • The home used as collateral must be your primary residence
  • You may not have any outstanding federal debt
  • You must have sufficient funds to cover the cost of maintaining your home
  • You must own your house outright or have paid off most of your mortgage
  • You must participate in an information session with an approved HECM counselor
  • You must meet the reverse mortgage minimum age requirement of 62 years or older

Given the above qualifications, a large segment of seniors tend to qualify for an HECM. However, if you do not qualify or meet the age requirement for a reverse mortgage, you can still find ways to extract money from your home and other investments. Home equity loans, home equity lines of credit, and life settlements—which allow you to sell your life insurance policy for cash—all provide qualifying candidates with a way to supplement their retirement funds.

Reverse Mortgage Pros and Cons

As with any major financial decision, you will want to weigh the potential benefits of reverse mortgages against their drawbacks before making any commitment. Below is a list of the key reverse mortgage pros and cons that candidates should consider.

Pros

  • Tax-free. Since funds from reverse mortgages are a loan and not considered income, the money you receive is not subject to taxes.
  • Positive payout. If your home’s value exceeds the outstanding loan balance, you will receive the positive balance when the reverse mortgage matures.
  • Proceeds options. The funds from the loan can come in several different forms: a lump sum, monthly income, or a line of credit that you can draw on as needed.
  • Maturity payment options. You can choose not to make monthly loan payments for the life of the loan, but if you choose to, you can reduce the loan interest and the amount you owe at maturity.
  • Usage flexibility. You have complete flexibility when it comes to how you use the funds, though some popular options include using them to fund living or healthcare costs and to pay outstanding loans, debts, liens, and judgements.
  • Home value. If your HECM loan balance increases beyond the appraised value of your home at the time the loan needs to be repaid, you will not have to pay more than 95% of the property’s appraised value. Any remaining balance will be paid by the mortgage insurance that comes with all FHA-approved lenders in HECMs.

Cons

  • Ongoing expenses. You must continue paying property taxes and homeowners insurance and keep the home in good condition for the life of the loan.
  • Safety net eligibility. Reverse mortgages can jeopardize your eligibility for Medicaid or Supplemental Security Income (SSI).
  • Foreclosure. If you get a private, non-HECM reverse mortgage from an FHA-approved lender, you will not receive mortgage insurance protection. This means you could be responsible for paying back your entire loan balance, even if it exceeds the value of your property, and potentially face foreclosure if you do not.
  • Higher interest rate. The loan will continue to collect interest at a higher rate than conventional bank loans for as long as the reverse mortgage remains outstanding, adding to your debt.
  • Limited tax advantages. There are no tax deductions for paying off a reverse mortgage.
  • Legal ramifications. Changes to your residency or marital status or a sudden death can have complex legal ramifications if you have a reverse mortgage.
  • Residency requirements. If you need to leave your home for longer than 12 consecutive months, you must pay the reverse mortgage back in full.
  • Fees. Reverse mortgages come with fees and closing costs which will be deducted from the amount you receive.

Are Reverse Mortgages Bad?

What is the bottom line? Are reverse mortgages good or bad? The truth is that reverse mortgages are nuanced mechanisms and whether they are the right or wrong choice for you will depend on the particulars of your situation and financial circumstances.

Here are a few factors that could indicate that a reverse mortgage is right for you:

If you would like to remain in your home for a long time. Not only does a reverse mortgage accommodate those who want to stay in their home, it is a requirement of the loan. It is important that you are confident you will not want to relocate in a few years. If the homeowner expresses a desire to leave the home or move into a long-term care facility, then a reverse mortgage would not be the right decision.

If you do not intend to keep your home in the family for future generations. Because the payoff you will receive from the reverse mortgage comes from the sale of your home at the time of loan maturity, reverse mortgages are not advised for those who want to keep a home within their family. Consider whether this is an acceptable consequence for you or if letting go of your family home is a prospect you do not want to consider.

If you want access to additional funds and can afford to maintain your home. Reverse mortgages give you access to a lump sum of money, monthly income, or a line of credit to be drawn on as needed—provided the homeowner covers the cost of their home’s upkeep. This means maintaining payments for homeowner insurance, home maintenance, homeowner association fees, and property taxes. You will want to be sure that you can cover all these expenses before you commit to a reverse mortgage, or you may have to forfeit the loan.

Though it may take some time to understand the inner workings of reverse mortgages, carefully considering how this form of equity loan would affect your personal finances and life in retirement is an integral part of retirement planning. Not only should you ask yourself, “what is a reverse mortgage?” and “how does a reverse mortgage work?” but you should also make sure to ask “how would a reverse mortgage affect me?”

Alternatives to Reverse Mortgages

If you do not meet the requirements for a reverse mortgage but still need a way to supplement your retirement income, there are other methods you can use to extract liquidity from your existing assets. In this section, we go through the various alternatives to reverse mortgages for those who cannot or choose not to pursue this type of equity loan.

Life settlements

If you don’t want to risk your home in a reverse mortgage, life settlements allow you to keep your home safe from foreclosure and monetize a high-value asset: your life insurance policy. In a life settlement, you can sell your life insurance policy to a third party for cash. Sellers can receive between 10% and 50% of the face value of their policy, a sum significantly larger than what they would receive by letting their policy lapse or canceling the policy in a cash surrender.

Life settlements offer policyowners the dual benefits of an increased retirement income through a large cash influx and decreased monthly expenses by ending costly insurance premiums. Long-Term Care Life Settlements can be a tax advantaged way to pay for expensive care needs or you can even elect to sell a portion of your existing policy in exchange for cash and a new policy with no future premium obligations. This Retained Death Benefit type of settlement payout is a great option for those who need cash but would also like to retain coverage for their beneficiaries.

You can learn more about life settlements and find out if you qualify right here on Retirement Genius.

Home equity loans and lines of credit

For those who do not qualify for a reverse mortgage, taking out a home equity loan (a second mortgage) or home equity line of credit (HELOC) can be a smart way to take advantage of your home equity. Unlike reverse mortgages, these loans do not come with any age restrictions or requirements that the homeowner maintain the property as their primary residence as with a reverse mortgage. In addition, the closing costs and interest rates on these conventional loans tend to be significantly lower than those of a reverse mortgage.

Keep in mind, however, that home equity loans and HELOCs only allow you to borrow up to around 80% of your home’s value and come with required monthly payments.

Mortgage refinancing

Refinancing an existing mortgage is another option for homeowners who want to increase their retirement income without going through a reverse mortgage. When you refinance your mortgage, you can change certain terms in your mortgage contract in order to lower monthly loan payments or interest rates. Instead of providing you with extra cash to spend on long-term care or medical expenses, a refinanced mortgage will decrease your monthly expenses, leaving you with more cash on hand to spend on your retirement expenses each month.

Senior Living Bridge Loans

There are two types of Senior Living Bridge Loans, secured and unsecured.

A secured bridge loan using a home as collateral for a loan with the intention that the home will be sold to fund a move into a long-term care facility. The funds from the bridge loan are made immediately available while the home is for sale. The lender makes payments to the senior care facility for whatever amount is needed on a monthly or as needed basis. The funds can be used to pay entry fees and then ongoing monthly fees. The terms of the loan are that the borrower will make interest only payments to the lender for the first 60 months. If the loan needs to continue beyond that point the payments would require principal and interest until the loan is repaid (typically through the sale of the home).

An unsecured bridge loan specifically designed to help seniors move into retirement communities can be borrowed for amounts between $5,000 and $500,000 based on co-signers from the borrower’s immediate family. Current variable interest rates range and origination fees for the amount borrowed are charged.

With the line of credit, interest-only payments of around $12 per month per $1,000 drawn are charged. The borrower will have between 15 and 18 months to pay it off the loan and term loans have up to 36 months before they are due, with payments on both the loan’s interest and principal required.

Conclusion

The prospect of reaching your long-awaited retirement years only to lack the funds to remain in your forever home can be heartbreaking. Reverse mortgages offer a flexible method of adding to your income, paying for medical care, or funding home improvements with the added bonus of allowing you to remain in a home you care about. For those eligible, reverse mortgage payments are left completely within their control, though these funds are best employed when borrowers avoid the temptation to put this money towards impractical expenses.

If you’re not eligible for a reverse mortgage or don’t wish to pursue this option, alternatives like a life settlement can provide you with the funds you need to spend your retirement in your own home, without putting your property at risk. Though you may not think of your life insurance policy as an investment in the traditional sense, it carries immediate and significant value. Selling your life insurance enables you to extract the most out of your policy while eliminating additional retirement expenses.

As always, we strongly advise you to continue researching this complex topic and sit down with a trusted financial professional to discuss reverse mortgage pros and cons and whether a reverse mortgage is the right choice for you. If you’re ready to learn more about how a reverse mortgage could help you plan for retirement, the experts at Retirement Genius can help. Contact us today.

Everything You Need to Know About Life Settlement Brokers

The decision to sell your life insurance policy in a process called a life settlement is often the product of careful consideration. But whether you no longer need your life insurance or can no longer afford the premiums, life settlements’ generous and flexible payouts can help you get the most out of your policy and reach financial goals like retirement or freedom from debt.

To get you started in the world of life settlements, this post provides a comprehensive guide to one of the common participants in this type of sale: life settlement brokers. From their role in life settlements to their relationship to policyowners, we’ll cover everything you need to know to make an informed decision about whether or not to pursue a brokered life settlement—so you can sell your life insurance policy with confidence.

What Are Life Settlement Brokers?

Life settlement brokers are licensed professionals who help negotiate life settlement contracts: agreements that allow people to sell their life insurance policies to a third party for cash. During this process, brokers approach licensed buyers on the policyowner’s behalf to market the policy and gather competitive bids.

Though a life settlement broker can help those who want minimum involvement in the life settlement process, their services come at the cost of extensive fees and commissions—often greater than 20% of your settlement. Because their commission is contingent on the face value of the settlement, brokers have a strong incentive to obtain the maximum life settlement payout for your policy. However, this commission will be deducted from your payout, resulting in a significantly lower cash sum from the sale than if the policy owner were to sell their policy directly to a buyer.

Why Sell a Life Insurance Policy?

The legal right of a policy owner to sell their policy has existed for over 100 years, and the life settlement industry has existed for over 30 years now. People see ads on TV and online every day, and there are about $4.5 billion of life settlements done every year. Wondering why you would want to consider selling a life insurance policy? There are a variety of reasons why people decide to take this step.

High monthly premiums: As you become older, the premium rate on life insurance policies often increases, often making continued payments unsustainable and counterproductive to your financial goals. Selling your life insurance policy in a life settlement allows policyowners to escape costly premiums without giving up the total death benefit. Unlike surrendering a life insurance policy or letting it lapse, life settlements provide a significantly higher payout than the cash surrender value, allowing policyowners to recoup a large part of their investment.

Alternative investments: Though they are often referenced as simply a way to set aside money for your beneficiaries, life insurance policies can also be thought of as investments. However, while this investment offers advantages such as acting as collateral in a policy loan, people sometimes decide to sell their policies in order to pivot to a different type of investment. With the motivation of diversifying their portfolios, policyowners might choose a life settlement as a way to maximize this investment before putting the cash payout into an alternative vehicle.

Emergencies or large purchases: If you need quick cash for an emergency expense or large purchase, selling your life insurance policy allows you to access a significant portion of your policy’s face value without having to trigger the death benefit. This is helpful for older policyowners who need money for retirement, escalating health care costs, or long-term care.

As these examples show, life settlements can be advantageous for people in a variety of situations. If you are 65 or older and have a life insurance policy of at least $100,000, a life settlement could help you meet your financial or retirement goals.

Who Does a Life Settlement Broker Represent?

When you initiate a brokered life settlement, the transaction will, broadly speaking, involve three parties: the person selling the policy, the company buying the policy, and the life settlement broker. The broker acts as the intermediary between the company buying the policy, called a life settlement provider, and you, the policyowner.

Though the broker will interact with both seller and buyer, they are legally bound to represent only the person selling the life insurance policy. Life insurance settlement brokers have a fiduciary duty to act in a policyowner’s best interest and help them find the maximum payout for their policy.

In return for their services, brokers receive a commission, calculated as a percentage of the entire sale’s payout. This commission can be as high as 30% of the sale amount and is deducted from the final sum the policyowner receives from the settlement. Depending on the size of your life insurance policy, this commission could amount to a significant sum and leave you with a much smaller payout than you would receive by transacting the settlement directly with a licensed life settlement provider.

Disadvantages of Using a Life Settlement Broker

Though the services of a life settlement broker can appear attractive to policyowners who want to avoid the legwork of selling a policy directly, it is worth noting that using a broker does come with several disadvantages. Below are a few of the drawbacks of pursuing a life settlement through a broker that you should consider before making any decision.

Life insurance settlement brokers deduct a large piece of a life settlement payout, as much as 30%, for their commission, which means the seller gets less for the policy than they deserve.

Selling your policy through a life settlement broker may subject sellers to the extra fees that some life settlement providers charge for brokered settlements. By selling directly to a licensed provider, sellers can avoid these fees and get the most from their policy.
Going through a broker adds additional time to the life settlement process, delaying the delivery of funds that policy sellers need from the sale.

As you weigh the costs of working with a broker against the benefits, it is a good time to consider what you are hoping to get out of the sale and how much time you are willing to sacrifice in the back-and-forth between the broker, seller, and buyer. If you would like to maximize the payout from your sale and access your cash as quickly as possible, selling your life insurance policy directly to a buyer may be a better option for you.

How Do Life Insurance Policy Settlements Work?

No matter your reason for pursuing a life settlement, the general process of working with a life insurance settlement broker will look the same.

After confirming your eligibility and your policy’s eligibility for the settlement, a life settlement broker will typically shop the policy around to several life settlement buyers. The broker will inform companies of the policy details in order to gauge their interest in the purchase. Companies who would like to purchase your policy will put forward bids for the settlement in which the policy goes to the highest bidder. The purchaser will then pay the policyowner for the sale, and the broker will deduct their commission from the policyowner’s payout.

Let’s take a closer look at a life insurance policy sale through a life settlement broker. The process can be divided into the following broad stages.

Policy Analysis

Before a life insurance settlement broker or company initiates a life settlement, they must first determine whether your policy is eligible for the sale and its current value. An eligible life settlement candidate must be at least 65 years old and have a policy worth $100,000 or more. Additionally, you will need to complete a detailed health questionnaire and authorize the life settlement broker or company to access your medical records and contact your insurance company.

Buyer Review

Life settlement providers then review the policy in detail to see if they are interested in bidding on it. They will examine your life insurance policy contract and a premium illustration that you or your insurance company provides. These specifics allow providers to take into account the insured’s life expectancy and the expected death benefit when the insured dies.

Auction

Once providers have determined that your policy is eligible for a life settlement and decided that they would like to purchase it, your life settlement broker will then initiate an auction with several rounds of bidding to sell the policy to the highest bidder. When people note that brokered life settlements take longer than settlements in which you do the legwork yourself, it is this back-and-forth that adds time to the sale. By going directly to a life settlement provider, you can receive just as attractive an offer but without the time-consuming auction process.

Final Sale

After the sale has closed, the policyowner provides the policy buyer with the necessary transfer information and signs documents to formalize the change in ownership. This step finalizes the process of transferring the policy’s premium payments to the new policyowner. Closing the sale also includes paying the seller their settlement payout, a sum less than the policy’s full death benefit but greater than the cash surrender value. And, in brokered life settlements, it also means subtracting a life settlement broker’s fees and commission from the payout from the sale.

Funding Options

Lump Sum Cash Benefit
The most common life settlement option is an all-cash lump-sum payment where the purchaser takes over all future premium obligations.

Retained Death Benefit
A policy can be exchanged a reduced, in-force policy with guaranteed death benefits and no future premium obligations.

Long-Term Care Benefit.
Turn an existing policy into a Long-Term Care Benefit Account that can be used to cover any form of long-term care costs and final expenses with possible tax advantages.

Annuity Income
Sell a policy to fund an annuity that will provide a guaranteed income stream for the rest of the annuitant’s life.

Choosing a Life Settlement Broker

Not all life settlement brokers have the same practices and commissions, so when choosing a broker, it is essential to understand up front the time and financial commitment that would come with the broker you are considering.

You will want to ensure full disclosure when it comes to the broker’s fees and commissions you will be responsible for once the sale is complete. This is the amount that a broker stands to receive from the settlement and sale; it can have a significant impact on the end payout that you receive. Because the broker’s commission is based on some fraction of the final sale value, the higher a percentage this commission is, the more will be taken from settlement payout and the less cash you will receive from the sale.

Another factor you should consider before entering into a brokered life settlement is the timeline of the sale. Pursuing a life settlement through a broker can extend the timeline of your sale because of back and forth between your broker and potential purchasers. As you contemplate what might be the best option for you, ask yourself when you need the cash from the sale. If you need the money from the sale of your policy to fund a large purchase or an emergency expense or is in any way time sensitive, the potential delay caused by a long, brokered life settlement may be a process you want to avoid.

The way you sell your life insurance will have important implications for your financial health, from how you plan for milestones like retirement to your preparedness for unexpected emergencies. While the above factors cannot not account for every possible consideration, they can help you determine whether working with a life insurance settlement broker or going directly to a life settlement provider is the right choice for you.

Enjoy the Financial Flexibility of a Life Settlement

Whether you choose to pursue a life settlement through a broker or by directly approaching a life settlement provider will come down to the importance you place on the size of your payout and the timeline of the sale. Regardless of which path you choose, life settlements are a savvy way to exit your life insurance policy—giving you a financial boost that you can put towards your retirement savings or personal expense.

If you are interested in selling your policy or would like to learn more about how life settlements can help you Retire Like a Genius, contact the experts. 

 

View Transcript

Retire like a genius. How to become a life settlement genius? Five things to know about a life settlement. People are seeing TV commercials and hearing more about Life Settlements every day. Billions of dollars worth of unneeded or unwanted life insurance policies are being settled every year. But for people who are unsure of what exactly a life settlement is and if it could be right for them. Here is what you need to know about Life Settlements today. What is a life settlement? It’s the sale of an unneeded or unwanted life insurance policy for a lump sum payment instead of abandoning it after years of making premium payments. Who qualifies? Life Settlements are specifically designed to financially compensate seniors and people with declining health who own a life insurance policy they no longer intend to keep. Here are five things you need to know about a life settlement. The older or sicker a person is the more they’ll be paid in a life settlement. If you’re too young and healthy you probably won’t qualify for a life settlement. it’s the legal right of every policy owner to sell off their policy with a life settlement a policy is personal property like a home and the owner has the same right to sell their policy just like they do with their house. Life Settlements are one of the best regulated Insurance options for consumers today. People see TV commercials all the time and Life Settlements have grown into a mainstream financial tool for seniors to pay for the rising costs of retirement and long-term care. Life Settlements can be a tax advantage way to sell off an unneeded or unwanted life insurance npolicy depending on the amount of premiums paid or how sick you are a life settlement can be partially or even entirely tax-free. There are no out-of-pocket fees costs for a policy owner to do a lifesettlemmt. A policy review takes a day to qualify and the entire life settlement process takes between 60 and 90 days to complete. So remember people pay premiums for years. Life insurance is an asset just like a home. Would you abandon your home after years of making mortgage payments of course not. So never abandon a life insurance policy without finding out if you qualify for a life settlement first. Retire like a genius. It’s always best to work with information and experts to help you naviagte these tricky issues so visitretirement genius today to learn more about how to retire like a genius.

Understanding Annuities: What They Are and Who They’re For

Introduction

Annuities are one of the few investment solutions that ensure you won’t outlive your money, and are a great addition to your retirement portfolio. That’s because they offer a guaranteed lifetime income when you reach retirement! No one should live in fear of outliving the money they worked so hard to accumulate, and annuities help protect what matters most as you look forward to a fulfilling retirement.

With over $250 billion in annuity sales each year, there remains confusion and controversy around this particular financial instrument. To alleviate that confusion, we set out to provide an extensive guide to annuities, including what they are, how they work, and how they differ from other types of investments.

What is the Definition of Annuities?

Annuities are a long-term financial vehicle designed to provide guaranteed lifetime income after retirement through a combination of savings and investments. They are contracts sold by insurance companies that promise the buyer (known as the annuitant) a future payout through one-time or monthly installments, usually for life.

The annuitant pays premiums in exchange for the insurance company to take on the risk of providing a monthly income stream for the rest of their life (and sometimes carried over to beneficiaries). A variety of contract provisions (known as riders) can also be purchased to modify and customize the annuity. Similar to other types of retirement investments, they are funded by payments the owner makes during their working years, and after retirement they are paid out at regular intervals.

How Annuities Work

Designed to provide a steady and guaranteed cash flow for the annuitant during their retirement, annuities alleviate the fear of individuals outliving their assets. As a long-term contract from an insurance company, the annuitant invests their money and in return, they receive income in the form of regular payments. The money invested builds in value and helps support the annuitant by providing them assurance of income if they outlive their savings.

Most of the time, the annuitant is an individual investor looking for stable and guaranteed retirement income. Annuities typically aren’t recommended for younger individuals, who should first address more immediate and pressing needs––such as paying down student loans, credit card debt or other loan balances, thereby minimizing interest charges––before tying up money in an annuity.

Annuities have two phases:

  • The accumulation phase is when an annuity is being funded and before payouts begin. Any money invested in the annuity grows on a tax-deferred basis during this stage.
  • The annuitization phase (sometimes referred to as the distribution phase) is the period when the annuitant starts receiving payments from their annuity investment.

Types of Annuities: Pros and Cons

There are several types of annuities, each with unique features serving different purposes, allowing the buyer to select the one that fits their needs and comfort level. Annuities can be created to last as long as either the annuitant or their beneficiaries are alive or can be structured to pay out funds for a fixed amount of time. Once you choose the type of annuity that’s right for you, you will receive payments based on the terms in your contract.

The four basic types of annuities are: immediate, deferred, fixed, and variable. They are based on when you want to start receiving payments, and how you would like your annuity to grow.

  • When you begin receiving payments. Annuity payments can be received immediately after paying the insurer a lump sum (immediate) or by receiving monthly payments in the future (deferred).
  • How your annuity investments grow. Annuities can grow in different ways—through interest rates (fixed) or by investing your contributions in the market (variable).

Immediate

Immediate annuities are often purchased by individuals of any age who have received a large lump sum of money (a settlement or lottery win) and prefer to convert this single amount into a stream of future cash flows. This method starts immediately, provides a guaranteed lifetime payout, and is best suited for those who want a secure lifetime income. Generally, you won’t have access to that full lump sum in the case of an emergency, since you’re trading liquidity for guaranteed income. Immediate annuities are unique because fees are taken out of the payments. The annuitant knows exactly how much they will receive in the future, for the rest of their life.

Deferred

Deferred annuities are a savvy option for those looking to contribute to their retirement income on a tax-deferred basis—meaning you won’t have to pay taxes until you take money out and when you are likely in a lower income bracket, much like a 401(k) or an IRA. This type of annuity provides you with guaranteed income in the form of either a lump sum or monthly income payments on future dates. Unlike another form of savings/income vehicle, the traditional 401(k), deferred annuities don’t have contribution limits. The amount your principal grows before you start receiving payments will depend on selection of the investment type.

Fixed

As a lower risk option, fixed annuities act like a savings account or CD providing the annuitant with a fixed minimum interest rate and a fixed schedule of payments over their life. The interest rate can last anywhere between a year and the full-length of the guarantee period. The earnings are tax deferred until the annuitant begins receiving the payments. This method is better used for growing income in the accumulation phase, not for generating income in retirement. While you cannot say how long you’re going to live, fixed annuities are most appropriate for individuals at a later stage of life where income protection and disbursement are most important.

Variable

Variable annuities act like an investment account providing the annuitant with a variety of options to invest their money to grow tax deferred and provide a death benefit for the annuitant’s family. This method allows you to invest your money into sub-accounts that, over time, help you keep up with or even outpace inflation. Like mutual funds, sub-accounts are dependent on market risk and performance. They are most appropriate for individuals with a longer time frame (at least 15 years or less) before the income is needed.

 

 

How Do Annuities Differ from Other Types of Investments?

Annuities, IRAs, and 401(k)s are forms of retirement plans but they have significant differences:

401(k) Plans

  • 401(k) plans are available to individuals whose employers offer them, while annuities aren’t employer-sponsored and can be purchased by anyone.
    There are contribution limits for 401(k) accounts, but none for annuities.
  • Contributions to 401(k) accounts may be deducted from your taxes in the years in which they are made, while contributions to annuities may not be tax deducted.
  • Withdrawals from 401(k) accounts are taxable in their entirety, while only the portions of annuity payments that represent earnings are taxable.

IRAs

  • IRAs are tax-advantaged retirement account established by an individual who can make their own investment decisions or hire a licensed professional to manage the account for them.
  • Contributions to an IRA are typically tax deductible subject to income limits.
  • The funds grow in the IRA tax-deferred, but once the owner becomes age 72 they must start taking Required Minimum
  • Distributions (RMD) withdrawals that are subject to taxes on the gains (but not the principal that was contributed).
  • Any funds taken out prior to the age 59½ are subject to early-withdrawal penalties up to 10% as well as federal and state tax penalties.

There are specific circumstances that will allow for penalty free withdrawals from an IRA or a 401K including:

  • Inherited account
  • Buy, Build, or Rebuild a Home
  • Fulfill an IRS Levy
  • Unreimbursed Medical Expenses
  • Health Insurance Premiums While Unemployed
  • Permanent Disability
  • Higher-Education Expenses

Some individuals choose to roll all or part of their IRA or 401(k) savings into annuities as a means of providing a stream of income to fund their retirement.

Annuities also differ from traditional investments. Investments happen when money is put into a product such as a stock, bond, mutual fund or even a home mortgage or bank savings account in the hope of making more money over time. An annuity is a type of investment product sold by life insurance companies.

Who Are Annuities Best For?

The answer to ‘who annuities are best for’ is entirely dependent on your situation. If you have health issues that could affect your longevity so that it’s unlikely you’ll outlive your savings and expect you’ll need liquidity to pay medical bills, annuities may not be the best option for you. If, on the other hand, you’re a healthy individual who anticipates a long life ahead, annuities can be good protection against outliving your savings. Especially if you’re older, the safety and predictability of annuities are likely to be suited to your needs. They provide peace of mind for those who don’t have a fixed income planned for their retirement, and the various options offer flexibility for different life stages and situations.

If you’re years away from retirement, the higher potential returns of a variable annuity could be your optimal choice, but those closer to retirement may want to go with a shorter-term fixed annuity that safely grows based on a set interest rate.

How Are Annuities Different from Life Insurance?

Life insurance deals with the risk of an individual dying prematurely. Policyholders pay an annual premium to the insurance company who pays out a lump sum upon the owner’s death. If the policyholder dies prematurely, the insurance company pays out the death benefit at a net loss.

Annuities deal with longevity risk, or the risk of outliving your assets, and are intended for retirement purposes. The risk to the issuer of the annuity is that the annuitant will outlive their initial investment. Annuity issuers may hedge longevity risk by selling annuities to customers with a higher risk of premature death.

Annuity Alternatives

Annuities are not the only financial planning strategy for generating income in your retirement. Alternatives can include bonds, certificates of deposit, retirement income funds, dividend-paying stocks, reverse mortgages, and life settlements.

A life settlement is a cash payment in exchange for selling your life insurance policy, which can be a solution to help alleviate debt, maintain a better quality of life, or put toward an income vehicle, such an annuity. Policyholders who no longer need their life insurance policy, or for whom the premiums have become too expensive, can sell their life insurance contract to a third-party buyer, such as a life settlement provider. To qualify for a life settlement, you need to be over the age of 65, your life insurance policy must have been active for at least two years and have a minimum death benefit of $100,000.

How to Fund an Annuity

A life settlement is a savvy way to help fund an annuity. By selling your life insurance policy in return for a life settlements you realize value out of a policy you can no longer afford to keep or want to cancel . The proceeds from the life settlement can then be used toward purchasing an annuity, converting what was once an expense into an income stream. All life insurance policies are unique, so your life settlement payout will differ depending on the value of the policy and the sale offer.

Conclusion

Annuities can help you achieve your retirement goals and, when done strategically, can help provide cash for your later years. It can be difficult to think of how long you will live, and challenging to predict how long your savings will last. Annuities offer a smart option for aligning with your goals and values, and helping you insure your future needs are financially covered. A talk with your financial advisor can help you decide if annuities, and what kind, are right for you. Contact the experts at Retirement Genius today.

Retire Like A Genius℠

Retirement Genius tips, tricks, and more are delivered right to your inbox. Sign up today and learn to Retire Like a Genius.