Delaware Reverse Mortgages – Common Misconceptions

STRUGGLING ECONOMY: Clearly, we are in a poor situation. Almost all data that came out last week was negative, and the markets responded in kind. The job numbers were negative.  Construction spending fell by -1.7%, mostly due to a drop in residential construction. Consumer credit grew by $6.9 billion. Factory orders dropped -2.5% in January.   JOB LOSSES IN PERSPECTIVE: Last month there was a net loss of 63,000 jobs. In the recession of 1980, in April payrolls declined by 145,000, 2.3 times what was lost in February 2008. Of course, since the total number of employees in April 1980 was a little under 91 million versus today’s almost 138 million, this 145,000 loss represented even a far greater percentage decline. Maybe more important, since February 2008 was the second month of job losses, a potentially better reference point would be the 431,000 jobs lost in May 1980, the second month of that year’s recession.   DECREASING EQUITY: In the fourth quarter of 2007, homeowners’ equity fell to its lowest level in more than 60 years. The national average for owners’ equity as a percentage of household value dropped to 47.9%. In 1945, the percentage was 84%.  (Federal Reserve’s Flow of Funds report for the fourth quarter of 2007: www.federalreserve.gov/releases/z1/).   A COLLEGE SAVINGS ACCOUNT….FOR YOURSELF:  Almost everyone knows that a Section 529 College Savings Account is a good place to put money because you enjoy tax-free growth if you ultimately use the money for qualified education expenses. Occasionally, I have worked with young couples who have started putting money into a plan, naming themselves as the beneficiary, temporarily, until they started having children. However, I believe that the use of these accounts should and will be used much more extensively by baby boomers for themselves.

More and more people are proactively planning what they will be doing in retirement, and for many, it is to move on to some different type of career. I had a very high executive client at a Fortune 500 company who retired and went to law school. But consider some of the following possibilities:

• A semester at sea studying marine biology
• A year-long French lit course in Paris
• A fall session exploring art in Guadalajara
• A summer of music appreciation in Vienna
• An ecological field trip to Costa Rica  

(See http://www.petersons.com/Â for more possibilities.)

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As we head into the third month of the year and what seems like the third year of this year’s presidential election, I hope you are well and that you are weathering the choppy economic environment as well as all of life’s other challenges.

LAST WEEK’S MARKETS:

The markets advanced for the first four days of the week, but gave it all back on Friday. The Dow [-0.93%; -7.53%], the S & P 500 [-1.66%; -9.38%], and the NASDAQ Composite [-1.38%; -14.36%] all declined for the week.  Many investors getting out of stocks moved to the quality of U. S. Treasury securities, driving their prices up and yields down. T-bills dropped well below two percent, meaning lower returns ahead for money-market funds and other short-term investments. If the Fed lowers rates again in March, rates on T-bills, CDs, and money-market funds could slip to near one percent.  Once again investors will have to move further out on the yield curve or take on greater risk, to maintain higher levels of income and return. The average taxable money market fund in the USA was yielding +3.05% last week, down from +4.75% just a year earlier (source: iMoneyNet). Keep Reading...