The Success Of The Baby Boom Generation

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The Baby-Boom generation is nearing retirement and it is clear that millions of aging Boomers are financially under prepared. Reasons are many - poor savings habits, rising medical costs, the demise of guaranteed corporate pensions, and the dreaded squeeze faced by many: i.e. having to pay college costs for their children, care for their elderly parents, and save for retirement, all at the same time.

The outlook is not entirely bleak, however. One bright spot that may help Baby-Boomers achieve secure a retirement is the record high-level of home ownership and the related growth in home equity. Home equity, the difference between debt owed on a home loan and the value of a home, accounts for at least fifty percent of net wealth for more
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This strategy makes even more sense when you consider that maintenance costs and the headaches of a large family-home are done away with for the retiree. Yet emotional attachment to a home is strong and we all know retirees who simply refuse to move from the home they have lived in for so many years.

2. Reverse Mortgage - Retirees remaining in their homes can still tap their home equity as a source of retirement income. An entire industry has grown up around the "reverse mortgage" concept which allows seniors over 62 to tap into their home 's value without making any repayments during their lifetime. A reverse mortgage (also known as a HECM - Home Equity Conversion Mortgage) requires no monthly payment. The payment stream is "reversed": instead of making monthly payments to a lender, a lender makes payments to you, typically for the remainder of your life, if you continue to reside in the home.

Origination fees and closing costs for reverse mortgages are high. Some people try to avoid these fees by instead borrowing against their home equity for retirement living expenses with a regular home equity loan or home equity line of credit (HELOC). However, this is not always a smart strategy. The reason is that with either a conventional home equity loan or a HELOC loan, you will have to make regular monthly payments that may be at a higher interest rate than can be earned on the loan proceeds without undue risk. Also,
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