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Old 01-09-2018,
AdelaideCh AdelaideCh is offline
 
Join Date: Jun 2017
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Default Lining Up Your Sources of Emergency Retirement Cash

Retirees depend on their nest eggs for much of their cash. When money is needed, they plan to raise it from either income generated by the nest egg or sales of assets, such as mutual funds or stocks. Most people enter retirement with no other ways of raising cash.

Selling more assets to raise cash incurs costs. One cost of that is likely to be capital gains taxes if the sales are from a taxable account or ordinary income when they’re taken from traditional IRAs. Annuities are another potential source of income, but you could owe income taxes and perhaps early distribution penalties on additional withdrawals, if the annuity allows access to the money.

With those options, another cost is you’re taking the money out of your nest egg and losing the future income or returns you were expecting. When your cash need arises during a bear market, you have to sell after sustaining declines in value and before the market recovers.
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Old 01-10-2018,
AdolphYfv AdolphYfv is offline
 
Join Date: Jun 2017
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Your retirement plan should include a way to raise emergency money that doesn’t involve selling assets, incurring taxes or paying high interest rates. You have the most options when a plan is made before retirement. But even after retiring you have options.

Home equity line of credit. The standard home equity line of credit (LOC) is for many people the easiest and least expensive source of cash. When you have some home equity and a decent credit rating, you should be able to set up an LOC before retirement.

Often there are low or no fees to set up an LOC, especially if you have other accounts with the lender. That way, there’s no charge until you actually draw against it. Otherwise, fees to set up an LOC are fairly modest.
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Old 01-11-2018,
AdrianDaf AdrianDaf is offline
 
Join Date: Feb 2017
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With an LOC, you have the borrowing power, but don’t incur interest expenses until you actually borrow. You also don’t have to borrow the full amount of your limit. Borrow only the amount you need, even if it is only a fraction of the LOC’s limit. An LOC often expires if you don’t borrow any money within five years or so, but you should be able to obtain another LOC or extend it if you still have home equity and a good credit rating.

Interest rates on LOCs tend to be among the lowest you’ll find. With most LOCs, the interest rate is variable and tied to a short-term market rate, such as the LIBOR rate. You probably can find an LOC that allows interest-only payments for five years or so. After the term of the LOC, any outstanding balance usually is converted to a fixed 30-year payment schedule. You often can pay off the LOC at any time without a prepayment penalty.
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Old 01-12-2018,
AdrienneLa AdrienneLa is offline
 
Join Date: May 2017
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Reverse mortgage line of credit. I’ve discussed in the past the recent improvements in reverse mortgages. The latest discussion is in the November 2015 issue. Most reverse mortgages these days are FHA-guaranteed. Retirees don’t need much reliable income to qualify for an LOC if they meet the reverse mortgage requirements. You must be at least age 62, have home equity, and have a session with an approved counselor.

Reverse mortgage LOCs have higher fees than traditional LOCs, but you don’t have to pay them all up front. They can be part of the loan balance. You also probably won’t be able to have as high a borrowing limit as under a traditional LOC. But with a reverse mortgage LOC, you don’t need much income to qualify. You also don’t have to make any payments during your lifetime. You can make payments if you want to restore the full borrowing limit. But you don’t have to pay the loan as long as you live in the house. After you leave the house or pass away, proceeds from the sale of the house pay the loan balance and expenses.
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