Financial Options for Seniors with Harlan Accola

This faith and finance podcast is underwritten in part by Movement Mortgage.

Movement provides residential home loans in all 50 states. Founded in 2008, amidst one of the biggest financial meltdowns in American history, Movement set forth on a mission to create a movement of change in their industry, in corporate cultures, and in communities. So that a portion of their profit creates a long term positive impact in communities, both close to home and around the globe through the Movement Foundation and Movement Schools. It all comes back to their mission to love and value people. Learn more at movement.com slash faith.

dot org. To increase their options and then it's on to your calls at 800-525-7000. That's 800-525-7000. This is faith and finance biblical wisdom for your financial decisions. Well, it's great to have our friend Harlan Akula back on the program. Harlan is with Movement Mortgage, an underwriter of this program, but he's also the go to guy for information on reverse mortgages. In fact, he's written the book on the subject titled Home Equity and Reverse Mortgages, the Cinderella of the Baby Boomer Retirement. Harlan, great to have you back with us.

It's great to be here again, Rob. Harlan, you've got some really interesting information about reverse mortgages that most of us have never thought of. But before we get to that, tell us why reverse mortgages may still have a bit of a PR problem when they perhaps don't deserve it these days. Well, Rob, a lot of people didn't know that federal regulation came in back in 1988 during Reagan's term when a lot of the bad players and wrong products were kind of tossed out and regulated against. But even after that, there was a lot of bad players that happens with any financial instrument. Anytime there's money involved, it attracts people that are opportunists and do things wrong and take advantage of vulnerable seniors. And so it's unfortunate that some of those things happen, but used correctly with all the new laws and safeguards that are in there for protecting widows. And financial assessments came about 10 years ago to make sure that people could afford taxes and maintenance when they're in the home. And that's eliminated a lot of problems in the program. But we still suffer from all the things that happened, the reputation. Sometimes you did some bad things in high school and people remember it later in life.

Yeah, that's exactly right. You, in fact, use the analogy of a Swiss Army knife for describing these mortgages, what are called home equity conversion mortgages or reverse mortgages. Why do you think that analogy works so well? Well, the bad things about reverse mortgages is they're a little bit confusing because there's so many different ways to use them. And historically, people have seen them as a loan of last resort for people that are ran out of money.

They live too long and they don't have enough money to keep any kind of lifestyle together. And so it's kind of a rescue mortgage that it's been viewed in in the past. And we want to keep folks from struggling. And we feel sorry for people that are in their 80s or 90s and simply run out of money. But the problem is, is that people have begun to just brand that it's kind of like Lincoln cars, only old people buy those things. And so it's just everybody thinks that a Lincoln car is designed for very old people. A lot of people think that reverse mortgages are just designed for people that are broke. And while we certainly want to help those people, we don't want everybody to think that's the only use because there are so many other things that the reverse mortgage can do like it does for me in retirement. Yeah, that's exactly right.

It really is a planning tool. And I think that's the key. It should be looked at that way. You know, through a biblical lens, we talk here on this program about the fact that there are clear warnings in Scripture around debt.

This is a conviction matter. If you want to pursue being completely debt free by this season of life, I think that's great. A lot of folks do that and don't look back. But I think that perhaps the missing piece is that a reverse mortgage is one of those planning tools in the toolbox. And it can be used very successfully. Right, Harlan?

Well, yes. The thing is, is that when we take a look at all of the challenges and all of the opportunities in the fourth quarter of life, what we don't sometimes look at is properly using and stewarding the wealth that we've accumulated in our own homes. And that is why we want to make sure that people understand that properly used, this is something that can enhance and make more secure that fourth quarter of life.

Yeah, no question about it. Our guest today is Harlan Akkala of Movement Mortgage. We're talking about reverse mortgages. When we come back, one of those uses of the Swiss Army knife is how a reverse mortgage can actually help keep your Medicare premiums low.

What about long term care as well? We'll cover that and much more just around the corner. Back with Harlan Akkala after this as we talk about reverse mortgages here on Faith and Finance. Following this interview, your questions today at 800-525-7000. That's 800-525-7000. Stay with us.

We'll be right back. Faithfi app is the leading biblically based finance app. You can manage your money, get top biblical financial resources and interact with a community of like minded believers where you can ask questions, get answers and share what you're learning.

Go to faithfi.com and click the word app to get started. Frustrated by your health insurance? Confused by the network restrictions and increasing premiums?

There's a better way. Christian Healthcare Ministries. CHM is a Christian community delivering a faith based solution to the high cost of healthcare. Take back control of your healthcare with the ability to choose a provider you trust with no network restrictions and savings of up to 40%. Learn more and enroll today at chministries.org slash faithfi.

That's chministries.org slash faithfi. Great to have you with us today on Faith and Finance. You know, here on this program we talk a lot about being debt free, about paying off everything as you're entering retirement to keep your expenses low. And while that is a great strategy for so many folks, there is a tool that involves you tapping into your home equity in that season of life that can make sense from a planning standpoint. It can, for many folks who are ill prepared for retirement, provide a needed source of cash flow.

It can even be used as a tool to keep Medicare premiums low and to allow your social security to build. These are missing tools or missing elements of what folks have not understood about reverse mortgages in the past. Today, joining us to tell us about that is Harlan Akula. He's with Movement Mortgage and Harlan, let's talk about the reverse mortgage in light of Medicare premiums.

What would you have us know? Well, that's a big surprise for a lot of our clients that we've worked with that as they draw money from social security and they draw money from their IRAs, sometimes taxes increase and income increases where they never expected it. Because they might take out $30,000 to buy a car or some unusual amount from their IRAs, which incurs more taxes and a higher income. Then as a backdoor surprise, they find out that something called IRMA, Income Related Monthly Adjustment Amount, on their Medicare causes their premiums sometimes to go up by hundreds of dollars.

They never anticipated, never even understood that that was a part of the equation. When they draw money from a source like home equity in their home, there is no 1099s, there is no W-2s. And so all of the income that comes from a reverse mortgage, because it is tax free and it's borrowed money, it's not income, that reduces their income that they're showing on their tax returns and thus reduces the amount of the Medicare premium that they pay for that next year or two.

Sometimes it can be hundreds, thousands of dollars over a period of a year, and it's certainly worth being very cautious as to how much money is being pulled out of those IRA taxable accounts. Yeah, no question about that. And that's perhaps something that folks haven't considered as they think about this season of life. I get calls all the time from people who are surprised by that IRMA increase, that is the income related monthly adjustment amount related to their Medicare premiums. What about long term care, Harlan?

How can a reverse mortgage help there? Well, this scares me because it's probably one of the biggest unplanned for things that just happens. When I got the call at two o'clock in the morning that my father had a stroke when he was in his 80s, it changed everything instantly that day. And unfortunately, so many people have to deal with things like that. We were kind of doubly impacted because my mom had Alzheimer's as well. A lot of long term care costs the last few years of their lives.

And we're not alone. That happens to many, many families. And there's two issues with long term care that is affected by the reverse mortgage. And one of the things is, is that people often cancel their long term care policies that they've had for years. They paid in for years and the premiums go up and they cancel right when they might need it. Sometimes we can use the money in the reverse mortgage or eliminate a payment on a regular mortgage so that they can afford to keep those policies going if they feel that they could potentially use them. And there's many people that don't have long term care insurance, never have been able to get it. And now they can't qualify because of medical conditions. Sometimes they use the reverse lines of credit, set that up so that when they need money in the future, they can use that money to stay at home instead of having to move to a more expensive nursing home. That's what my parents did.

It was better for mom to be at home with her Alzheimer's. And there's not too many people that would prefer to go to a nursing home as stay at home. And so we use some of the money in their home to pay for them to stay at home with home care. And a lot of families think they can't afford that. But we were able to do that because of the money that was inside a mom and dad's home in their farm home in Wisconsin.

And so that's something that I want everyone to know that that's an option. Some people prefer to go to assisted living or a care home, but many people don't want to. And sometimes you can just use that money inside the home to stay right there.

Yeah, that's really helpful. We mentioned, of course, among other rising expenses for folks in this season of life is property taxes and insurance. And in some places like Florida and California, these costs are going through the roof. That, of course, puts pressure on folks to sell and move to less expensive areas. So, Harlan, how can a reverse mortgage actually keep you in your house?

Well, we have a brochure that we hand out from the National Council on Aging, and it's called Use Your Home to Stay at Home. When people pay off their house, it is true that they don't have any principal and interest payment anymore. Their payment is zero. But that doesn't mean your obligation for costs change because you still have all of the other costs maintenance. And, of course, as you mentioned, insurance and taxes that go up and HOA fees and all of the other things that put a lot of pressure on a fixed budget.

And there's one other issue. When somebody has to move to a less expensive area, sometimes they have to sell their home and they run into capital gains taxes because maybe they bought their house for $200,000. Now it's worth $800,000 and they have to pay a lot of taxes to even move. And they don't want to move because they enjoy where they live.

The money inside of the reverse mortgage that appreciated equity over a number of years can be used to pay the insurance and pay the taxes and pay for the new roof or pay for those increase in HOA fees because sometimes staying in place is expensive to move. And many people don't want to move. And sometimes the best way to do that is to just get the money that's sitting right there in the living room.

Yeah, that's exactly right. Now, we've been talking about some of the ways seniors are getting squeezed financially, but that's not everybody. There's some folks in our listening audience, Harlan, who may be comfortable, but still unable to do some of the things they'd like to do in this season of life, but can't afford.

So give us some of those examples. Well, you know, I think the biggest thing is when I was talking to a financial advisor years ago, from a Christian perspective, we were going over all kinds of different things. And he said, you know, Harlan, when you get to the point where you have enough in retirement and you're still working and you can afford to take care of your normal expenses and so on, the extra that you have, have you ever thought about giving it away with a cold hand or a warm hand? That just stopped me, just kind of dead in my tracks. And I said, well, I guess everybody kind of gives it away with a cold hand at the end.

And he said, you don't have to. You can give it away while you're alive to your children, your charities, your church. This is something that many people have not thought about.

I hadn't thought about it. And that is something that I try to help my children, my churches and charities now while I have the ability and the understanding of what needs to be done. And I still work, but I know some of my friends don't like their jobs and I love working at Movement, but some people don't like where they work and they want to quit their jobs and they want to volunteer and help with all of the things they never got to do before. Well, many of those people now have additional income from the reverse that they don't have to worry about money. And what a lot of people don't realize, Harlan, is that this is what's called non-recourse debt, right?

Yes, this is the safest mortgage in that you can never owe more than the house is worth and the children will never be asked to pay the debt. That's an enormous distinction. All right, Harlan, unfortunately we're about out of time. How can folks get more information? Well, they can just go right to faithfi.com slash movement or email us directly at reverse requests at movement.com. That's faithfi.com slash movement, faithfi.com slash movement or reverse request at movement.com. Harlan, thanks for stopping by. Thanks for the opportunity, Rob.

Harlan Akula from Movement Mortgage today talking about reverse mortgages. Back with your calls right after this. 800-525-7000. That's 800-525-7000.

Stick around. We're grateful for support from Movement Mortgage, who provides residential home loans in all 50 states. Guided by a mission to love and value people and a goal to redefine the mortgage process, Movement seeks to help others achieve their financial goals.

You can find out more at movement.com slash faith. Movement Mortgage LLC supports equal housing opportunity. NMLS number 39179.

For licensing information, please visit nmlsconsumeraccess.org. We're grateful for support from Eventide Investments on the Faith and Finance Program. Eventide's approach to values-based investing is grounded in the belief that humankind was created in the image of God with intrinsic dignity, value, and worth. Eventide calls this investing that makes the world rejoice. More information is available at eventideinvestments.com.

That's eventideinvestments.com. Great to have you with us today on Faith and Finance. We're taking your calls and questions today. 800-525-7000. We have a few lines open.

You can call right now. Hey, before we head to the phones, let me remind you, our brand new study is out. Now, you might say, what is that? Well, it's the first in our FaithFi study series. It's a study, four-week study on the parable of the rich fool.

You'll know it well. It's from Luke 12. It deals with some incredible topics as someone approached Jesus to be an arbitrator over an inheritance dispute.

Well, as he so often did, he turned the tables and told a parable that really got to the heart of the issue. And if you're looking for a great study that's practical and rooted in God's Word for individual study, or maybe your small group at church or in your neighborhood, check it out today. You'll find it at faithfi.com. Just click shop. That's faithfi.com.

Just click shop. Let's round out the program today with your phone calls to Illinois. Hi, Daniel. Go ahead, sir.

Hi, how are you, sir? So I've been debating about this question. I have a retirement plan through my workplace, but I also have a 401k on the side with about $70,000. And I haven't contributed to it for the past three years. I'm just wondering, what should I do with that?

Should I just leave it there and never touch it or should I move it? Yeah, so it's an old employer that you've separated from and you left the 401k plan there? No, the same employer. I just haven't contributed to it anymore because they don't match it. Oh, I see.

Okay. And are you maxing out the Roth every year? The Roth, I do not, but I've been buying stocks from the company instead.

Okay, which is good. I just don't want you to get too highly concentrated. You know, with your company stock, you typically don't want to own more than 10% of your investable assets. So what I would do is since you've already got 70 in the 401k, and that's a tax deferred environment, meaning it's going to grow tax deferred, you're going to pay tax on it when it comes out in retirement. I like you building the Roth alongside that.

So you'll have the pre tax and the after tax bucket to pull from all growing in a tax advantaged way. So I would get to the place where you're maxing out that Roth. Now, if you start bumping into that contribution limit, which is 7000 for 2024, if you're under 50, over 50, it's 8000. If you get to the place where you're funding the max in there, then I'd go back to the 401k and start, you know, continuing your contributions there.

But since they don't have any matching, I would use the Roth first. And then when you get to that limit, which you'll get to fairly quickly, if you're putting in any meaningful amount of your monthly income, then that's where I would start to resume some salary deferral into the 401k. And then the key is to make sure that you've got a good investment strategy across all of it, where you're not taking unnecessary risk, you're not too highly concentrated in your company or anything else. And you've got a good diversified strategy. Does that make sense? Yeah, I was just not putting any more because since I have a pension, I was like, I don't want to be too greedy.

You know, you already have a pension, why should I put on the 401k, you know? Yeah. Well, that's a great point there.

So that's the question. How much is enough? And I think we all need to deal with that both for our lifestyle. How much are we spending on a monthly basis and our accumulation? Because we're not just, it's not a matter of the mindless accumulation of wealth. We just want to, you know, put away as much as we can for as long as we can without any kind of goal.

I think we want to prayerfully consider that. How much am I ultimately trying to have saved for that retirement season of life? Not that I want to retire to a life of leisure and full time vacation. I want to continue to be productive in service to the Lord.

But we recognize that in that season of life, you may be redirected away from paid work, or you may not be physically able to do paid work. And so that's where we want enough for you to maintain that lifestyle that you believe God has called you to. And so that can be computed in terms of a goal, an actual dollar amount that you're trying to save toward that would factor in all of your investable assets, your pension, your 401k, your Roth. So I think what's next here for you, Daniel, is some retirement planning with a certified kingdom advisor who understands your values and can help you arrive at that enough finish line. And then you know, OK, based on my age and how much I'm putting away every year and the pension that I already have and the 401k assets, I'm either on track ahead or behind. And that will tell you exactly how much you need to put away and then you update it every year, you know, with the market conditions. So I'd head to our website, faithfi.com, and just click find a professional there at the top. And what you're looking for is some retirement planning to determine what is my ultimate retirement savings goal.

Let's start there and then we'll use that information to inform how much you should be contributing to any of these accounts moving forward. I hope that helps, my friend. Thanks for calling today.

We're going to finish in Orlando. Hi, Linda. Go ahead.

Hi. My mother left a home to me and my sister. It was a quick claim deed that was written up about 30 years ago and never changed. It's complicated by the fact that my sister has lived free of charge, with the exception of tree trimming in the house and a kind of a pro bono thing when my mom came to live with them for a few years. And they have done some repairs on the house, although the money used for the repairs was all of our inheritance. Now, I need the equity out of our family needs the equity out of this home. I still have a mortgage on my my house and a car that's dying and kids in college. I'm trying to find a way that I can get the equity out of the house, but maybe find a way where she could still live there.

I don't want to force a sale. Yeah. So is your mother still living? No, she passed away three years ago. OK. And so you said that the inheritance was used. So was there not a probate process that allocated the inheritance? I understand the house is a different issue, but was that with the rest of the assets, they were not distributed according to her will? What was left was distributed evenly, but there wasn't much left after most of it was used on the house.

OK, so the house was used to repair the home and maybe renovate it. And what percentage of the home do you own? 50 percent. 50 percent.

All right. Have you approached your sister and told her you need to get the equity out? No, I'm about to do that this weekend. Two weeks after my mom passed away, she approached me and demanded that I sign my 50 percent over to her husband. Oh, well, that's not her decision. You're the steward of that portion that was entrusted to you by your mom. So I think at this point, yeah, I mean, you're the rightful owner, 50 percent of the property. She's, of course, living there, which complicates things. There was money used from the estate to improve the property.

Hopefully you'll benefit from that on the sale. If your sister wants to continue to live there, then she's going to need to get a mortgage on the property. Is it is it free and clear at this point? OK, so at this point, she's going to either have to get a mortgage for your 50 percent and you'll have to establish a market value with a professional, probably through an appraisal that you can document. And then she would get that 50 percent to cash out that she would then pay to you. Or she's going to have to sell it.

And at that point, you all would split the proceeds. And if she's unable to do that or unwilling, then obviously it's going to get a little bit more complicated because it could get legal in nature. So I think just start at least the first conversation by being prayed up, lay out the facts.

You own half the house and let's see if she won't take the proper steps to put the mortgage in place to cash you out or move. Obviously, if it goes beyond that, then it's a whole different issue. Unfortunately, I'm out of time. Linda, we'll be praying for you as you have that.

I know that's not an easy conversation. God bless you. Thanks to my team today. Thank you for being here. We'll see you tomorrow. Bye-bye.