May 9th, 2016 | Retirees
For years, 1 STOP Mortgage has served Seniors in Memphis, Jackson, Atoka, and other areas in our great State of Tennessee.
In doing so, we have had the opportunity to review their financial situation as related to the documents required in their mortgage transation, as related to either their purchase or refinance loan with us.
At times we have realized the challenges which they have and have been pleased to help them in a myriad of ways, such as refinancing for home improvement needs, securing for them a lower downpayment on their "downsizing" purchase loan.
James E Veale, CPA-MBT has published an informative article addressing Seniors' Social Security income and how it relates to their cash flow and other considerations.
The manner in which some financial advisors, CPAs, and others manage a Seniors' income on their behalf and/or advise them regarding it is very important. He tells how and why in this article:
Out of every paycheck for most employees, an amount is taken out for FICA of which 81% is taken to fund Old Age, Survivors, and Disability Insurance (OASDI) or what we call Social Security. The amount withheld is taken on an after tax basis which means that it is an after tax contribution. (Self-employed individuals have a similar after tax contribution to the OASDI.)
So like an annuity, every Social Security benefit payment includes both income and a return of capital. Social Security is not just income, but rather income AND a return of capital. This is also why only a portion of Social Security benefits can ever be subject to income tax.
While the American retiree has a huge income deficit, the cash flow deficit is key to understanding the future of any senior. For example, if all of the shares of stock a senior owns have substantial value but if sold would be sold at a tax and economic loss, selling these shares as ex-dividends they will not produce any income. What the proceeds represent is a partial return of capital.
Just because some asset managers like the idea of increasing the asset base of clients in order to exploit their fee income, that does not make it
2) the actions of a fiduciary, or
3) what best serves the interests of the Senior.
Sometimes in our profession, fellow colleagues can bring problems on ourselves, as well as our clients.
1 STOP Mortgage Note to Seniors: Take time to research your financial advisor, CPA, Portfolio consultant, etc.
After all, it is your money!