Contributed by Major Mike Dryden, USAR Retired
As an older veteran, the last thing on your mind might be a home refinancing plan. You may have paid off your house and are basking in the lifelong dream of finally having no mortgage payment. Spending money on house payments are for the younger folks, right? Well, I want you to consider some salient points for pulling some cash out of the old homestead.
First, interest rates are at an all-time low. With a little shopping, you should be able to find a VA lender offering rates on a 30-year fixed as low as 3.5%. If you are receiving any VA disability income, the lender may not charge you any processing fees. With your equity, you could refinance with no out of pocket upfront cost. As with all financial manners, do your due diligence. I am not a professional financial advisor, but I do play one in this article and at several local coffee shop locations.
You may have several personal reasons for considering a refi at this late stage of life. Personally, I like spending the kid’s inheritance and just leaving them with your everlasting love and affection for the many years of joy they brought.
Too hard on the kiddie, you say? Well, on a worst case basis, let’s explore some possible outcomes to having lots of equity in your abode.
For a lot of seniors, pensions and Social Security haven’t kept up with inflation. Add to the mix, the shrinking value of the dollar, you find yourself strapped for cash at the end of the month. Owning no money on your home is every family’s dream, but not using that equity to pay down high-interest credit cards (many with interest rates as high as 30% with Draconian late penalties) and deferring your home’s upkeep isn't wise.
Next good reason is that you can’t take it with you. I have been looking for a way to pad my ascend (or descend; the jury is still out) into the afterlife, but still haven’t found one.
Personally, if I could pick my way to check out, it would revolve around falling off a bar stool in Bangkok and hitting my head after laughing at a joke. Sorry, but I can’t seem to rise above my Army helicopter pilot days. However, reality has shown me that one minute you are heading to Wallyworld to check out the clearance section and BANG, you slip on the steps and break a hip. Depending on your overall health and living situation, you could have just entered the world of long-term care.
Even worst, you have a stroke, survive but are unable to live at home. Medicare doesn’t cover LTC stays, but Medicaid does. Yes, you heard it right. The premium you are still paying out of your retirement from social security doesn’t cover you in your time of need. But if you just got off the boat from a third world country, just released from jail or a teenager who has just realized that she should have paid better attention in sex ed class instead of giggling, you are covered. Welcome to 21st century America.
With LTC facilities monthly rates ranging from $4000 to $28000 depending on the level of care, how long can you pay this amount out of pocket? For most of us, it ain’t long. At that point, you are on Medicaid until you die. Good deal, you say but your heirs will find out Uncle Sam will reach into the casket and your pockets to get reimbursed for their generosity. Remember the phrase,“Ain’t no such thing as a free lunch?”
The government will be paid back first for the funds spent by you using Medicaid. For most families, this means you will get very little out of your parent’s estate. This payback policy doesn’t apply to all the people just added to the Medicaid roles as a result of Medicaid expansion. For these folks, there does exist a free ride.
I don’t know about you, but my family comes before Uncle Sam.
The point that’s lost in the national discussion is that social security is not funded by the US government. No, it is funded by employees and employers. If you receive a W-2, then your employer has contributed dollar for dollar to your account. If you are self-employed, then you have paid the full ride.
What the US Congress has done is siphon our contributions and diverted them to the general fund. They have replaced cash with US government bonds, 2.5 trillion dollars worth of the lowest yielding instruments on the market. Are you surprised? We, the working people, are the nation’s largest creditor, not China or Japan.
Social Security should not be called an entitlement. It’s a deferred retirement plan funded by the workers and businesses. More employers have gone to jail and been fined for not paying their FICA than evading income taxes. Let’s reserve the term entitlements for Medicaid, TANF, SNAP, WIC, earned income tax credits and the endless list of programs for the socially and economically disadvantaged segment of our society.
By now, you may be seeing some advantages for pulling equity out of your estate and giving it to you grandchildren. This strategy is good estate planning and not anything untoward. Unless you are part of the .00001 percent of the population (and I am very liberal with that figure) that believes government can spend your money better than you, then die broke and enjoy yourself. Life is not a dress rehearsal.
I bet now falling off a bar stool in Bangkok sounds pretty good, eh?
For now, Major Mike is pulling pitch and getting above the small arms fire en route to Far North Fubar Farm.