In May 2016, the U.S. government passed a new regulation regarding the beneficial ownership of legal entity customers. Going forward, it will be mandatory for all financial institutions to comply with this regulation by identifying the ultimate beneficial owner(s) and a controlling person of a legal entity customer opening or maintaining an account.
In compliance with this new regulation, Highland Bank will collect beneficial ownership information from legal entity customers beginning May 1, 2018. This means that any time an account is opened or maintained for a legal entity, we will request information that identifies the ultimate beneficial owner(s) and controlling person of the legal entity. The required identifying information includes name, address, date of birth, identification number, and other information that will help identify those individuals. This information will need to be collected whether or not the person identified is currently a Highland Bank client. This information will also be collected for existing legal entity customers who establish or maintain accounts once this new regulation is implemented at Highland Bank on May 1, 2018.
While we understand the information requested is personal and sensitive, we need to obtain this information in order to comply with the law. As always, we will treat all information collected with the utmost care. All information will be stored securely and handled with the same standard of privacy that we have always maintained.
The beneficial ownership regulation is a federal law requiring all financial institutions to identify and verify the identity of the beneficial owners of legal entity customers as well as a controlling person of the legal entity anytime an account is opened or maintained. The regulation is aimed at making financial institutions safer for their customers and protecting the country’s financial system
Highland Bank, as well as all other financial institutions in the U.S., will be required to collect beneficial ownership information. The U.S. government implemented the new beneficial ownership regulation to help fight financial crimes. Highland Bank is doing its part in upholding the new regulation to protect the financial system. Compliance with regulations has always been of utmost importance to Highland Bank, and the new beneficial ownership regulation will be treated with the same level of importance.
No. All financial institutions are required to comply with the new beneficial ownership regulation and will be collecting this beneficial ownership information from applicable customers.
The U.S. government regulation defines “beneficial ownership” as being made up of two roles: (1) those that have an ownership interest in a legal entity and (2) those that control a legal entity.
For those people who have an ownership interest in the legal entity, Highland Bank is required to identify and collect personal information on anyone that meets or exceeds the following ownership thresholds:
A natural person having 25 percent or more of the equity interests of a legal entity; or
A natural person owning more than 10 percent if:
A person with significant managerial control or influence over a legal entity customer (e.g., Chief Executive Officer, Chief Financial Officer, Managing Member, General Partner, etc.)
For every legal entity client subject to beneficial ownership, you must identify one control person.
NOTE: It is possible that the control person may also be an ultimate beneficial owner.
In most instances, a copy of a valid driver’s license will meet Highland Bank’s identification requirements and can be provided in person or via secure email. Please reach out to your Highland Bank relationship manager to obtain the specifics regarding identification requirements.
Yes. Regardless of customer status, information about the ultimate beneficial owners and control person must be provided in order to comply with the regulation.
The Certification of Beneficial Ownership is a legally required form that Highland Bank must collect from legal entity customers regarding their ultimate beneficial owners and the control person. By completing the form, you are attesting that the information provided is accurate to the best of your knowledge.
Highland Bank will maintain beneficial ownership information in its system of record. We maintain strict privacy policies and procedures. Any client information, including beneficial ownership information, will not be shared.
No. This information will not be used for marketing or prospecting purposes.
Beneficial ownership information will be collected using Highland Bank documents and should be returned to your Highland Bank relationship manager.
No. The Beneficial Ownership regulation only applies to applicable legal entity accounts.
For more information regarding beneficial ownership, please contact your relationship banker.
One of the most important decisions you’ll make when starting a business is choosing the right bank accounts. As an entrepreneur, you’ll want to make sure you don’t mix your personal finances with your business money: If your cash isn’t kept separate, it could be hard to meet IRS recordkeeping requirements, and that could lead to tax penalties. Opening new accounts in your company’s name is typically a better practice. Having separate bank accounts could also help limit your personal liability. Say someone were to sue your company; your business assets might be at risk, but your personal assets would likely be protected from legal action. Here’s a look at three common types of accounts to consider for your company.
For entrepreneurs, opening a business checking account means you don’t have to ask customers to write checks to you personally. Some customers could view checks written out to individuals as unprofessional, and that could hurt sales. With a business account, checks are made out to the company name. Many banks offer business checking accounts for a minimal fee. Some even offer free business checking, though your company may need to agree to limit deposits and withdrawals to a set number — say, 300 transactions a month — or agree to keep a certain minimum balance. When you sign up for business checking, many financial institutions will also offer online banking and payroll processing services.
You don’t have to put all your company’s cash in a checking account. It may make sense to place money you don’t need to spend right away into a business savings account, where it may earn a better rate of return. A business savings account could also serve as an emergency fund to help pay for business operations if your company goes through a sales slump. And, as with personal accounts, your money would be protected with federal insurance up to $250,000 per depositor.
Opening a credit card in your company’s name gives your business a chance to establish credit. When you first sign up, you may need to personally guarantee the debt because your company won’t have an established financial history. But your company will soon show a track record of payment as you put the card to use. Eventually, business loan and credit requests could be guaranteed by your company, and not your personal finances. Opening bank accounts for your business can be an important step in establishing your company’s financials. By opening a separate checking account, savings account and credit card for your business, you’ll avoid the headaches that mingling personal and business money can create and you’ll make your company’s record-keeping easier and more robust for the future.
© Copyright 2016 NerdWallet, Inc. All Rights Reserved
By Roslyn Lash
Getting a job, buying a car, buying a home — all of these milestones are both exciting and at times stressful for young adults just getting started. For many people, these are wonderful goals that help push them forward. But as millennials build their careers, start families and consider their futures, it’s important to remember that true success has little to do with your job title, the type of car that you drive or the size of your house.
Success is about having peace of mind. And you cannot feel successful or have a sense of true accomplishment when you are worried about money. Millennials must be comfortable with their finances to achieve long-term success.
To have peace of mind as well as peace in your finances, you must prepare for and practice the keys to financial wellness:
This is about investing in your future by seeking the highest education that you desire intellectually and can afford financially. Your knowledge and education will open doors that would have otherwise remained closed. Education has a major influence on your earning power. It can propel you when the economy is good and sustain you when it’s bad. You can lose your job but not your education.
The most essential rule of saving is to pay yourself first. You should contribute to your personal savings and your retirement savings with every paycheck. The simplest way to accomplish this goal is through direct deposit. For your personal savings, you can have a set amount deposited into a savings account and then have the balance go into your regular checking account, which is used to pay for your living expenses. By doing this, you are assured that you have emergency savings. For your retirement savings, you should start contributing to a 401(k) or individual retirement account as early as you can. Start contributing in your 20s so you have even more time to take advantage of compound interest (in which your earnings are added to your principal).
Spend your money in a way that minimizes your debt. You should use cash to pay for small-ticket items, those things you can afford to pay for outright. Expensive purchases such as a house, car and furniture understandably might not be bought for cash. But you can still be mindful of your spending habits by asking yourself key questions: Is this a need or a want? If it is a want, can it wait, or is it something that you should purchase immediately? In addition, do some comparative shopping. Be sure that you’re getting the best price for the items you buy — and for the credit you use. Are you receiving the lowest available interest rate on your credit cards? If you’re paying 21% while you could be paying 12%, you are doing yourself a disservice and throwing away your money.
If you’ve started a family, be sure that you have adequate life insurance to protect them in the event of your death. This is especially important if you have small children, because you want to provide for their future. Your children’s financial needs will continue, and they’ll need money for their everyday expenses such as housing, clothing and food. You may also want to help ensure opportunities for a brighter future by providing enough money to assist with endeavors such as going to college, buying a car or starting a business.
You can find affordable term life insurance policies. These are basic, no-frills policies with a set duration of coverage, usually up to 30 years. You could also purchase policies for an indefinite term or with additional features. For instance, a whole life policy remains in force until death, but can be significantly more expensive than a policy that lasts for a specific number of years. Talk to your financial advisor and/or insurance agent to determine the type and amount of coverage you need.
Owning a home has long been considered a foundation of wealth creation. It’s one of the most important steps you can take toward financial wellness. If you plan on living in an area for over five years and you can afford to buy a home, it’s something you should certainly consider. As a homeowner, you can build equity and take advantage of tax benefits such as mortgage interest and property tax deductions. But homeownership isn’t for everyone. If you prefer flexibility and don’t plan to live in the same place or you don’t want the responsibility of owning a home, it may not be right for you.
The earlier you establish these practices and pillars of financial security, the more possibilities and freedom you will have later in life. Developing sound financial principles now will ensure that you and your family can weather financial storms and achieve true success.
The article The Keys to Financial Wellness for Millennials originally appeared on NerdWallet.
Most teenagers probably won’t leap at the prospect of learning about personal finance on their own. That’s why it’s important to take the time to teach them smart money management. To get the conversation started, here are seven topics worth discussing to help your teen avoid costly financial missteps in the future.
Preaching about the value of a hard-earned dollar isn’t quite as effective as encouraging your child to get a job. By working for their money, teenagers are likely to begin thinking critically about how they spend it, which is a good habit to pick up at an early age. If your child is too young for a job, you could provide a weekly allowance for helping around the house.
Once your teen starts earning money, explain how to set a budget. Consider explaining the difference between essential and nonessential expenses, providing examples from your own life.
Since creating a budget isn’t the most exciting activity, introducing the idea of saving up for a fun purchase might reinvigorate your teen. Putting away money every month requires discipline and is a great skill to practice at an early age by regularly stashing away some cash for a new smartphone, for example. Crunch the numbers with your child to determine how much needs to be saved each month to hit the savings goal by a certain date.
So money doesn’t have to be stashed under their mattress, sign your teenager up for a checking and savings account. Although you’ll need to co-own the account if your child is under 18, your teen can have an active role in managing it. Just know that you’ll have to foot the bill if any fees, such as overdrafts, are incurred.
Although your child won’t be able to get a credit card before turning 21, anyone can be set up as an authorized user on your plastic at any age. Make sure to implement rules regarding when your teen can use the card, and make it abundantly clear that your credit score will take a hit if your card is maxed out.
It can be tempting to overspend on name-brand products. To help your teen fight those initial instincts, shop together and explore the wonders of coupons, sales and store brand items. This should underscore the notion that popular products don’t always have to be the go-to option, which can save your child a lot of money over the years.
When it comes to saving money, compound interest is a person’s best friend. Teaching your child about the many benefits of compound interest should encourage contribution to a 401(k) plan in a future full-time job.
© Copyright 2016 NerdWallet, Inc. All Rights Reserved
Apart from the pain of a family member or close friend’s passing, settling their financial matters can be time-consuming and difficult. You may have to comb through paperwork from bank accounts to life insurance policies. Although not exhaustive, these steps can ease the process of sorting through the deceased’s finances.
A will usually specifies who is to manage the estate, which includes anything of value left behind. Called the estate’s executor, this person typically has the legal authority to act for the deceased in dealing with financial services providers, government agencies and other institutions.
If there’s no will, state law generally lists who can fill the executor’s role. This list can include a surviving spouse, child or next of kin. A person acting in this capacity is known as an estate’s administrator and is generally appointed through a court proceeding.
If there are any trusts included in the will, which take effect when the person dies and are known as “testamentary trusts,” a trustee may be named in addition to an executor or administrator. A trustee, whether a person or an institution like a bank, manages the property covered by the trust on behalf of someone else, such as a minor, who is named the beneficiary of the trust.
If it’s unclear who is to manage the estate, a court will decide the issue, but before this happens, related documents, including property and debt records, must be compiled. These papers can include a will, trusts, insurance policies, investment and bank account statements, deeds, mortgages and loan or credit account statements. Also, the documentation typically covers tax returns for the two most recent years and a credit report. The returns can help identify property that might be missed otherwise, and a credit report may reveal overlooked debts.
Once the papers showing the estate’s holdings and accounts are assembled, they draw a picture of its condition. Anything jointly owned, from real estate to bank accounts, or designated for a beneficiary, like the benefits from a life insurance policy, is generally not considered part of the estate. The deceased’s debts, including credit card balances and loans outstanding, also need to be checked and paid off from the estate’s holdings.
As you work with a lawyer and contact financial institutions about the death, you’ll probably be asked for proof, such as an official death certificate. If you’re managing the estate, you probably will want to check which entities require certified copies, which bear official stamps on the paper. It’s generally a good idea to get at least 10 certified copies of the death certificate from the city clerk or other local administrator where the person lived. Certain institutions, such as the Social Security Administration, require certified copies, while credit card or utility companies may accept photocopies.
Additionally, you’ll need copies of the documents that name you as the estate’s executor or administrator, which a probate court usually provides.
Notify financial institutions, insurers and relevant government agencies of the death, but also reach out to any organizations where the person had accounts, was a member, or received subscriptions or other services. Related bills may still come in and must be paid until cancellations take effect.
Those in line to receive life insurance and or other death benefits tend to be responsible for filing related claims. These are handled by insurers, retirement plan or pension administrators and government agencies for things like Social Security survivor benefits.
By going through these steps, you can start to organize the finances of the deceased and get through this process more smoothly. Once the person’s finances get sorted out, you may be better able to refocus on your own financial life.
© Copyright 2016 NerdWallet, Inc. All Rights Reserved
Amazon. Chipotle. GoPro.
These household-name businesses were launched thanks to investments by the founders’ parents. But parents also have sunk plenty of money into their offsprings’ doomed enterprises, sometimes endangering their retirements and family relationships in the process.
Certified financial planner Jon Ten Haagen of Huntington, New York, had a retired client who against his advice gave $100,000 — most of her savings — to her son to start a restaurant. The business failed within a year, and he has yet to pay any of the money back, he says.
“She’s just getting by at this point,” Ten Haagen says.
Parents usually want their kids to succeed, and many are accustomed to sacrificing to help make that happen. But parents shouldn’t be misled about the risks, financial planners say.
“This investment is going to be concentrated, illiquid, and with high risk of total loss,” says Hui-chin Chen, a CFP in Arlington, Virginia. “If it fits in the parent’s portfolio and does not jeopardize their retirement, then it’s something both sides may consider.”
Parents whose finances can’t withstand losing the money should focus on providing other kinds of support, such as helping draft a business plan or pointing them to the nearest Small Business Development Center. These centers, part of the U.S. Small Business Administration, provide advice and support to would-be entrepreneurs.
Speaking of business plans, make sure your kid has one before any money changes hands, says Douglas A. Boneparth, a CFP in New York. The plan should include details such as the target audience for the business, what competition exists, expected set-up and ongoing costs and when the business is likely to be profitable.
“You want to know when you can expect a return, even if it’s just knowing your child will be successful,” he says.
Good plans require considerable research and effort, so your daughter’s or son’s willingness to do this footwork can be an indication of whether he or she is entrepreneurial enough to run a business, Boneparth says.
Will you be an investor in the company or a lender? Will you have a say in how the company operates? If the business succeeds, will you share in that success with a slice of the profits or the ability to sell your stake?
Parents who are going to be investors or partners should ask for a formal operating agreement that outlines financial contributions, voting rights, rules on making decisions and how people will join or leave the company. Operating agreements are a normal part of setting up a limited liability company, which also can help protect the parents’ assets from lawsuits and other problems created by the business.
Many business founders, however, don’t like being told how to run their business and may have a hard time answering to shareholders or investors, Chen says.
“In this case, they need to answer to their parents, which can be even more problematic,” she says.
Chen has advised clients to instead structure monetary help as a loan, with interest rates that meet IRS guidelines to avoid gift tax complications. Parents always have the option to forgive the loan later.
Those who want to minimize parent-child tensions may opt to skip the loan and make an outright gift. Most won’t have to worry about gift taxes, since people now have to give away over $11 million during their lifetimes before taxes might be owed. But gifts larger than $15,000 per recipient per year trigger a requirement that the giver file a gift tax return.
Parents also should consider family dynamics if there are siblings, since helping one child can foster jealousy in the others. Those “Mom always liked you best” rivalries can tear families apart.
Parents don’t have to make equal distributions to each child, but may want to consider accounting for money in their wills or other estate plans. If a loan isn’t paid back, for example, it could be deducted from that child’s inheritance, says Steve Branton, a CFP in San Francisco.
Resist the urge to keep the arrangement a secret, advises Megan Ford, a financial therapist at the University of Georgia and past president of the Financial Therapy Association. Engage the other siblings early in the decision-making process to discuss their feelings and concerns, she advises.
“A common tactic families use to sidestep conflict is avoidance, but transparency and communication is key to avoiding resentment within the family,” Ford says.
This article was written by NerdWallet and was originally published by The Associated Press
At 21, you’re a financial adult. But chances are you still don’t know what you don’t know. We asked personal finance experts and financial planners what newly minted adults need to know about money. Their bottom line: Be sure your balance sheet includes some joy, too.
A job you love saves money. How you earn a living affects how you spend, says Kathy Kristof, a longtime financial journalist and editor of SideHusl.com, a website that evaluates gig opportunities. If you hate your job, you’re likely to spend more to distract yourself from all you put up with at work.
Spend on joy. Diane Harris, editorial director of Considerable, a financial and lifestyle site launching later this summer, and former editor-in-chief at Money, says she wishes she had understood at 21 that spending on experiences and people you love brings more joy than accumulating stuff. Budget for happiness.
Buy freedom. Delaying gratification is hard. But savings give you the means to act when you need to, says Krista Smith, a fee-only certified financial planner in Atlanta. “Your savings are often what saves you when you finally get the courage to leave a bad relationship and need to pay a security deposit on a new apartment, when you bust a tire on the highway, or when a family member’s health is failing and you need a plane ticket NOW.”
Time is money. When you buy something, you trade minutes or hours of your life for it. It’s a good way to decide if it’s worth the price.
You need less than you think. It’s OK to drive a beater, live with a roommate and buy secondhand. It’s a great way to set yourself up for wealth later. You’re just starting out, and it’s smart to live as if you’re broke, Kristof says.
Live on less than you make. A lot less, if you can. Expenses add up quickly. Learn to cook and to use household tools, for example. Those skills can make a big difference in your budget.
Travel cheaply while you can. You may not mind hostels and bunk beds now. There’s a good chance you’ll feel differently later. Go.
Don’t lose “found money.” Smith says if she had saved even half of holiday and birthday checks, money from selling textbooks and the occasional $20 bill when she was starting out, she could have been in a position to avoid credit card debt later.
Save money now — don’t wait. It’s tempting to put it off. Even Harris, who was a personal finance writer advising others to save, didn’t do it. “I would have SO much more money for retirement now if I’d heeded my own advice,” she said. If your employer provides matching retirement funds, that’s essentially free money.
Cash in on compound interest. The sooner your money starts earning money for you, the longer it will work — and the less you have to save. Compound interest is the interest that your interest earns. In time, your balance may increase as much as or more from interest than from your contributions.
Build your credit. Your credit history matters. Pay on time, every time. A good credit score may keep you from having to pay utility deposits, help you get approved for a lease or result in lower car insurance.
Know what loans cost. Lenders are likely to approve you for more than you can reasonably repay. Before you sign, make sure you know how much you are borrowing, and the total of your payments. The faster you pay something off, the less you’ll pay in interest.
Bev O’Shea is a writer at NerdWallet. Email: [email protected]. Twitter: @BeverlyOShea. The article It’s Not All About Money: Financial Wisdom for Young Adults originally appeared on NerdWallet.
All of us are vulnerable to fraud. But the ways some older people use technology can put them at higher risk.
That’s where you come in. When you’re home for the holidays, or the next time you visit your folks, offer to help with a few tasks that can keep your parents safer online.
Identity thieves glean details from social media accounts that they can use to impersonate others. Unfortunately, many people have no idea how much information they’re exposing to the world.
“If you’ve never changed your Facebook privacy settings, everything you post can be seen by everyone,” says Doug Shadel, AARP’s lead researcher on consumer fraud and author of “Outsmarting the Scam Artists.”
Your mom may love the birthday greetings on her special day, for example. But publicly posting birthdates, full names, addresses, relationship status, hometowns and other key details just makes it easier for someone else to answer security questions that give access to Mom’s accounts, Shadel says.
Facebook offers a privacy checkup link, accessible via the question mark at the top of every page, that allows people to quickly adjust some of their settings. Also show your folks how to access their privacy settings from the drop-down menu to the right of the question mark. Then, tackle any other social media sites they use. If you’re not sure where the privacy settings are or what to change, search the site’s name plus “privacy settings.”
Security experts say it’s essential to:
People older than 65 are actually less likely to reuse passwords than younger people, an AARP survey found. Only 36 percent of the older crowd use the same password on more than one site, compared with 55 percent of those ages 18 to 49.
That may be because older people have fewer accounts to keep track of, Shadel says. Anyone who has more than a handful of passwords quickly realizes how hard it is to keep track of them all. To stay safe, Shadel recommends people use password managers such as LastPass or 1Password to ensure they’re using strong unique passwords, particularly for financial and email accounts.
Not all security experts are convinced that password managers are the solution. For example, Avivah Litan, distinguished analyst at business research firm Gartner, worries about trusting any one company to guard your information. She suggests other methods, such as writing down passwords in disguised form that only the user can translate.
Even strong passwords can be hacked, though, so Litan also suggests people help their parents add two-factor authentication to their important accounts. With this protection, they typically will be texted codes to use in addition to their passwords.
“It really raises the bar,” she says. “It’s much harder for criminal to hack into their account.”
Only one-third of people older than 65 have online access to all of their financial accounts, the AARP survey found. People should have that access so that they can monitor their accounts for fraudulent activity, Shadel says. Weekly check-ins are a good goal; Shadel says he checks his bank account and credit card activity daily.
“A lot can happen in the 30 days you’re waiting for that statement,” Shadel says.
Once your parents have online access, show them how to set up account alerts that will notify them via email or text of unusual activity, large transactions and other noteworthy events that could indicate fraud.
After the massive 2017 data breach at Equifax, one of the three big credit reporting agencies, security experts recommended consumers freeze their credit reports at all three credit bureaus. Credit freezes prevent potential lenders from accessing those credit reports, making it harder for identity thieves to open up new accounts.
Unfortunately, only 14 percent of adults have set up those freezes, even though they are free, Shadel says. It’s also free to temporarily lift a freeze, so consumers can apply for new credit when they want it.
You can help your parents set up freezes and find a secure place to store the log-in credentials or PINs they’ll need for any thaws.
These methods aren’t foolproof. The aim is to be just difficult enough to victimize that the fraudsters move on to the next target.
“If you put up any resistance at all, your chances of being a victim go way down,” Shadel says.
This article was written by NerdWallet and was originally published by The Associated Press. Liz Weston is a writer at NerdWallet. Email: [email protected]. Twitter: @lizweston.
The article 4 Tech Tasks to Keep Your Parents Safer Online originally appeared on NerdWallet.
Most people would be better off not having mortgages in retirement. Relatively few will get any tax benefit from this debt, and the payments can get more difficult to manage on fixed incomes.
But retiring a mortgage before you retire isn’t always possible. Financial planners recommend creating a Plan B to ensure you don’t wind up house rich and cash poor.
Mortgage interest is technically tax deductible, but taxpayers must itemize to get the break — and fewer will, now that Congress has nearly doubled the standard deduction. Congress’ Joint Committee on Taxation estimates 13.8 million households will benefit from the mortgage interest deduction this year, compared to more than 32 million last year.
Even before tax reform, people approaching retirement often got less benefit from their mortgages over time as payments switched from being mostly interest to being mostly principal.
To cover mortgage payments, retirees frequently have to withdraw more from their retirement funds than they would if the mortgage were paid off. Those withdrawals typically trigger more taxes, while reducing the pool of money that retirees have to live on.
That’s why many financial planners recommend their clients pay down mortgages while still working so that they’re debt-free when they retire.
Increasingly, though, people retire owing money on their homes. Thirty-five percent of households headed by people ages 65 to 74 have a mortgage, according to the Federal Reserve’s Survey of Consumer Finances. So do 23 percent of those 75 and older. In 1989, the proportions were 21 percent and 6 percent, respectively.
But rushing to pay off those mortgages may not be a good idea, either.
Some people have enough money in savings, investments or retirement funds to pay off their loans. But many would have to take a sizeable chunk of those assets, which could leave them short of cash for emergencies or future living expenses.
“While there are certainly psychological benefits related to being mortgage-free, financially, it is one of the last places I would direct a client to pay off early,” says certified financial planner Michael Ciccone of Summit, New Jersey.
Such big withdrawals also can shove people into much higher tax brackets and trigger whopping tax bills. When a client is wealthy enough to pay off a mortgage and wants to do so, CFP Chris Chen of Waltham, Massachusetts, still recommends spreading the payments over time to keep the taxes down.
Often, though, people in the best position to pay off mortgages may decide not to do so because they can get a better return on their money elsewhere, planners say. Also, they’re often the ones affluent enough to have big mortgages that still qualify for tax deductions.
“Mortgages many times have cheap interest rates that are deductible and thus may not be worth paying off if your portfolio after taxes can outpace it,” says CFP Scott A. Bishop of Houston.
For many in retirement, paying off the house simply isn’t possible.
“The best case ‘wishful thinking’ scenario is that they’ll have a cash windfall via an inheritance or the like that can be used to pay off the debt,” says CFP Rebecca L. Kennedy of Denver.
In pricey Los Angeles, CFP David Rae suggests mortgage-burdened clients refinance before they retire to lower their payments. (Refinancing is generally easier before retirement than after.)
“Refinancing can spread your remaining mortgage balance out over 30 years, greatly reducing the portion of your budget it eats up,” says Rae, whose office is in West Hollywood.
Those who have substantial equity built up in their homes could consider a reverse mortgage, planners say. These loans can be used to pay off the existing mortgage, but no payments are required and the reverse mortgage doesn’t have to be paid off until the owner sells, moves out or dies.
Another solution: downsize to eliminate or at least reduce mortgage debt. CFP Kristin C. Sullivan, also of Denver, encourages her clients to consider this option.
“Don’t fool yourself that your grown kids will be back visiting all the time,” Sullivan says. “Certainly don’t keep enough space and comfort for them to move back in with you!”
This article was written by NerdWallet and was originally published by The Associated Press. Liz Weston is a writer at NerdWallet. Email: [email protected]. Twitter: @lizweston. The article Should You Pay Off Your Mortgage Before You Retire? originally appeared on NerdWallet.
Sameer Patel loves to DIY. He’s built a weight rack for his home gym, rebuilt a swing for his son and welded a fire pit for his backyard. So when it was time to add gutters to his home in Tucson, Arizona, he was ready to do it himself.
“I had gone to Home Depot, read a lot of posts and was determined to do this myself,” Patel says. But the numbers didn’t add up.
Patel estimated tool rentals and materials (overestimating for the inevitable mistake) would run $652, still under the $800 quoted to him by a local contractor.
But when he factored in time — the project would take an entire weekend — and the likelihood he’d reuse his newfound gutter knowledge, he called in a professional.
“Even though I’d save money with this project … I was never going to do this” again, Patel says. “I don’t plan on starting a gutter install business.”
When weighing your own DIY project, run the numbers, then ask yourself these four questions before deciding whether to invest the elbow grease or pass it off to a professional.
Installing a new kitchen backsplash is a relatively straightforward task. A good online tutorial will teach you the basic techniques and walk you through the supplies needed.
A top-to-bottom remodel of your kitchen is another story. You’ll need to plan for and install flooring, cabinets, countertops and appliances, and may need to move gas and plumbing lines. That’s a lot of moving parts, especially for novices.
“When it gets to be more complex, it’s always good to have someone who is overseeing the project,” says Kelly Barrett, senior vice president of home services at Home Depot. That’s when it pays to hire a professional.
Sewing, carpentry, painting, metalwork: Each project requires a unique set of skills. Not having them isn’t a deal breaker, though. Half the fun of DIY is learning something new. Patel taught himself to weld so he could build his family a fire pit.
“It was fun sourcing the metal, developing a model, cutting and welding it,” Patel says. “The best part is the story about how it was made, knowing the mistakes and fixes and how we’d do it better next time.”
Before tackling a new project, Patel assesses his skill set, figures out how easily he can learn any new skills, and factors in how often he’ll use his new knowledge. If it’s a skill he won’t reuse, he’s less likely to do the project himself.
How much damage could you do if your DIY project goes awry?
Craft projects are less risky. Sure, you may burn your thumb with hot glue, but you won’t burn the house down. But some home improvement projects could flood your home or endanger your life if not done correctly.
“Make sure you’re safe,” says Brittany Bailey, a licensed general contractor and DIY educator at Pretty Handy Girl. “If you’re taking out a load-bearing wall and don’t know what you’re doing, that’s risking your life, your family’s life.”
Put a dollar value on your time and factor that into the total project costs. R.J. Weiss, a certified financial planner, uses this formula: Total savings divided by hours needed to complete the project.
“Now, I know my hourly rate for completing the project. Then the question really comes down to, am I willing to do the work for that amount of money,” Weiss says. “For projects I actually enjoy doing, such as yardwork, this point is moot. However, for those I’d grind my way through, it’s important to recognize the true opportunity cost of going the DIY route.”
Kelsey Sheehy is a writer at NerdWallet. Email: [email protected]
The article 4 Questions to Ask Before You DIY originally appeared on NerdWallet.
