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December 16, 2005

Reverse mortgage popularity will go even higher

As many retirees see their pension benefits dwindling, Pension Benefit Guaranty Corporation (PBGC) business is booming. PBGC is the government organization that assumes responsibility for the pensions if the company you earned your pension from, terminates the pension plan. Basically, PBGC protects workers pension in cases where employer terminates its pension plan. It can be done when declaring bankruptcy, just like United and Delphi did. That is called Distress Termination. Or company may also terminate its pension plan by transferring it to PBGC, which is called Standard Termination.

The point is that pensions paid by PBGC often come short from the pension an employee expected from an employer. With rumors abound that GM is going to go bankrupt, many more workers can see their pensions smaller than they should be. Several much better doing US corporations may follow, as pension obligations hang heavy for Ford, IBM and others. To stay more competitive in the global market, these companies can terminate their pension plans. In 2005, PBGC has taken over the pensions of more than $265,000 workers and retirees. And I think more will have to join the club in a near future.

Many retirees who used to work for now bankrupt companies, lost the company stocks they accumulated for years, often decades of work. That happened with United, Delphi workers recently, with some having several hundred thousand dollars wiped out completely. Many others see their stock holding values greatly diminished.

That leaves the reverse mortgage as a very suitable supplemental income. Many retirees have their homes paid off or nearly so. They can borrow against the equity of their homes. With the higher limits for 2006, reverse mortgage is strong financial tool for many retired homeowners to consider. Just proceed with care.

See What is the reverse mortgage and related FTC's links:
Cashing In On Home Ownership
Get the Facts Before Cashing In On Your Home’s Equity

 
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