Retirement Realities: Dropped Interest Rates

Mark Oberlin joins us to discuss the Fed announcement of rates being cut 1/4 percent. What does that mean if you are considering refinancing your debts? 

Episode Transcript

Speaker 1 (00:00):
This is West Michigan's morning news. Steve, Kelly, Brett Bakita
reunited with our friend Mark Oberlin with a segment we
call Retirement Realities. Mark's been out there for a little
while and the wild wild West of getting up whenever
he wants to. Mark, Thanks for joining us again today.

Speaker 2 (00:18):
It's always a pleasure, guys.

Speaker 1 (00:20):
A lot of headlines this week about our money and
if you are retired, you know, like and are on
a fixed income. I always hate the way that that's worded.
Talk to us a little bit about refinancing your debts
or what you should do when you hear that the
rate goes down. Can retirees still refinance their mortgage?

Speaker 2 (00:38):
Absolutely? There's was legislation introduced decades ago that could no
longer discriminate against older folks. You know, just because you
retired from your job, Well, you just have to have
sources of income to be able to support a mortgage.
You know, mortgages are fifteen twenty thirty year obligations, and
it used to be you know, just for both and

(01:00):
to have a mortgage have depths when you're retired. But really,
there's no reason you couldn't or shouldn't have one, you
just have to be able to support it with income,
and you know with social Security, pensions, investment incomes sometimes
you know, you just have to fabricate income to be
able to get a mortgage.

Speaker 1 (01:20):
And explain that what that term means. Mark as far
as going in a little more depth with fabrication, you.

Speaker 2 (01:26):
Know a lot of people have vast resources when they retire.
They've been saving all their life. Their company has a
pension plan which is gold, but they don't have a
lot of income outside those areas, and so hey, they
find a vacation home in Florida or Arizona, they go
to get a mortgage and the banker says, I'm sorry,
you don't have enough income. It's like, well, I got

(01:48):
like two three million dollars in all my retire accounts,
which is true. But you have to fabricate an income
to get a mortgage. So how do you do that.
You just tell your advisory banker to start sending you
a couple thousand bucks a month and do that for
like two or three months, and that's a trend, that's
an established distribution rate, and then you qualify for the mortgage.

(02:11):
You can stop it anytime you want after you get
the mortgage, you just have to create income. I mean,
it's absolutely a silly proposition, but that's how you do
it in today's world.

Speaker 1 (02:23):
But technically, aren't lower interest rates a negative for retirees assuming.

Speaker 2 (02:28):
That, yes, they're not having debts in their life? You know,
lower interest rates are great for credit cards, auto loans,
home equity loans. But you know, again, most retirees don't
have large debts. They intentionally paid them off. They didn't
want to have any payments in retirement. So if their
money's in savings, like you know CDs, CDs is a

(02:51):
year or two ago, we're paying five and a half percent.
Today they're down in the threes. And if the Fed
continues to lower rates next year, then yeah, they're going
to be below three. So retirees often are the victim
of success. You know, they've paid their debts off, they
get they're living off their interest and unfortunately now they're

(03:13):
going to get paid less for that. And so what
alternatives are there? When do government bonds you know, five, ten,
twenty years, but you also absorb the risk of locking
in for that long. How about inflation? What are the
impacts there? We can go into stocks with dividends. Again,
stocks with dividends probably will pay you more than three percent,

(03:36):
but they also have volatility. So there's no perfect solution
to this lowering rate environment. It just disproportionately hurts seniors
and savers.

Speaker 1 (03:48):
So thirty seconds on finding the right man or woman
to help you make those decisions. We have a financial professional,
and it makes a war difference, not just for our
peace of mind, but for progress working toward retirement.

Speaker 2 (04:04):
Well, again, finding the right person is really a person
that you know meshes gels with your personality and outlook
on the world. Not everybody embraces debt and retirement. But frankly,
you know, four or five years ago, when rates were
two to three percent of mortgages, I was encouraging clients
to take out mortgages for some of these large, you know,

(04:26):
second home purchases. Today, you know, the rates are a
lot higher, but they're still historically low, lower than they
were a year ago, lower than they were two years ago.
So you know, there's a right mixture of equity and debt.
And again most people would rather not have a payment,
but sometimes it makes absolutely great financial sense.

Speaker 1 (04:47):
We call it retirement realities. Mark Oberlin always a pleasure
Thanks brother, take care,