Q: I live in a trailer park, and own my unit outright. I need income to supplement my Social Security, so I'm thinking a reverse mortgage would be perfect. However, I was told I can't do this for a mobile home. What do you think of the idea of me selling my mobile home, buying a house, and getting a reverse mortgage on the house?

A: Reverse mortgages (RM) are an increasingly popular way to raise monthly cash flow, but it is not fail-safe.

The good news: As long as you continue to keep up the house and pay all other housing expenses such as property tax, insurance, maintenance, etc., the mortgage lender can never kick the owner out of the house. However, reverse mortgages are complicated and expensive. They cost many thousands of dollars to set up, and interest owed compounds throughout your lifetime and becomes a liability in your estate. If your spouse or partner is not on the deed, he or she could be evicted after you die.

It IS true that mobile homes are not eligible, but consider how difficult it may be to find a house that is less expensive than a mobile home. You would likely need to move to a less attractive area to find one that would give you enough equity in the property to obtain an RM. Finally, only a certain number of HUD-approved RM loans are allocated to each area, so it is possible that you could spend many thousands of dollars on selling and purchase costs and then not be approved for a RM that is federally protected.

Frankly, this is unlikely to be a good solution to your cash flow needs, but you may want to go online for a complimentary appointment with a HUD-approved RM specialist or call (1-800-569-4287.)

Q: I have friends retiring right and left. Most of them are a little older than I am, but some are my age. How do I know when I have enough?

A: It’s the age-old question: when is enough enough? There are several places you can turn for answers, including historical rules of thumb, fact forms on the Internet, and meeting with a financial advisor.

Here are a few common ways to estimate a retirement number:

• By age 50 you should have saved 4.5 times your annual salary; by age 60 you should have saved 8.1 times.
• Spend no more than 4% of your savings in your first year of retirement, and escalate that each year by no more than the rate of inflation. By this measure, if 4% of your nest egg won’t cover your estimated expenses, you’re not ready to retire.
• Get an idea how long you might live by going on www.LivingTo100.com and answering the 40-odd questions.
• Advisors used to estimate that a household needed 60-70% of their pre-retirement income to cover post retirement expenses, given a lower cost of living (lower work expenses, paid off house, no education or other loans, and so forth). But nowadays it’s better to plan for 90-100% of pre-retirement income if you can. Retirees these days tend to travel and spend more.
• Alas, though you may have no education or mortgage expenses, medical costs are increasing far above the rate of inflation. So all of these estimates may be outdated. Try using one of the many online estimators, including this one on www.aarp.org.
• Even better, find a fee-only planner in your area (not “fee-based”) and ask her or him to run the numbers for your personal situation. There are no guarantees in life, but if you’re considering leaping into retirement, make sure you first look carefully.

Q: My first grandchild was born last year. My husband and I would like to set up something for her college education – and the education of any future grandkids. What do you suggest?

A: I commend you for considering the gift of education! Your kids will appreciate it now, and your lucky grandchildren will later.

There are several ways to fund future education, from trusts to outright gifts to tax-advantaged accounts. Trust accounts for minors used to be common and easy, but their tax advantages have dwindled and the account becomes the property of the child.

For many situations, setting up an educational savings account (called a "529 account" in tax jargon) is a good combination of simple, flexible, and with some safeguards.

Every state offers 529 plans and many universities have them too. You have some investment choices in these plans, including inexpensive ETF indexes as well as target-date funds designed so that the asset allocation is more conservative as your student's enrollment year nears. The money you contribute is after-tax, so the appreciation is not taxed as long as the money is spent on education for the named individual. Even if you maintain ownership (naming the child as beneficiary), the funds are not included in your estate.

Ah, but what about those future grandchildren? If you start a 529 plan for each grandchild and retain ownership of the plans, you have the power to change beneficiaries and shift funds among the plans within annual limits. A secondary owner can even continue this after you're gone, though no new money could be added!

Karen Telleen-Lawton, CFP®, serves seniors and pre-seniors as the Principal of Decisive Path Fee-Only Financial Advisory in Santa Barbara, California http://www.DecisivePath.com. You can reach her with your financial planning questions at This email address is being protected from spambots. You need JavaScript enabled to view it.

Meet Karen