QUESTION: I am writing you to seek advice for my mother, who is in her 70s and living alone in her home of 45 years. The house is paid for and taxes on it are about $2,300 a year.
Our family (her children) feel that she should probably live in an apartment where there would be more security, neighbors, etc. What are the financial advantages to be had by selling the house, investing the money and living off the interest versus keeping the home?
She receives advice from friends and each has a different opinion.
ANSWER: You're going through the same wrenching decision that hundreds of thousands of middle-aged Americans are going through every day in trying to do the best possible thing for their aging parents.
The piece of the equation that is missing here, however, is just how does your mother feel about this? Is she relatively comfortably fixed financially? Is her health robust enough to handle the hassle of maintaining a single-family residence?
I have known people in their 80s and 90s who would fight to the death to stay in the old homestead--regardless of good sense in letting go. Many people, too, simply can't adjust to the community-living lifestyle of apartments or condominiums.
From a tax standpoint, selling should be no problem for her--up to $125,000 of gain that she has in her house is sheltered. Investing this at, say, 8% would give her an annual income of about $10,000 or roughly $833 a month and, of course, she would also escape the $2,300-a-year property tax bite.
If you detect a reluctance on her part to move, you might also inquire locally whether any lenders are writing Reverse Annuity Mortgages (RAMs). Under this arrangement the lender agrees to pay a fixed monthly annuity to your mother for the duration of her life, which is based on her age and the equity in the home.
The payout can be substantial under a RAM and at the time of her death the lender takes title to the house, sells it, compensates itself for the interest already paid in the annuity and the balance goes to the heirs. And, of course, under a RAM she can change her mind about living alone at any time and terminate the agreement. It's worth looking into.
Campbell, a retired Times staff writer, now is a Phoenix-based free-lance writer. Questions can be sent to Campbell at P.O. Box 80260, Phoenix, Ariz. 85060.