Freezing Brains: New Research Breakthrough

Plus, why reverse mortgages won't save Boomers 

Ric Edelman: It's Thursday, August 8th. I'm really excited about this one, but I don't know why. There's a new technique that has allowed scientists to freeze brain tissue. Yeah, so that it regains normal function after they thaw it. This could potentially open the door to improved ways of studying neurological conditions. That's why I'm excited about it, but it goes a little bit towards sci-fi here. You see, brain tissue, usually, if you freeze it and then thaw it, it doesn't survive.  

But researchers in China have now figured out how to use embryonic stem cells to grow brain samples that can live for three weeks. Now that's not going to bring you back from the dead, but it is enough time for scientists to get some useful knowledge that might help with fighting brain disorders and diseases. And hey, who knows? Maybe with this research, if you've got a terminal illness, you can go ahead and freeze your entire brain. Get yourself cryo-preserved, so that in the future, when they've cured whatever disease you've got, this research will let them thaw you out and cure you.  

Or, if you're an astronaut, and you need to travel 81,000 years to get to Alpha Centauri, that's like one of the closest major places within our own galaxy, 81,000 years away, this will let you go to sleep for 81,000 years and be awakened when you get there. Cool stuff, no? Well, maybe no.  

Anyway, a couple of weeks ago, I did a show on the fact that Boomers are running out of money, that one of the aging crises that we have in America is the fact that as Boomers age, you know, we have 10,000 Boomers retiring every day, 10,000 Boomers reaching age 65 daily at this point – and although Boomers have most of the money in the country, most of that money is concentrated among a relatively small percentage of Boomers. The majority of Boomers in this nation don't have a lot of money. If you missed the show where I talked about this, the link to it's in the show notes. Anyway, that was the theme of a podcast a couple of weeks ago. It caused Martin of Virginia to write to me, and I'll tell you what he asked. 

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Ric Edelman: Welcome back. The Truth About Your Future continues. So Martin of Virginia wrote to me, and he asked: 

"What happens when Boomers run out of money? Will reverse mortgages save them?” 

Well, Martin, will it save them? It could certainly help some of them. I'm not necessarily sure I would endorse the use of a reverse mortgage as the savior. But let me broaden it and explain to you what a reverse mortgage is in case you're not familiar or an elaborate why I don't know that necessarily it's the answer.  

We begin with the premise that you own a home in the first place. If you don't own a home, you're in retirement and you're running out of money. Well, if you're not a homeowner, then you don't have a home to sell. You don't have a home's equity to turn to for help. So the premise here that Martin is raising is that the Boomers own homes. And that's a fair premise. I certainly can't argue with that. I think a very large percentage of Boomers are homeowners and have equity in their homes because home values have risen dramatically over the period you've likely owned your home. So you own a home, you have equity in it. You're running out of cash, right? You don't have a lot of savings and investments. You've been tapping into those monies to help support yourself and now you're running out. But you do have this home that is worth five figures, maybe more likely your home is worth six figures, even seven figures. And there's a lot of equity in that house. The value of the house is a lot more than the mortgage on that house. So, could you turn to a reverse mortgage to help you?  

Well, here, first of all, is what a reverse mortgage is. You know what a normal mortgage is. With a normal mortgage, you make a payment to the bank every month. A reverse mortgage gets its name because it's the exact opposite. Instead of you sending a check to the bank every month, the bank sends you a check every month. Hence the reverse element of this. The interesting thing is that this is not really a mortgage product. It's really a life insurance product. In other words, it's actuarial science that determines the size of that check that the bank is willing to send you. In other words, not willing to send you a check based on the value of the house, purely. They are also basing the value of the check on how long they expect you to live. In other words, how long are they going to have to send you those checks? In other words, the older you are, the bigger the check they're willing to send you because the older you are, they're not going to have to send you checks for very long.  

So, the amount of check you get is determined by the bank, not by you. And it's based on a combination of the value of the house, the amount of equity in the house, and your age and life expectancy. And for most folks, they discover that the size of the check is a lot less than they expected to get based on the equity in the house, because it's based on actuarial science. 

So what we find is that when people are running into financial difficulty and they're looking for additional income resources, and they think a reverse mortgage will help them out, they often get, rather nonplussed when they check it out and they discover – gee, I'm only going to get a couple of hundred bucks a month? They were expecting a couple of thousand. So I don't know that it's necessarily the answer. There are also a lot of pieces of fine print associated with reverse mortgages, among them, if you're married, but the house is only in one of yours names, and that one person gets the reverse mortgage and then dies, the surviving spouse has to leave, has to move out of the house because the house upon death now is owned by the bank. They have to, you know, recover the money they've lent you. They're not giving you money. They're lending you money and they are going to demand that the house be sold upon your death, so they can, you know, get their money back. And not only upon your death, but even if you simply move out of the house. Well, why might you move out of the house? Because you might have to move into a nursing home. So if the homeowner leaves the home, that house is going to get sold. And the other spouse is frankly left without their home. So that's another piece of negative fine print associated with this.  

They are also very expensive. And that's partly because there's not a lot of competition in the marketplace. There are not very many companies offering reverse mortgages. And as a result, there's not a lot of fee pressure, as they're not competing terribly much. And therefore, the fees are very high. So what I have discovered, over the years and analyzing these things is that rather than signing up for a reverse mortgage, a better strategy is often going and either getting your own new mortgage, because a lot of Boomers by the time they're in their 60s and 70s and 80s, they either have very little existing mortgage or the home is fully paid for completely. Go get a brand-new mortgage and generate that monthly check yourself out of the home equity loan that you've obtained. Or more draconianly, sell the fricking house. I mean, do you really need that house any longer? Is it really meeting the lifestyle requirements that you currently have? If you sell the house, you're going to get a whopping big check and then you can move to a smaller or less expensive home and now you've got a big, big piggy bank that you can turn to, to provide yourself with monthly income as you need.  

So the short answer, Martin, is that sure, a reverse mortgage might be helpful, but more broadly, the notion of equity in your home is a resource that Boomers will be able to tap into. But it assumes a couple of things. Like I mentioned at the top, it assumes you own a home. It assumes you have a lot of equity in that home. And it assumes that the equity in that home is tappable to the to a degree sufficient enough to generate the income you need because you blew it with the rest of your personal finances and you have insufficient savings and investments elsewhere. So the short answer is yeah, it'll help some Boomers who otherwise run out of money, but it's not going to help them all. And it's not going to solve the aging crisis associated with aging Boomers who are retiring with insufficient retirement assets. In other words, don't be one of those people. Start planning now, whatever amount you're saving. Save more. 

You can send me your question as well, just send it to AskRic@TheTruthAYF.com. The link is in the show notes.    

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Ric Edelman: I’m glad you’re with me here on The Truth About Your Future. If you like what you're hearing, be sure to follow and subscribe to the show, wherever you get your podcasts, Apple, Spotify, YouTube – and remember leave a review on Apple podcasts. I read them all! Never miss an episode of The Truth About Your Future. Follow and subscribe on your favorite podcast app. I'll see you tomorrow. 

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Links from today’s show: 

Boomers are Peaking (5/24/24 Episode): https://www.thetayf.com/blogs/this-weeks-stories/boomers-are-peaking  

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