Tulsa World, Okla., Stories Phil Mulkins column [Tulsa World, Okla.]

Dec. 07-- You planned for retirement, you saved for it but you set limits on how you would spend your retirement nest egg once you landed there. Bankrate.com says there are five things you shouldn't do with your money in retirement.

Expensive hobbies: Even if your only real passion is playing golf, your retirement plan should include a way to pay for it. Golf or movie watching might be things you would enjoy more of, but spending on hobbies and recreation can easily get out of hand in the early retirement years. Some pension plans are no help as they let you take more out in the first five years you are most actively pursuing a new hobby. Ensure your spending plan fits your lifestyle but allows your retirement income to last for the long haul.

Home upgrade: If you couldn't afford to upgrade or add onto your home during your working years you can't afford it in retirement. Plan on spending 1 to 2 percent of the home's value annually on maintenance, says Consumer Reports MoneyAdviser. If you plan to sell the big, old place and move into a smaller one, you might have to upgrade it just to sell it: new kitchen, new bathrooms, new roof, etc. Do not take on major debt (home equity line of credit or a second mortgage) to finance upgrades in retirement. Save the upgrading money while you're still working.

Adult child bail out: Your college kid picked a major with dubious earning potential or your adult child is already in financial trouble. If you know you can't reject a request for help you'd better plan to have enough cash to cover this generosity. Helping adult children financially is the biggest budget drain for retirees. Those still saving for retirement put their future at risk helping children buy homes or pay related expenses.

Caring for parents: If you expect to care for a parent or in-law after retiring, factor these expenses into your retirement plan. Serious illness often sends parents into their retiring children's homes or asking for help paying medical bills or nursing home care.

Retirees might also be paying bills, buying groceries and taking care of household maintenance for parents struggling financially who want to stay in their own homes. Talk about what each person can do to see if this matches what the parents think will work for them. Also discuss estate planning, a will or living trust, power of attorney and a living will.

Special needs child: A special needs child will depend on you after you retire, making provisions for him a priority in your retirement plan. Some financial relief comes when a disabled child turns 18 and is eligible for Social Security "supplemental security income" (SSI) This is no longer restricted by how much the parents earn. Adults with a disability diagnosed before age 22 also are eligible for Social Security "disability insurance" benefits, based on the retired parent's Social Security earnings.

The adult child is not required to have worked to receive benefits. A priority will be to ensure the special needs child be taken care of after your death -- options include setting up a trust or purchasing a permanent life insurance policy (proceeds to be used for the child's needs). Don't leave such assets in the child's name as this disqualifies a child for Social Security and Medicare when they have too many assets. It is important to work with an attorney with a specialty in special needs planning.

Reverse the mortgage, live better

Anyone facing retirement, with nothing saved but a house that's mostly paid for, has heard that the "reverse mortgage" is the answer. Homeowners 62 or older think reverse mortgages () seem like excellent ways to tap into home equity for retirement income.

A reverse mortgage loan typically doesn't have to be repaid as long as the last surviving borrower lives in the home or until the home is sold, says Bankrate.com.

Bank pays you: Unlike conventional mortgages, for which borrowers make monthly payments to lenders to own and live in the homes; reverse mortgage lenders issue payments to borrowers based on the equity they have in their homes.

These payments are generally not taxable nor do they affect Social Security or Medicare benefits.

Reverse mortgage downsides: Closing costs and fees can be steep and if you are thinking about leaving your home in two to three years, this is not a financially prudent way to extract money from your home. In that case, a home equity loan is likely a cheaper option.

HECMs: Of the three types of reverse mortgages, FHA-insured "home equity conversion mortgages" (HECMs) account for 90 percent of all RMs, according to the National Reverse Mortgage Lenders Association.

Recently, FHA announced the "HECM for Purchase Program" , which allows qualifying seniors to sell their existing residences and use the HECM as a purchase loan to buy a new principal residence.

Under the new program, borrowers can also choose to retain their existing homes as rental properties but their finances will incur additional scrutiny by the government to ensure they have enough income to maintain both properties.

HUD Tulsa Field Office: If you don't use the Internet, write for HECM info at Department of Housing and Urban Development, Williams Center Tower II, 2 West Second Street STE 400, Tulsa, OK 74103; or call 918-292-8900.

Tulsa World consumer writer Phil Mulkins wants to know which topics interest you. Call 918-699-8888, email your suggestion to [email protected] or mail it to Tulsa World Consumer, PO Box 1770, Tulsa, OK 74102-1770.

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