Julie Scarborough

Does ’4 Percent’ Still Work for Retirement?

Julie Scarborough — Thu, 02 Feb 2012 14:54:58 +0000

If you retire, how much money can you remove each year from your savings and make sure you don’t rob your golden years of the gold you will need to put food on the table?

In the past couple of decades, many financial planners had their clients live by what’s called the 4 percent solution. Backed by research done in the 1990s, the solution enables a retiree in the first year of retirement to take 4 percent out of their total retirement savings and use it for living expenses. Then, each year the person can increase the amount just a tad to cover inflation.

So if the person retired with $500,000 in savings, the person could use $20,000 of it for living expenses in year one of retirement. The next year they would tweak the sum to cover the cost of inflation. With inflation running at 3 percent, the tweak would be $600. In other words, for year two of retirement the person would have $20,600 in spending money from their nest egg, plus whatever they get from Social Security, pensions or part-time work.

According to research done by financial planners such as William Bengen in the 1990s, a person who removes more than 4 percent is taking a relatively large risk of running out of money prematurely in retirement. He came to that conclusion after examining numerous market conditions from the past and applying them to today’s long life spans. Often people retire in their 60s and live into their 90s. The 4 percent solution assumes people are retired for 30 years.

But the traumatic experience of two horrendous bear markets since 2000 has caused financial planners to re-examine old assumptions. After all, embedded in the 4 percent solution is the idea that an individual will have a mixture of stocks and bonds that will grow enough to replenish some of the money the person removes each year for retirement living expenses. And the brutal truth of the past few years has been that while the U.S. stock market has provided a 9.9-percent-a-year gain on average since 1926, in a single year like 2008, a person can lose more than 30 percent.

The realities have been hard on seniors, and especially on those who have never heard of the 4 percent rule and simply removed the money they wanted or needed for retirement expenses. If a person spends too freely early in retirement and then sees the well going dry at 75, it’s tough to find a job.

While research done before the 2000s skirted over periods of massive losses and especially the Great Depression, there is renewed interest in peering at brutal times as well as benevolent times in the stock market.

So new research by Chris O’Flinn, president of Elm Income Group, garnered attention at the annual conference of the Society of Actuaries last week.

O’Flinn wondered if people could still feel safe removing 4 percent from their savings and whether they could dare push the limits a little and remove 5 percent.

He went through history from 1926 through 2009, examining what a typical retirement portfolio of half stocks and half bonds would do.

The conclusion: A person who removes 5 percent of their money the first year of retirement and then tweaks it each year to cover inflation stands a 51 percent chance of running out of money in a 35-year retirement. In a 30-year retirement, the danger of running out is 36 percent. In 25 years of retirement, there’s a 20 percent chance of outliving your money.

A person who sticks to the 4 percent solution improves the odds of having enough money. Yet over 35 years, there is a 15 percent chance of exhausting your savings prematurely, and over 30 years, there’s an 8 percent chance.

The 1960s were also tough on retirees. A nasty combination of high inflation and bad returns on investments conspired to erode people’s savings faster than usual, O’Flinn said.

Some people feel comfortable with a 15 percent risk. But if you want certainty that you won’t exhaust your savings, history suggests you should be fine if you remove no more than 3.5 percent of your savings in the first year of a 30-year retirement.

Of course, that’s getting pretty lean on spending money. O’Flinn notes that another way to handle a period like we’ve encountered in the past few years is to stop taking any inflation adjustment for a year or more. The idea is to take as little as possible out of your savings so that you give the stocks time to make gains again. If you’ve removed money, it will never have a chance to heal and prop up your savings again.

Gail MarksJarvis is a personal finance columnist for the Chicago Tribune and author of “Saving for Retirement Without Living Like a Pauper or Winning the Lottery.”

4 Tips for Efficient Downsizing

Julie Scarborough — Thu, 02 Feb 2012 14:51:08 +0000

The organizational benefits of downsizing can be very rewarding. You can save time, restore order, relieve stress, free up space and, perhaps most importantly, save money.

While the process may seem overwhelming, the following tips will help accomplish the task.

1. Try not to focus on the entire house at once. Take on one project at a time and don’t allow yourself to get overwhelmed. If the room itself is too much to take on, focus on one area at a time.

2. Evaluate what you have. If you haven’t used or thought about something in over a year, it’s probably safe to get rid of it. Craigslist and eBay are great online tools that will help you cash in on things that you don’t need anymore. Or donate items you no longer need.

3. Properly store irreplaceable items. Meaningful items such as old photos, yearbooks, wedding dresses, and christening gowns should be properly stored in sealed containers. You may even want to go one step further with old photos and convert them to a digital format to ensure that they will always be safe.

4. Stay positive. Getting rid of items that remind you of your past can be an emotional process. At first it might seem difficult to part with certain things. Concentrate on what’s important to you and visualize what your home will look like when you have de-cluttered and re-imagined your space.

Downsizing requires a great deal of planning and patience. You might find that you are needing the services of others, such as stagers, de-clutterers and junk removers, as well as a storage plan for the things you want to keep safe.

Requesting A Raise? 5 Tips to Remember

Julie Scarborough — Thu, 02 Feb 2012 14:44:51 +0000

Asking for a raise in a weak economy may seem like a long shot. Or maybe even job suicide. But experts say that if you’re valued by your employer and carefully present your request, a pay increase is sometimes possible. Some tips:

• Rehearse: Find a friend to portray your boss and try out what you plan to say. “Practice a tone that sounds friendly and assertive rather than bitter and entitled,” recommended Alexandra Levit, author of “Success for Hire.”

• Find the right time: Meet with your boss when he or she is not overly busy or distracted. “Avoid scheduling the meeting to ask for a raise as the last meeting of the day because your boss will be more focused on leaving than on considering your request,” said Ian Newton in the book “How to Get Ahead at Work.”

• Outline your strengths: Use specific examples to show why you’re an asset to the company. “Focus on the benefits your boss and the company receive from your contributions, rather than the additional money you need or desire,” Levit said.

• Consider other benefits: “If your boss is leery of giving you a salary raise, perhaps he or she will be open to giving you more vacation time, or flex time, or perhaps a bigger office or an assistant,” Newton said.

• Plan B: If you can’t get a raise immediately, see whether you can get one in the future contingent on accomplishing specific goals. “Ask your manager what you need to do to receive a raise and if it’s possible to revisit the issue in the near future,” Levit advised.

©2012 the Los Angeles Times
Distributed by MCT Information Services

Get A Tax Break For Home Improvement

Julie Scarborough — Thu, 22 Sep 2011 14:40:02 +0000

Real Estate Tax Talk

By Stephen Fishman
Inman News™

August 16, 2011

In today’s down market, many homeowners are reluctant to pour more money into their homes. Before deciding whether to replace a roof or merely patch it, homeowner’s should consider the tax implications.

Home improvements — a new bathroom or kitchen, for example — can increase the value of a home and reduce any taxes due on the profit earned from its sale.

Home repairs provide no immediate tax benefits to a homeowner. They are not tax deductible and they are not added to the home’s basis (cost), for tax purposes. As far as taxes go, they are a nonevent. Thus, a homeowner who patches a leaky roof gets not tax benefits.

Home improvements are very different, though. The cost of an improvement is not deductible, but it is added to the home’s basis for tax purposes. For example, the cost of adding a new roof to a home is added to its tax basis. This reduces any taxable gain when the home is sold.

Of course, a substantial amount of gain is usually tax free, anyway, under the home sale tax exclusion: $250,000 for single homeowners and $500,000 for married owners filing jointly. But homeowners with substantial equity can still benefit from an increased tax basis in their homes.

For example, if Joe and Jane purchased their home in 1990 for $250,000 and it is now worthy $1 million, they will have a $750,000 gain. A full $500,000 of this amount is tax-free because Joe and Jane are a married couple and qualify for the tax exclusion.

But this leaves $250,000 subject to taxation. If Joe and Jan had spent $250,000 adding improvements to their home, they would have no taxable gain. This is because the $250,000 is added to the home’s original $250,000 basis, providing an adjusted tax basis of $500,000.

As a result, their gain on the sale would only be $500,000, not $750,000; and this entire gain would be tax-free because of the $500,000 exclusion.

So how do you tell the difference between an improvement and a repair? Here’s the basic rule provided by the Internal Revenue Service: A repair keeps a homeowner’s property in good operating condition but it does not:

-Materially add to the value of the property
-Substantially prolong its useful life, or
-Make it more useful (see: Treasury Regulations, Subchapter A, Section 1.162-4).

In contrast, an improvement adds to the value of a homeowner’s property, prolongs its life, or adapts it to new uses.

The problem with this definition is that virtually all repairs increase both the value and useful life of the property being repaired. The key difference between a repair and an improvement is that a repair merely returns property to more-or-less the state it was in before it stopped working properly. The property is not substantially more valuable, long-lived, or useful than it was before the need for the repair arose.

In contrast, an improvement makes property substantially more valuable and/or long-lived or useful than it was before the improvement.

You need to compare the situation before and after you made the expenditure involved. Have you just returned your property to the state it was in before the need for the repair arose? Or, have you made it much better?

If the answer to the first question is “yes,” you’ve repaired the home. If the answer to the second question is “yes,” it’s a home improvement.

Good examples of repairs include repainting a home, fixing gutters or floors, fixing leaks, plastering, and replacing broken windows. Examples of improvements include adding a deck to a home, a new bathroom, installing a new heating system, or putting on a new roof.

Stephen Fishman is a tax expert, attorney and author who has published 18 books, including “Working for Yourself: Law & Taxes for Contractors, Freelancers and Consultants,” “Deduct It,” “Working as an Independent Contractor,” and “Working with Independent Contractors.” He welcomes your questions for this weekly column.

Contact Stephen Fishman:
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Three Ways to Increase the Value of Your Home

Julie Scarborough — Thu, 22 Sep 2011 13:54:53 +0000

Buyers only get one first look at a property, and they don’t want to use their imagination. They assume the house they see is as good as it’s going to get. If you want your home to sell, step out of your comfort zone and think like a buyer. Here are three ways to help you turn your house into the home of someone else’s dreams. We’ve broken down each category into low-cost, “Basic” tips and tricks, and an “All-Out” blow-the-budget transformation. How far you take it is up to you.

Clean

No one likes a ditty house, and your what “lived in” is to you might be someone else’s “messy.” When in doubt, clean. It’s the least expensive way to improve your home’s initial appeal, and it’s a good way to get a jump-start on your move.

Basic: The first thing you need to do is de-clutter. If your moving company offers storage, this is the time to use it. Extra furniture, oddball art, pots and pans that don’t fit in the kitchen—it all needs to go. Don’t go overboard—your house should still look like a home. It just needs to be airy enough for a buyer to put his or her mental imprint on it. Your hackey sack collection from college won’t help. Next up is a good, solid scrubbing. Spend a weekend washing the floors, baseboards, and bathrooms. Be sure to get the tops of cabinets and corners behind furniture. Clean every piece of glass in the building. Too many people ruin a pristine home with spotty mirrors and doors. Don’t forget the outside of the house. Hose down your exterior walls and driveway, trim the lawn and hedges, and remove any trash cans and clutter from sight. If your neighbors are less-than-tidy, you might want to offer them some free help, as well. And while you’re cleaning the garage, wash your cars, too. They make an impression.

All-Out: If you have money to spend, install space-saving storage solutions in the garage, kitchen, and bathroom to reduce clutter. Consider paying a service to do the deep cleaning you’re bound to miss. Rent a pressure washer for the driveway or (if it’s a real mess and you’re feeling generous), repave.

Fix

Part of the joy of buying a new home is starting with a clean slate. No one wants to buy an existing to-do list of nagging little fix-its. Making small fixes now can put the buyer’s mind at ease.

Basic: Focus on inexpensive, highly-visible problems. Doorbells, window glass, cabinet handles, and holes in walls are all easy to spot and cheap to fix.

All-Out: Take aim at long-term maintenance projects, such as pool pumps, water heaters, and air conditioning servicing. Buyers probably won’t notice these on their own, but your agent can call attention to these facts to help reduce worries about long-term costs.

Brighten

Buyers like to see what they’re viewing. Good lighting, vivid color, and a few visual cues can go a long way toward making your home a memorable one.

Basic: Repaint interior walls, particularly those in the bathroom, kitchen, and extremely bright areas. White walls are particularly important, as they get dingy quickly. Replace traditional incandescent light bulbs with compact fluorescents, which put brighter lights in your existing sockets while saving money. Tie back curtains to let in the maximum amount of sun, which makes a house look more inviting than artificial light. Spruce up empty or colorless zones with potted plants. They add character to a room, but are obviously disposable if a buyer dislikes them. Repaint your front door, mailbox, and any street numbers.

All-Out: Repainting the entire interior if it’s been more than a few years since the last paint job. Install additional lighting in cabinets and closets. Add new cabinet doors and counter tops.

What Not to Do

While you can certainly overspend on any of the above suggestions, their value is well-established. Making a home cleaner, better-functioning, and more attractive is a no-brainer. However, some improvements can go too far, and actually hurt your investment. As a general rule, don’t build for the sake of building. Bigger isn’t always better, and if you take a project too far, you risk going in a direction the buyer will have to undo. For example, adding an extra bedroom might seem like a great investment, but a retired couple may prefer to use that space to install a pool in the back yard. Upgrade the home you have, but don’t try to make it something else.

By Cormac Foster

Avoid Foreclosure Rescue Scams

Realty Executives — Fri, 16 Sep 2011 14:16:30 +0000

By: Donna Fuscaldo

With foreclosure rescue scams widespread as more homeowners fall behind on mortgage payments, be smart if you seek help.

A record high 2.8 million properties were hit with foreclosure notices in 2009, putting even more Americans at risk of facing foreclosure rescue scams. Homeowners who fall behind on mortgage payments need to tread carefully when seeking assistance, since foreclosure rescue scams come in many guises. A day spent researching legitimate options, from a mortgage modification or principal forbearance to a short sale or deed-in-lieu, could keep you from becoming a scam victim.

Foreclosure rescue scams run rampant

Homeowners facing foreclosure are prime targets for scam artists. The U.S. Federal Trade Commission identified 71 companies running suspicious foreclosure rescue ads, and the Better Business Bureau counts foreclosure rescue rip-offs among its top 10 scams. Understanding how these scams work can help you avoid becoming a victim.  The variations are seemingly endless, but one popular foreclosure scam involves a representative of a so-called foreclosure rescue company promising to negotiate a deal with your lender. The rep, vowing to take care of everything, will instruct you not to contact your lender, lawyer, or credit counselor during the supposed negotiations. The more brazen ones will even tell you to pay your mortgage directly to them.  Once you pay an upfront fee or hand over a few months’ worth of mortgage payments, the scam artist will disappear. You’ll be left with an emptier wallet and a mortgage that’s in even deeper trouble because no deal was cut and no payments were made on your behalf. According to John Riggins, chief executive of the Fort Worth, Texas, office of the Better Business Bureau, upfront fees can range from $500 to $5,000.

Rip-offs come in many forms

A bankruptcy foreclosure scam can involve a promise to fend off foreclosure in exchange for an upfront fee. Instead of getting you legitimate relief, the fraudster will pocket the fee and secretly file a bankruptcy case in your name. The scam may seem to work initially, because a bankruptcy filing will stop foreclosure proceedings temporarily, but they’ll resume. Compounding your problems, a bankruptcy can mar your credit report for 10 years.  Another common scam, called the bait-and-switch, results in a scam artist taking ownership of your home. You sign documents supposedly for a new loan that will make your mortgage current. What’s really happening is you’re signing over the deed of your house. In this scenario you would still owe on your mortgage but no longer own the home.  In a rent-to-own scheme, you’re told to surrender a home’s deed as part of a deal that lets you stay put as a renter. The scam artist, perhaps claiming to be able to refinance at a better rate with you off the title, promises to sell the house back to you in the future. However, terms of the deal may make it all but impossible for you to repurchase the home, or the scammer may get you evicted by raising the rent beyond your means. Either way, you end up losing the home while remaining on the hook for the unpaid mortgage.

Look out for red flags

Being aware of the warnings signs can protect you from foreclosure rescue scams. Red flags include:
•   Demands for high upfront fees.
•   Guarantees to stop a foreclosure.
•   Instructions to make mortgage payments to someone other than your lender.
•   Pressure to sign over a deed.

Legitimate foreclosure counselors won’t put on a full-court press, nor will they guarantee that you won’t lose your home to foreclosure. What they will do is review your financial situation and offer up options. Foreclosure counselors approved by the U.S. Department of Housing and Urban Development won’t charge you a fee either.

Legitimate ways to get foreclosure help

There are a number of legitimate ways to contend with foreclosure. If you’ve missed mortgage payments, start by getting in touch with your lender. Ask to speak with someone in the Loss Mitigation Department and explain your situation.  Your lender may be able to arrange a repayment plan, called a special forbearance, based on your current economic circumstances. The lender could even give you a temporary reduction in your monthly payment or suspend payments for a period of time.  With a principal forbearance, the lender will reduce the amount of your mortgage, thus reducing your monthly payments. However, the amount of the principal reduction doesn’t disappear. Rather, it’s tacked on to the end of the loan, effectively creating a balloon payment.  A federally facilitated mortgage modification could also help. The Making Home Affordable modification program pays lenders to re-work loan terms and lower monthly payments. Be prepared to gather lots of paperwork and undergo a trial modification.  If all else fails, you may need to give up your home. If so, look into the federal Home Affordable Foreclosure Alternatives program. HAFA offers lenders financial incentives to opt for a short sale or deed-in-lieu rather than a foreclosure. In a short sale, a lender agrees for a home to be sold for less than the outstanding mortgage, and then considers the debt paid off. In a deed-in-lieu, a homeowner turns over the home to the lender, and the mortgage is closed.

Donna Fuscaldo has written about personal finance for Dow Jones, the Wall Street Journal, and Fox Business News for more than a decade. Like many homeowners, her mortgage is precariously close to being underwater.

Visit Houselogic.com for more articles like this. Reprinted from HouseLogic.com with permission of the NATIONAL ASSOCIATION OF REALTORS®.

Five Considerations for First-Time Buyers

Julie Scarborough — Mon, 15 Aug 2011 19:47:03 +0000

Your first home purchase is exciting, but it can also be stressful. Here are some tips to limit the trauma and help you find the home of your dreams the first time around.

1. Set your budget

The most important step in selecting a home is knowing how much you can spend. If you already use an electronic budgeting system, you’re ahead of the game. If not, track your expenses for the past several months to a year. Try to quantify the “gray areas” of cash withdrawals that disappear on small purchases. Now add up your current rent and other related expenses. If you’ve been saving money toward your down payment, note that, as well. Finally, ask yourself where you can tighten your belt with your existing discretionary purchases. This is the maximum amount you could pay per month.

Now ask yourself if this is reasonable, given your current savings and possible expenses. Only you know the answer to that. When you’ve arrived at a comfortable number, write it down, and save your calculations. You’ll take this to the bank when you apply for loan pre-approval. For now, you have an estimated payment you can use while shopping online.

2. Set your Criteria

A home is the biggest purchase you’ll probably ever make. Stay focused and don’t let emotion guide you. If you have one child and no plans for more, four bedrooms are probably a waste. Write down a list of must-haves, nice-to-haves, and can’t haves before you start visiting homes. You’ll save time, help your agent work more productively, and keep yourself from getting carried away—into the wrong house.

Important criteria include:

Age of house
Number of bedrooms and bathrooms
Size of lot / yard
School district requirements
Type of street (Are busy streets OK, or do you want a cul de sac? Do you need to be near a bus or light rail line?)
Type of home (Single-story? Mutli-level? Are there any dominant architectural styles in your area that you refuse to buy?)
Central heating and cooling
Expensive additions, such as in-ground pools

3. Make a list of Homes

After you’ve made this list, search online and find several representative homes. If you have time and you’re fairly local, drive by a few of them to get a feel for the neighborhoods. Write down your impressions. This will help you understand home much of a home’s description is fact versus fluff, and give your real estate agent a good idea of your likes and dislikes.

4. Find a Realtor®

Most home buyers select a licensed Realtor® to represent them, and they are almost always happy they did. Realtors® are real estate agents who subscribe to a strict code of ethics and are acknowledged experts in the field. A Realtor® knows your local market, and can help you through every step of the home buying process, from finding your dream home to negotiating the best possible terms, explaining everything along the way.

5. Bring a Camera

Your Realtor® will take you on a number of open houses, and your opinions can be lost in the blur. To keep things straight, bring a digital camera on your trips. Take a picture of the street nu,ber of each property, then photograph each room during your walk-through. Photograph a house even if you decide it’s wrong for you—there may be furnishings, construction tips, or other features you notice later that could come in handy when you find the right home.

by Cormac Foster

Fixed-Rate or Adjustable-Rate Mortgages?

Julie Scarborough — Fri, 12 Aug 2011 18:03:32 +0000

Whether you’re buying your first home or refinancing your existing home, you have a host of financing options available. But before you start talking about points, fees, and closing costs, you need to decide whether to choose a fixed-rate or adjustable-rate mortgage.

Adjustable-rate mortgages (ARMs) earned a bad reputation leading up to the housing bust, and with good reason, but that was largely the fault of predatory lenders who oversold houses to underqualified buyers with artificially low initial payments. Still, ARMs are a bit of a gamble, and they are absolutely the wrong tool for homeowners trying to squeeze into the most house they can afford.

Interest rates are extremely low right now, so you shouldn’t expect an adjustable rate to go anywhere but up. For this reasons, most homebuyers will be more comfortable with fixed-rate mortgages that provide a predictable payment future–particularly for their primary residence. On the other hand, quick turnarounds can be different story. If you’re an experienced real estate investor looking to flip a house quickly, an ARM could save you some money while you hold the house. Smart Money Magazine has an excellent calculator on their Web site that helps explain the break points, but be warned–a calculator can’t predict market fluctuations. If you choose an ARM, be sure to work with a mortgage company you trust, and have a backup plan if the house doesn’t sell as quickly as you’d like.

by Cormac Foster

Foreclosure Counselors: What They Can and Can’t Do

Realty Executives — Thu, 07 Oct 2010 14:07:33 +0000

By: G. M. Filisko
Published: August 4, 2010

Foreclosure counselors can make the difference between losing your home and keeping it. Here’s how they work and how to choose one.

If you’re facing foreclosure, your foreclosure counselor will be a key part of your foreclosure team. As you start looking for one, however, you need to know what exactly they do, what they don’t do, and how to choose one who’s legitimate and qualified.

What a foreclosure counselor does
•   Reviews your finances
•   Helps you establish a budget
•   Explains your non-foreclosure options, such as loan modification, short sale or deed in lieu of foreclosure; helps you navigate the process with any chosen option
•   Advocates on your behalf with lenders and loan servicers

Counselors should also be upfront about discussing their own track records as well as the track records of the agency they work for.  Expect to spend two to 24 hours with a counselor, depending on the complexity of your foreclosure situation, including how many lenders you have to provide documentation to and negotiate with.  “Be sure the counselor is looking at your entire situation,” and not just your foreclosure, adds Martha Viramontes, director of housing at ClearPoint Credit Counseling Solutions in Los Angeles. “When counselors focus only on your mortgage, they’re fixing only one aspect of your financial situation.” They should give you an action plan containing the tasks you are going to perform to change your financial situation.

What a foreclosure counselor doesn’t do
•   Give tax advice
•   Give legal advice
•   Give guarantees regarding a particular outcome
•   Create miracles

For additional advice, add a tax adviser and attorney to your team.  Finally, “don’t expect a counselor to be a genie,” says Douglas Robinson, a spokesperson for NeighborWorks America, a nonprofit community development corporation in Washington, D.C., that provides foreclosure counseling. “If you’re in a home that under the most aggressive scenario you can’t afford, but maybe you got into it because of some toxic loan that should never have been available in the first place, you’re probably going to have to move. It’s best you get out smoothly.”

How to choose an agency
Seek only HUD-approved agencies. HUD makes it easy:   Type in your state or ZIP code at www.findaforeclosurecounselor.org or call HUD’s foreclosure counseling hotline at 800-569-4287 or its foreclosure prevention hotline at 888-995-HOPE (4673). HUD-approved agencies are all nonprofit, community-based organizations that have administered a housing counseling program for at least a year.

HUD-approved agencies also are required to:
•   Employ counselors who are knowledgeable about federal housing programs
•   Have a staff of counselors of which at least half must have two or more years of counseling experience. At least half must also have received housing counseling training in the past two years
•   Provide you with certain documents, such as a privacy agreement explaining how your personal information will be handled

In addition, at the agency you work with, see if you can find a foreclosure counselor who has certification through the NeighborWorks Center for Homeownership Education and Counseling Look (NCHEC), which has a Foreclosure Intervention and Default Certification Program. Certified counselors must follow NeighborWorks counseling standards and code of ethics and conduct.

They also are required to:
• Have at least one year of experience in foreclosure counseling
• Attend three foreclosure prevention courses

G.M. Filisko is an attorney and award-winning writer who has seen the sad effects of foreclosure on friends and neighbors. A frequent contributor to many national publications including Bankrate.com, REALTOR® Magazine, and the American Bar Association Journal, she specializes in real estate, business, personal finance, and legal topics.

Visit Houselogic.com for more articles like this. Reprinted from HouseLogic.com with permission of the NATIONAL ASSOCIATION OF REALTORS®.

Attic Insulation Saves You Money

Realty Executives — Thu, 07 Oct 2010 12:23:01 +0000

By: Jeanne Huber
Published: September 21, 2010

Add attic insulation to lower heating and cooling costs by as much as $600 per year.

Save about $600 per year by boosting the amount of attic insulation from R-11 to R-49. Depending on the type of materials you use, figure on paying an insulation contractor about $1,500 to insulate an 800-square-foot attic, which pays back your investment in three years. You’ll spend about half that to do the job yourself.

Do you need more attic insulation?

A good, quick way to check if you need insulation is to look across your attic floor. If the existing insulation comes up just to the tops of the joists, then you probably need to add insulation. If you can’t see the joists and the insulation is well above the tops of the joists, you’re probably okay and you won’t recoup the cost of adding more.

Types of attic insulation

Add insulation to your attic one of three ways:  Roll-on or blanket-type insulation comes as rolls of fiberglass batts, either 15 or 23 inches wide—designed to fit between the width of typical framing. If your attic already has some insulation in the attic floor, roll out the batts at right angles to insulate over the framing members.  If you’re doing the job yourself, blanket-type material is easiest to work with. Be careful not to compress it or it won’t be as effective.  Loose-fill or blown-in insulation requires a machine that shoots a stream of loose-fill cellulose over the existing attic floor framing. This is typically a job for an insulation contractor. The advantage is that loose-fill insulation does a great job of filling in small crevices and other hard-to-reach areas.  Sprayed foam polyurethane is a good choice if you plan to turn your attic into a finished room. In that case, you’ll want to insulate the roof—not the floor. Sprayed foam polyurethane molds to rafters, blocks water vapor, and has a high R-rating per inch. Expect to pay about double the per-square-foot cost of roll-on and loose-fill insulation.

How much attic insulation is enough?

To determine how much to add, look up the recommended amount for your area, then subtract the value of your existing insulation. If you don’t know, you can figure it out using the Home Energy Saver online energy audit tool.   No matter which method you choose, federal tax credits of up to $1,500 are available until the end of 2010.

Jeanne Huber is the author of 10 books about home improvement and writes a weekly column about home care for the Washington Post.

Visit Houselogic.com for more articles like this. Reprinted from HouseLogic.com with permission of the NATIONAL ASSOCIATION OF REALTORS®.