55Plus Homes Blog

Why Is South Carolina A Good Place To Retire

There are a lot of benefits available to retirees. 

In South Carolina, if you are 65 and older and lived in your house for at least one year, you are entitled to the Homestead Tax Exemption. This program exempts the first $50,000 of the value of your home from all property taxes. This also applies to property held in revocable trust, and is extended to a surviving spouse 50 years or older. 

Other Retiree benefits available in South Carolina include...

  • Your choice to serve or not to serve on city, county or state jury duty.
  • Discounted admission fees to state park facilities.
  • Free hunting and fishing licenses (at least one year residency requirement). 
  • Free Tuition at state supported educational institutions (subject to space). 
  • Income tax credit.... 

Although laws continue to evolve, here are a few FAQs from the South Carolina Department of Revenue's website...

Do some taxpayers age 65 and older not have to file a SC income tax return?

Yes, certain taxpayers age 65 and older may not have to file a SC income tax return. An individual is not required to file a South Carolina income tax return who has... 

  1. a single, surviving spouse, head of household federal filing status, or a married, filing separately filing status when the spouse does not itemize deductions and... 
  2. gross income less than the sum of the federal exemption amount, the applicable standard deduction amount, and any age 65 and older deduction for which the taxpayer qualifies.

Further, an individual is not required to file a South Carolina income tax return who has...

  1. a federal joint filing status and...
  2. combined gross income of less than the sum of (a) twice the federal exemption amount, (b) the standard deduction if the individual and spouse had the same household at the close of the tax year, and (c) any age 65 and older deduction for which the taxpayer qualifies. 

Is social security taxed by the federal government also taxed in South Carolina? 

No. Social Security benefits and railroad retirement taxed for federal purposes are not subject to tax in South Carolina. 

Is retirement income received from employment outside of SC taxable?

Retirement income received by a resident individual is taxable in South Carolina. The residency of a taxpayer when the taxpayer receives the retirement income, not the place of employment where the retirement income was earned, determines the taxability of retirement income. South Carolina does not tax the retirement income of nonresident individuals. See Code Section 12-6-1130. 

Also, see Code Section 12-6-3500 that provides for a credit over the qualifying taxpayer's lifetime for other state income taxes paid on the employee's contributions.

Is there a deduction for retirement income subject to tax in South Carolina?

Yes. A taxpayer receiving retirement income may deduct up to $3,000 of qualifying retirement income annually until reaching age 65, and deduct up to $10,000 of such retirement income annually at age 65 and thereafter. For this purpose, "retirement income" means the total of all otherwise taxable income not subject to a penalty for premature distribution from qualified retirement plans and public employee retirement plans of the federal, state, and local governments, including military retirement.

Further, if both spouses receive retirement income, each spouse is entitled to a retirement income deduction. In addition, a surviving spouse is allowed a deduction for income received from his or her retirement plan, if any, and a second, separate deduction for retirement income that is attributable to the deceased spouse, if any. The deduction for retirement income received as a surviving spouse is based on the age the deceased spouse would have been had he or she lived. 

What is the income tax deduction available to all taxpayers age 65 and older? 

An income tax deduction of up to $15,000 is allowed against any South Carolina taxable income of a resident individual who is 65 or older by the end of the tax year. The following requirements apply to this deduction...

  • Amounts deducted as retirement income reduce this $15,000 deduction. 
  • Amounts deducted as a surviving spouse do not reduce this $15,000 deduction.
  • Taxpayer's filing a joint return are allowed a deduction of up to $15,000 when only one spouse is 65 or older and up to $30,000 when both spouses are 65 or older by the end of the tax year. 

If you are considering moving to South Carolina you may ask... Is pension income taxable?

Pension income received while a resident of South Carolina is taxable to South Carolina. However, South Carolina allows a retirement deduction and an age 65 and over deduction. 

Is all military retirement pay taxable to South Carolina?

South Carolina does not tax retirement benefits received from the United States or any state for service in a state National Guard or a reserve component of the Armed Forces of the United States. South Carolina does tax military retirement pay based upon service in any other military component (such as active duty), however, South Carolina allows a deduction for up to $10,000 of taxable retirement income. 

An example best illustrates how to determine the amount of military retirement pay that is excluded from South Carolina taxable income. 

Assume your military retirement pay is from service on active duty and also service in the National Guard. You must determine what portion of the total retirement pay is to be excluded from your South Carolina taxable income. 

This is a 2 step process:

  1. Determine the percentage of your total military service that you served in the National Guard or Reserves based on the following formula: Reserve time + National Guard time = % Exclusion Total military time.
  2. Determine the amount of your military retirement income that is not subject to tax: % Exclusion x Total military retirement income = Military Retirement pay not subject to tax in SC taxed on your federal return.

For a more thorough review of the tax benefits offered in South Carolina to retirees, and the applicable laws associated with each, visit the South Carolina Department of Revenue at SCTax.org.

For a more comprehensive review of the Homestead Tax Exemption offered in Charleston County, visit TaxWeb.CharlestonCounty.org.

To see an Example of Charleston's County Property Tax, visit CharlestonCounty.org.

For an education on how to apply for Retirement Benefits and to utilize the Social Security Retirement Planner, visit SSA.gov.

The State of South Carolina's Lieutenant Governor's Office on Aging publishes a summary document which outlines the benefits available to senior citizens in South Carolina. Here are the highlights:

AGE 85

  • Exempt from the additional 1% sales tax that went into effect with the passage of the Education Improvement Act. Senior citizens must ask for exemption at time of purchase and may be required to show proof of age. 

AGE 70

  • Choice to serve or not to serve on Federal court jury duty.

AGE 65

  • Apply for Social Security whether you are planning to retire or not (may apply 3 months prior to Social Security retirement age).
  • Apply for Medicare (automatically eligible if you qualify for Social Security benefits).
  • Part A: hospital insurance - FREE.
  • Part B: other medical services, require a monthly premium of $78 (penalty for late enrollment). Medicare pays 80% of allowable charges after your deductible. Individuals must pay the remaining 20% and any other additional charges.
  • May be eligible for Supplemental Security Income (SSI) payments depending on resources and income. If you are eligible for SSI, you automatically receive Medicaid.
  • Homestead Tax Exemption... first $50,000 of the fair market value of your house or mobile home owned by a state resident of at least one year is exempt from municipal, county, school and special assessment real property taxes. Exemptions provided to surviving spouses who are 50 or older and anyone who is legally blind or has a permanent disability, regardless of age. 
  • Apply at the county auditor's office on or before July 16. 
  • Income Tax Credit: South Carolina will allow a $15,000 deduction from taxable income for taxpayers 65 years of age and older. 
  • Taxpayers under age 65 may exclude from taxes $3,000 of their qualified retirement income annually. At age 65, the deduction on retirement income increases to $10,000 and retirees may claim an additional $5,000 deduction on other income. The total deduction cannot exceed $15,000.
  • Choice to serve or not to serve on city, county or state jury duty. Discounted Palmetto Passport admission to state park facilities.
  • FreeHunting and Fishing Licenses permanent hunting and fishing licenses (one-year residency requirement). 
  • Vehicle Discount. Biennial registration fee for private passenger-carrying vehicles discounted to $20. The annual registration fee for any property carrying vehicle with a gross weight of 5000 pounds or less is $30 biennially. 
  • Free eye care. Call 1-800-222-EYES (3937) to receive a referral to a local ophthalmologist who will provide needed medical eye care at no cost to qualifying individuals. Must be US citizen. Does not cover hospital charges, drugs or eyeglasses.

AGE 62

  • Apply for Social Security if you plan to retire. Apply no later than the last day of month you want the benefits to begin.
  • Special discounts may be given on eyeglasses, lenses or any accessories. 

AGE 60

  • Free tuition at all state supported educational institutions that include state universities, colleges and technical schools (subject to space restrictions and usual entrance requirements). 
  • May retire from the SC State Retirement System after 28 years of service. 
  • Eligible for services through the Aging Network (contact your local Council on Aging).

AGE 55

  • Automobile insurance credit is mandated for persons who are 55 years of age or older and have successfully completed a driver training course approved by the Dept. of Public Safety. Contact the local 55 Alive program through AARP. Or call 1-888-227-7669.

NO AGE RESTRICTIONS FOR THE FOLLOWING:

  • Social Security - Social Security income that is taxed on your federal income tax return is not taxed on your South Carolina income tax return.
  • Retirement Income - Prior to reaching age 65, taxpayers may exclude annually $3,000 of their retirement before calculating their taxable income. Once taxpayers reach age 65, they may exclude $10,000 of retirement income. You can take this deduction on income received from any qualified retirement plan... including IRAs, government pension plans, Keogh plans and private sector pensions. Retirees may also claim an additional $5,000 exemption on other income upon reaching age 65. Total deductions cannot exceed $15,000. The $15,000 total deduction may also be claimed on any source of income, not just retirement income. 
  • Dependent Care Credit - Families caring for an elderly relative in their home who must hire caregivers in order to work may deduct up to 7% of the amount claimed on their federal income tax against their state income tax. 
  • Home Care or Nursing Home Credit - Tax credit of 20%, not to exceed $300, of expenses paid for intermediate or skilled care to an institution is allowed. A credit of 20% on expenses, up to $300 annually, is allowed on state income tax for nursing home care at home or in a licensed institution. To learn more or inquire about specific questions to your situation:

Contact State of South Carolina
Lieutenant Governor's Office on Aging
TN (803) 734-9900 or (800) 868-9095
E-MailAskUs@Aging.SC.gov
Website Aging.SC.gov

To exempt home and vehicle property taxes, you must first file an application at the county auditor's office.

Although the 55Plus Homes Team endeavors to keep up to date on all the benefits offered to retirees in South Carolina, we recommend that you contact a tax professional if you have any questions or are in doubt about a tax issue or procedure. 

To learn more about Why South Carolina is a good place to retire subscribe to our YouTube Channel or visit 55PlusHomes.info for the BEST Retirement Properties For Sale.

 

Things To Do In Charleston SC

 

The over 4.8 million tourists that visit the Charleston area each year come for several reasons. The ambiance of our historical city, friendly people, beautiful scenery, amenities, sports, shopping, world-class restaurants are just a few reasons why the lowcountry area is so popular.

The large tourist volume helps sustain such amazing cultural and recreational amenities which aren't found in cities with similar populations. From the world-class symphony orchestra to the Gibbes Museum of Art to college sports to the historical homes tours, there is always something to do. And, when you live here, you'll be able to enjoy and take advantage of all that Charleston offers.

Almost every weekend there is a different event or activity taking place in the area. 

One such activity you do not want to miss is the South Carolina Aquarium. 

Located on the historic Charleston Harbor, the South Carolina Aquarium opened on May 19, 2000. The Aquarium projects out 200 feet into the Charleston Harbor and offers a state-of-the-art environmental learning center. 

It is home to more than ten thousand plants and animals including loggerhead sea turtles, alligators, great blue herons, owls, and lined seahorses, just to name a few. 

The largest exhibit in the Aquarium is the Great Ocean Tank, which extends from the first to the third floor of the Aquarium.  It holds more than 385,000 gallons of water and contains more than seven hundred animals.

The Aquarium also features a Touch Tank, where patrons may touch horseshoe crabs, Atlantic stingrays, and other marine animals.

In addition to all of the South Carolina Aquarium's educational efforts, the facility operates a Sea Turtle Hospital. After the staff nurtures injured turtles back to good health, these rehabilitated turtles are transported to a local beach and are returned to the ocean. 

To plan a visit to the South Carolina Aquarium, an exceptional experience for anyone visiting Charleston or living here, go to SCAquarium.org.

If you decide to move here and are looking for a 55 Plus Community, check out 55PlusHomes.info or contact Debra Whitfield, an award winning and seasoned SRES Realtor supporting the 55 Plus Community in making key life decisions in the real estate market. Debra can be reached at (843) 367-4845 or debra.whitfield@coldwellbanker.com.

This presentation contains images that were used under a Creative Commons License. Click here to see the full list of images and attributions: https://app.contentsamurai.com/cc/57608

Making a Case for Reverse Mortgages in Retirement Income Conversations

December 05, 2016

Social Security benefits represent the largest retirement income asset for most Americans, supplying roughly two-thirds of retirees with more than half of their retirement income, according the Employee Benefits Research Institute (EBRI). For many Americans, what they have saved for retirement will prove to be inadequate, especially if one of their most valuable assets is ignored. “Few people consider monetizing their housing wealth, yet home equity is often between 60 and 70 percent of their net worth according to the U.S. Census Bureau.

This asset is hiding in plain sight, an asset that retirees have been saving for via regular mortgage payments throughout their lives, but is virtually invisible when clients enter the decumulation phase. For much of middle America, it is like trying to retire on just 35 percent, or less, of their accumulated wealth,” stated Shelley Giordano, Chair of the Funding Longevity Task Force at the American College of Financial Services. Recent research led by the Task Force demonstrates that, despite playing a lesser role in the retirement income story, home equity can be a significant resource. Including a discussion of the housing asset is an appropriate component in careful retirement income planning. 

The wellspring of interest in reverse mortgages is attributed, in part, to Robert  C. Merton, Distinguished Professor of Finance, MIT Sloan School & Nobel Laureate – Economics 1997. He is traveling the world encouraging financial services professionals to reconsider housing wealth as an inevitable solution to funding the global longevity challenge. For Dr. Merton, the most compelling reason for using the house via a reverse mortgage is that the loan is non-recourse. He explained, “A reverse mortgage is both a stream of income as a hedge and an asset. It changes from the former to the latter when the people in the house no longer need it. The reverse mortgage recognizes it by saying, ‘As long as you’re in the house, you pay nothing, even if you live to be 120.’ When you’re not there, your heirs get the unspent cash from the reverse mortgage and they can sell the house, pay the amount due, keep the difference or let the bank take the house if the amount owed exceeds the value of the house. That’s a wonderful contract!”

Advisors should be aware that many of the abuses of reverse mortgages in the past have been addressed by The Reverse Mortgage Stabilization Act of 2013 and other regulatory improvements. The Federal Housing Authority (FHA) now requires that  lenders validate that the Home Equity Conversion Mortgage (HECM) is a sustainable solution for any given homeowner.

In an interview with The American College of Financial Services, Donald Graves, RICP®, of the HECM Advisors Group and president of the HECM Institute, discussed several ways to support retirement income strategies with a reverse mortgage, specifically, a reverse mortgage line of credit.

“The typical retiree, from my understanding, is looking at four ‘Ls’— longevity, lifestyle, liquidity and legacy.” said Graves, and the type of reverse mortgage will depend on a client’s specific goals and concerns. Roughly 95 percent of reverse mortgages are The Home Equity Conversion Mortgage (HECM) and the only type that is insured by the federal Department of Housing and Urban Development. The FHA regulates the HECM industry closely and provides the backstop for consumers so that neither they, nor their heirs, are responsible for any debt beyond what the house provides at sale. No deficiency judgment may ever be taken against the borrower or his estate; the house is the loan’s sole collateral. In addition, the HECM is so flexible that the client does not have to commit to any particular way of using the loan and can easily move from one structure to another throughout the course of the loan.

The client can choose to access cash from a reverse mortgage as a lump sum, line of credit, tenure payment, term payment, or combination of these options. The client may elect to treat the loan as an interest-only home equity line of credit (HELOC), but also have the option to just as easily return to a mortgage with no payments if their circumstances change. The ultimate decision on how to use the HECM over time will depend on what the client and advisor want to accomplish.

Why Are Reverse Mortgages Becoming Popular Again?

In general, older consumers are carrying more debt into their retirements than in previous decades, with mortgage debt responsible for the lion’s share. According to the Consumer Financial Protection Bureau, 68 percent percent of retired boomers — roughly 4.4 million— have an existing mortgage and report that making mortgage payments in addition to other monthly expenses is a hardship, yet they wish to remain in their current homes throughout retirement.

By replacing a typical mortgage with the lump sum from a reverse mortgage, the client is no longer required to provide monthly principal and interest payments. Without the monthly debt obligation, clients achieve some breathing room and can dramatically slow the drain on fragile portfolios.

A client without a large existing mortgage to pay off may elect to establish a reverse mortgage line of credit. This line of credit provides a liquid emergency fund to meet unforeseen spending shocks in retirement. Clients may want to use the standby line to help mitigate losses from selling in down markets. “Mitigating sequence risk of returns in a portfolio simply involves setting up the reverse mortgage line of credit and drawing from that if the preceding year is flat or negative,” explained Graves.  In addition to increasing longevity of a client’s retirement assets, removing the need to spend assets during a market downturn can increase satisfaction in retirement.

Annuitizing home equity can also help to lessen a retiree’s withdrawal rate. Research published by Gerald Wagner, PhD, CFA and Wade Pfau, PhD, CFA suggests that steady monthly tenure payments from the HECM contribute to cash flow survival for a wide range of clients. In other words, the probability of running out of money is less if home equity is factored into retirement income planning.

Creative Uses of Reverse Mortgage Lines of Credit

Aside from extending a retirement income plan’s longevity and helping to mitigate portfolio risk, reverse mortgages can be used for Social Security optimization, providing individuals the option to defer claiming their Social Security benefits when they would otherwise be unable. Although no strategy is right for everyone, some clients will be helped if they can both delay Social Security and portfolio draws by using the HECM as an “income bridge” in the early years of retirement.

Clients can use a reverse mortgage line of credit without drawing against their retirement portfolio to accomplish any number of retirement goals, needs or desires like:                                                                    • Self-insuring for long-term care • Gifting to children/grandchildren • Paying taxes on Roth Conversion

Another benefit to monetizing home equity with a reverse mortgage is the absence of income taxes. “For a client in the 33 percent overall tax bracket, every dollar taken out of a reverse mortgage equals a dollar and a half not taken out of retirement assets,” said Dr. Thomas C.B. Davison, CFP®. 

A Special Note on “Standby Lines of Credit”

Most advisors are unaware that when the reverse mortgage is used as a “standby line of credit,” borrowing power grows month-over-month at the cost of the money actually borrowed.  “The HECM line of credit, unlike a traditional HELOC, cannot be canceled, frozen or reduced and must grow in credit capacity regardless of the underlying home value,” observed Giordano. Graves concurred, calling the standby line of credit “the Swiss army knife of retirement income planning.” An advisor familiar with the literature will best be able to guide clients in the appropriate, and prudent use of home equity with an eye to conserving it just as they would any other client’s other assets. “Had advisors been versed in the proactive but controlled use of reverse mortgages, many of the unfortunate situations that arose at the end of the housing bubble could have been avoided,” noted Giordano.

A Better Way to Position Reverse Mortgages with Clients                                                                                     First and foremost, Graves urged financial advisors to reframe their opinion of reverse mortgages and start viewing them as supplementary to a complete retirement income plan. As advisors work with clients, it’s important they have a comprehensive understanding of how a reverse mortgage can meet their clients’ goals, regardless of the retirement income strategy. “We’re not saying it’s the conclusion,” Graves said of reverse mortgages, “We’re saying it should be part of the conversation.” Giordano agreed.  “You will learn quickly about the various options, and how interest rates, life expectancies, home values, and existing mortgages interplay. Once you see how it works for one client, the rest will be easy.”

2015 Median Home Prices Highest for SC

2015 was the best year for residential real estate in South Carolina since the Great Recession ended in 2009, according to a year-end market report from the SC Association of Realtors. The Charleston SC region lead the way for the state with over 16,000 closed sales up close to 14%, average days on the market was 62, homes sold at an average of close to 98% of listed price and median price of $229,000. Our Charleston market is dominating the state due to a great economy, lifestyle living and top rated hospitals.

Charleston SC Selling or Buying in 2016?

With the housing inventory at a low point in the Charleston SC area, it might be wise to shop early if buying a home. As the heat of the buying season begins, you may get into bidding wars due to the shortage which will drive the price up. I suggest to go home shopping now where you may find a deal or too. Some homes that are vacant and have been on the market for 4 months or more could be snatched up for prices way below asking price.

On the flip side, if selling, as the Spring season is the time when most sellers put their homes on the market, this year I think the optimal time to list will be April to June when the herd of buyers will be out and you will get the highest value for your home. Let's hope you get a few buyers interested and your home gets bid up way above your asking price!

If you are a buyer or seller, please give my team at 55PlusRealEstate a call. We will be happy to provide you with information about our local markets and look forward in working with you.

55Plus Homes
Debra Whitfield - Team Leader

Realtor® - ABR, SRES, SRS
Charleston, South Carolina
Phone: 843-367-4845
Email: debra.whitfield@coldwellbanker.com

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