Nearly every Texan has become more aware about providing for retirement. It’s difficult to escape the advertising blitz extolling the benefits of Individual Retirement Accounts or the time and effort spent by corporations mulling 401(k) opportunities or explaining Keogh Plans versus other investments.

The “plan now” theory is a good one. It not only educates persons regarding the plethora of avenues available but it also will reduce one’s anxiety once the stable, reliable, weekly paycheck no longer is around. Planning for retirement helps people substitute that familiar paycheck with other funds.

But I don’t think enough has been said to seniors who suddenly find themselves outside the normal planning road. For example, suppose a retired couple suddenly receives a chunk of money they did not expect. It happens all the time. Without any advance notice, the couple has been “cashed out” of the one rental home they had held for 10 years as a hedge against inflation. That’s why some sellers enjoy “carrying the contract.” It also provides buyers and investors an alternative to bank financing.

The shock of being cashed out can be significant. Instead of receiving $1,100 a month in rent and enjoying the benefits of depreciation, $165,000 is suddenly dumped in their lap and that convenient monthly income no longer arrives in the mail.

“They’re usually leery and confused over the intent of what people are telling them to do with their money,” said Susan Kelleher, an accountant who serves many senior clients. “They are thinking, ‘What if something happens to me? I am going to need this money at what point in the rest of my life?’ The issue is a big one.”

I was acquainted with a similar experience several years ago. I had a friend who, in 1989, purchased a parcel from a retired couple. The friend, envisioning a future vacation retreat, bought the property for $130,000 and paid a down payment of $20,000. The retired couple carried the financing for the $110,000 balance, agreeing to enter into a real-estate contract with the buyer. The couple wanted reliable monthly payments to supplement their income realized from a small downtown tavern. They did not care about a possible balloon payment after three or five years and hoped the loan would go its 15-year term.

A few years went by and the rate on the loan became higher than the original rate. My friend contacted the couple to see if they would discount the loan amount slightly for a cash buyout. Sometimes, when a contract is paid off in full years before the loan is due, the contract holder will accept less than the face value of the loan.

This gets the money into the seller’s hands faster, in effect trading the opportunity for reinvestment for interest lost. It can benefit both parties, depending upon the initial rate of the loan.

In addition, the seller, unless specifically stated in the agreement, cannot control a cash-out or the size of the monthly payment above the agreed amount. (“Buyer to pay $731 a month, or more …” is how these contracts generally are worded.)

When my friend finally located the contract holder, he learned the husband had died two years before and the widow eagerly awaited the monthly contract payment. To my friend’s surprise, the widow wanted nothing to do with a cash-out, even at full value, despite the significantly higher earning potential of the lump sum. She pleaded with my friend to continue the monthly payments.

According to Kelleher, that philosophy is not uncommon among seniors. Many seek predictability and are uncomfortable with change.

“It all depends with what they want to do with their lives,” Kelleher said. “Many of the people facing the situation you describe remember the Depression and banks going under. They remember the late 1920s and the stock market collapse. Some people would put that lump sum in a passbook account that would make them very little on their money – they simply want the peace of mind that it’s there. Others would put it in the stock market and try to make a killing. But there’s so many options in between those two.”

Kelleher said a lot of retirees who come to her for advice are not sold on annuities and prefer tax-free investments.

“It may or may not be good for their financial situation, but many of them just don’t want to pay taxes. They feel they’ve done so long enough, no matter how you try to explain other options.”

If you, or your folks or friends, are suddenly cashed out of real estate take time to check with a professional about your options. Financial sources are available at most senior centers and public libraries. It will be time well invested – especially if the cash from the property is your only investment.