Lean Times

As dividends fall the cost of living continues to climb 

“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness.” – Charles Dickens ~ A Tale of Two Cities

While Dickens’s opening lines are not prescient they certainly could describe the current state of affairs in which we find ourselves. Lenders are seeing a significant rebound in consumer interest as evidenced in new application activity, as several retirees and seniors face lean times seeing the coronavirus continue to spread across the globe.

Today long-term inflation remains moderate, however, food prices jumped significantly this quarter as supply chains were temporarily interrupted due to the COVID-19 pandemic. NBC reported that beef prices jumped 20.4% from April to July. Everyone is feeling the squeeze- the mass affluent, middle class, and low-income older homeowner.

However, beyond daily expenditures seniors who dutifully saved are feeling the brunt as well. Millions of older Americans count on dividends to make ends meet. These shareholders are seeing dividend payouts slashed as over 700 publicly traded companies seeking to preserve cash in an uncertain economy announced a reduction or suspension of dividends. For example, last month MarketWatch noted the highly-touted Halliburton (HAL) slashed their quarterly dividend payouts  75% in May to 18 cents a share. The Janus Henderson asset management group sees this trend continuing. In its recent Global Dividend Index report, Janus projects dividend payouts will decrease between 15-34% by the end of 2020.

Consequently, older homeowners with substantial investments who rely on dividend payouts and those whose home is their most significant asset are facing lean times; both will need a source of funds to bridge the gap. Investors may be forced to tap into their cash savings or worse, sell stocks at a significant loss. Moderate and lower-income senior homeowners have limited options and are likely to begin viewing their home’s equity in a new light.

Americans are an optimistic lot not naturally inclined to anticipate unnerving ‘what-if’ scenarios. However many ancient philosophers did anticipate potential outcomes practicing ‘premeditatio malorum’- which loosely translated means to ‘anticipate the worst and plan accordingly’. Reverse mortgage professionals can encourage this mindset by asking some simple questions. “How long would your cash reserves last if you continue to use them to cover monthly expenses?” “Do you have a plan if you no don’t receive any dividends this year or next?”. Those working with a financial professional may be hearing similar probing inquires from their advisor.

Your mission should you choose to accept it is to continually build momentum in presenting the reverse mortgage not as a cure-all for one’s financial woes, but simply as a valid and established potential solution which could help older homeowners weather the economic storm in which we find ourselves. Now is the time to schedule those financial advisor introductions you’ve been putting off or plan your first public seminar.

Fortune favors the bold, especially when opportunity presents itself in the midst of adversity.

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