Here’s how many Social Security recipients have their home paid off

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The Social Security Administration’s report provides a treasure trove of data

 

What do the vast majority of age-eligible potential homeowners have in common? Social Security and for most it’s the linchpin of their retirement security.

 

 

 

With The Senior Citizens League reporting over 40 percent of retirees rely solely on Social Security benefits to survive, it is no surprise that 62% of program recipients report they are dissatisfied with their 2024 3.2% cost-of-living adjustment. Next year’s cost-of-living-adjustment may be disappointing as well. The projected cost-of-living adjustment for 2025 will be only 1.75 percent, a significant decline from the 3.2 and 8.7 percent increase in 2024 and 2023.

 

 

 

While Social Security benefits are adjusted annually based on the percentage increase of the Consumer Price Index (CPI) the accumulated cost of living far exceeds any boost in monthly payouts. We covered some of this in last week’s episode which exposed the CPI lie.

 

 

 

A survey from Atticus found nearly two out of five respondents plan to return to work due to the modest 2024 COLA increase. One 65-year-old woman responded to the survey saying, “Utility, insurance, heating, and food costs have risen 8-14% in the last year. The 2024 COLA doesn’t offset these rising costs”.

 

 

 

A 75-year-old woman said, “My medical insurance supplement nullifies the Social Security increase. The spike in food prices hits hard, especially for those relying solely on Social Security.”

 

Nadia Vanderhall, a financial planner at The Brands and Bands Strategy Group, told Newsweek, “Even though people can be within retirement for over 30 years, Americans are living longer while things are becoming more expensive.”

 

 

 

In response to the pressures of inflation, older Americans are making financial changes to cope with the higher cost of living. 64% are cutting back on their discretionary spending. This typically means less dining out or shopping. However, even more painful are the 36% who are cutting back on daily essentials. Consequently, older Americans are cutting back on groceries, medications, or healthcare visits.

 

 

 

Could a reverse mortgage provide some much-needed cash flow? Could these cash-strapped Social Security beneficiaries find relief by tapping into their home’s value?

 

 

 

To answer that question we look at the 2021 bulletin Housing Expenditures of Social Security Beneficiaries from the Social Security Office of Retirement and Disability Policy. The report data comes from Census Bureau data that surveyed households with at least one person receiving Social Security. Here’s what they found as of 2018. Renters accounted for 32.5% of Social Security recipients. Homeowners with a mortgage balance represented a median share of 25% of households, and only 12% owned their homes free and clear.

 
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What HECM Pros Should Know About Inflation

There’s one conversation that every financial advisor should have with their clients. A conversation that should also be explored by reverse mortgage professionals with every potential borrower. Inflation. Questions such as “How are you coping with the higher price of everyday goods and services you’re paying today?” can reveal a cashflow crunch that needs to be addressed.

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Helping the Overlooked Majority

helping the overlooked majority of retirees

“The median net worth of retirees aged 65-74 was only $266,000 in 2019, of which $240,000 was in their homes. All indications are that in the last few years, the problem has gotten worse.”, writes Jack Guttentag, AKA the Mortgage Professor, in a recent Forbes column last week.

The problem has indeed worsened thanks to record-high inflation which has hit older Americans living on a fixed income especially hard. Guttentag’s solution is the integration of financial advisors, HECM originators, and insurance professionals- each participating in a coordinated plan to help the client have adequate cash flow throughout retirement.

That appears to be a worthy plan for…

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those who are several years away from retirement, but what about those who’ve already retired or will retire in the next few years? Will they consider tapping into their home’s accumulated value? It can be argued retirees with the majority of their wealth tied up in bricks and mortar of their homes are generally overlooked by financial advisors, traditional mortgage originators, and the media.

As a reverse mortgage professional in the U.S., you may not be surprised to learn that resistance to utilizing home equity is not limited to the United States. Your Mortgage-com reported on a study by National Seniors Australia and Challenge which found only 2% of retirees in Australia have accessed their home equity through a traditional equity loan or reverse mortgage. Does a two percent market penetration sound familiar? Also, two in three respondents said passing on their home to their heirs was important. Nevertheless, nearly one-in-five respondents said they might consider a reverse mortgage, or as the Aussies call it, a Home Equity Access Scheme.

The overlooked majority have no problem spending down their retirement savings in 401(k)s, IRAs, and other savings instruments. It’s the ordinary course of action expected of retirees during what is called the distribution phase. Consequently, you will seldom hear a family member complain that their parents spent down their retirement accounts.

But when it comes to the home the shift in perception is significant. It can be argued that the home is one form of savings- a forced savings account of sorts, that is paid over several decades. The greatest difference it’s a savings vehicle in which the homeowner lives. That personal attachment leads to resistance, misunderstanding, and fears of losing their housing security.

This is where knowing the financial position of your potential borrower is vital.

Do you know the homeowner’s sources of income? Do you know how long these income streams will last or if they are at risk of being reduced? What is their monthly cash flow? Only when these key facts are known can you make a meaningful comparison of life with or without a reverse mortgage. More than ever before the overlooked majority are more vulnerable to outliving their money or reducing their standard of living. That’s why the specific and practical introduction of integrating a reverse mortgage must go beyond mere features and benefits and focus on problem-solving.

Additional reading:

[Your Mortgage] Study: retirees not a fan of accessing home equity

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