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Reverse Mortgage = Economic Stimulus

By
Mortgage and Lending with Reverse Mortgage Company

In some of my daily reading yesterday, I came across an interesting fact I had wondered about, but never really researched. I found that the average senior between the age of 65 and 74 spends 92% of their income. This is startling, but not to be outdone, seniors 75 and older spend 98% of their income.

 

 

On Tuesday, the House approved a plan by a margin of 385 to 35 which excludes a great many seniors because they do not have sufficient income. However, there is some noise being made which would allow seniors to include their Social Security payments as income, thus helping them benefit from this plan.

Senator Max Baucus, Chairman of the Senate Finance Committee, is pushing this proposal because the House plan excludes a huge segment of the population who need it most. Seniors.

“America’s seniors have worked hard all their lives, and are major contributors to our economy. So my proposal will give America’s seniors the same rebate as any wage earner. Rebates for seniors and payroll taxpayers, extended unemployment insurance, and tax relief for struggling businesses will put more cash into the American economy right away."

Senator Baucus then released the following statement:

“Statistics show that American seniors are a prime demographic for an economic stimulus package. But more than 20 million seniors could be left out of the planned Federal tax rebate unless Congress acts – just because they don’t have at least $3000 in earned income, or enough taxable income to get the full proposed credit.

“The Finance Committee plan would allow almost all seniors to receive a $500 rebate by showing at least $3000 of Social Security income on a 2007 tax return. America’s seniors have worked hard all their lives. Many live on fixed incomes, and struggle to pay their medical and heating bills. Seniors deserve to be included in any rebate program. And a rebate to seniors works for America’s economy – here’s how:1

“Seniors are significant contributors to American economic activity.

“Economists agree that consumer spending, fueled by tax rebates, can boost America’s economy. Americans over 65 are responsible for 14 percent of all consumer spending.

“Seniors spend – exactly what America’s economy needs now.

“Americans over age 65 spend 92 percent of their incomes within a given year – that’s higher than any other demographic group over the age of 25. Households headed by a person over age 75 spent an even higher percentage of their income – 98 percent.

I have seen many critics of reverse mortgage view these statistics as, "you made your bed, now you have to lie in it." They figure that if you didn't plan sufficiently, that's your fault. They tend to look at these statistics as irresponsible spending. I see it differently. In order to keep up with the demands of the cost of living, seniors have to spend a nearly all of their significantly reduced income in order to survive!

While I applaud the efforts of those who want to help seniors benefit from this stimulus package, I don't think a $500 annual check is going to be enough. I would just like you to think about these statistics, and then consider how reverse mortgages have given seniors more margin. If a reverse mortgage can broaden that margin from 92-98% down to 62-68%, that's pretty significant, right? What about dropping it to 32-38%? You'd be crazy not to, wouldn't you?

If you, or someone you know is in the category of spending virtually all of your income just to survive, you have to consider a reverse mortgage.

Lastly, I've believed this all along, but didn't have the data to prove it until now. Reverse mortgages are good for the economy by enabling seniors to be more financially viable.

Comments (6)

David Gold
Pantheon National Title - Orlando, FL
Corey - you are correct.  Unfortunatley, in order to get the stimulus bill through quickly, HECM's were held out of the HUD limit increases.  Once the Modernization bill goes through and HUD limits are increased for all FHA loans including HECM's, you'll be able to help many more seniors.
Mar 15, 2008 04:06 PM
asdf asdf
Dana Point, CA

One thing I think you are missing is the fact that these seniors are actually doing better than most of the country if they are only spending 92% of their income. The national savings rate is actually a negative number, like -.2% or something.

Rogan McGillis

www.reversemortgagecity.com

Mar 25, 2008 05:31 PM
Gita Bantwal
RE/MAX Centre Realtors - Warwick, PA
REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel
I am shocked to read the report and can't believe that the national rate is a negative number.
Apr 05, 2008 10:53 PM
Gita Bantwal
RE/MAX Centre Realtors - Warwick, PA
REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel
I am shocked to read the report and can't believe that the national rate is a negative number.
Apr 05, 2008 10:54 PM
Gita Bantwal
RE/MAX Centre Realtors - Warwick, PA
REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel
I am shocked to read the report and can't believe that the national rate is a negative number.
Apr 05, 2008 10:55 PM
Gita Bantwal
RE/MAX Centre Realtors - Warwick, PA
REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel
I am shocked to read the report and can't believe that the national rate is a negative number.
Apr 05, 2008 10:55 PM