Tag Archives: reverse mortgage

FHA Eases Condo Rules, Expanding The Purchase And Reverse Mortgage Market

Through a new rule announced Wednesday, the Federal Housing Administration (FHA) is making it easier for aspiring entry level housing buyers and condo owners to get reverse mortgages with FHA insured financing. 

The FHA published a final regulation and policy implementation guidance this week establishing a new process for condominium approvals which will expand FHA financing for qualified first time home buyers as well as seniors looking to age in place, the Department of Housing and Urban Development said in a press memo. 

In a stated Trump Administration effort to “reduce regulatory barriers restricting affordable home ownership,” the new rule introduces a new single-unit approval procedure that eases the ability for individual condominium units to become eligible for FHA-insured financing. It also extends the recertification requirement for approved condominium projects from two years to three.

The rule will also allow more mixed-use projects to be eligible for FHA insurance, the department said in a press release. HUD Secretary Ben Carson touted the rule’s ability to assist both first-time home buyers, as well as seniors aiming to age in place.

“Condominiums have increasingly become a source of affordable, sustainable home ownership for many families and it’s critical that FHA be there to help them,” said Carson in a press release announcing the new rule. “Today, we take an important step to open more doors to home ownership for younger, first-time American buyers as well as seniors hoping to age-in-place.”

Acting HUD Deputy Secretary and FHA Commissioner Brian D. Montgomery added that this rule is being implemented partially in response to the demands of the housing market.

“Today we are making certain FHA responds to what the market is telling us.
Montgomery said in the release. “This new rule allows FHA to meet its core mission to support eligible borrowers who are ready for home ownership and are most likely to enter the market with the purchase of a condominium.”

The last notable action taken by FHA in terms of condominium approvals took place in the fall of 2016, when the agency proposed new rules that would allow individual condo units to become eligible for FHA financing, including Home Equity Conversion Mortgages (HECMs).

FHA estimated this new policy will notably increase the amount of condominium projects that can now gain FHA approval. 84 percent of FHA-insured condominium buyers have never owned a home before, according to agency data. Only 6.5 percent of the more than 150,000 condominium projects in the United States are approved to participate in FHA’s mortgage insurance programs.

“As a result of FHA’s new policy, it is estimated that 20,000 to 60,000 condominium units could become eligible for FHA-insured financing annually,” the press release said.

Read the final rule in the Federal Register.

Source: by Chris Clow | Reverse Mortgage Daily

USA Today Investigates Reverse Mortgage Foreclosures, Evictions

A recent in-depth investigation on foreclosure actions related to reverse mortgages published late Tuesday by USA Today paints a bleak picture surrounding the activities and practices of the reverse mortgage industry, but also relates some questionable and out-of-date information in key areas highlighted by the investigation, according to industry participants who spoke with RMD.

The investigative piece was the first in a new series of articles released by the outlet, touching on subjects including “questions to ask before getting a reverse mortgage,” ways to “fix” the reverse mortgage program, and details on how reverse mortgages work.

Referring to a wave of reverse mortgage foreclosures that predominantly affected urban African-American neighborhoods as a “stealth aftershock of the Great Recession,” the investigative article focuses on nearly 100,000 foreclosed reverse mortgages as having “failed,” and affecting the financial futures of the borrowers, negatively impacting the property values in the neighborhoods that surround the foreclosed properties.

In a related article, the publication details the various sources from which it drew information and the methodologies used to reach their conclusions, including some of the challenges involved in such an analysis.

The article authors detailed the ways in which they went about their information gathering, which included inquiries of the Department of Housing and Urban Development (HUD). However, some of the interpretations based on that data are largely out of date, according to sources who spoke with RMD about the coverage.

Non-borrowing spouses

A major component of the USA Today investigation revolved around a non-borrowing spouse who was taken off of the liened property’s title in order to allow for the couple’s access to a higher level of proceeds in 2010. When the borrowing husband passed away in 2016, the lender instituted a foreclosure action that has resulted in the non-borrowing wife having to vacate the property.

“Even when both husband and wife are old enough to qualify, reverse mortgage lenders often advise them to remove the younger spouse from loans and titles,” the article reads. The article does not address protections implemented in 2015 to address non-borrowing spouse issues.

In 2015, the Federal Housing Administration (FHA) released a series of guidelines that were designed to strengthen protection for non-borrowing spouses in reverse mortgage transactions. In the revised guidelines, lenders were allowed to defer foreclosure for certain eligible non-borrowing spouses for HECM case numbers assigned before or after August 4, 2014.

Lenders are also allowed to proceed with submitting claims on HECMs with eligible surviving non-borrowing spouses by assigning the affected HECM to HUD upon the death of the last surviving borrower, where the HECM would not otherwise be assignable to FHA as part of a Mortgagee Optional Election Assignment (MOE).

A lender may also proceed by allowing claim payment following the sale of the property by heirs or the borrower’s estate, or by foreclosing in accordance with the terms of the mortgage and filing an insurance claim under the FHA insurance contract as endorsed.

Foreclosure vs. eviction

“A foreclosure is a failure, no matter the trigger,” said one of the article’s sources.

Multiple sources who wished to remain unnamed told RMD that positioning a foreclosure as a “failure” of the reverse mortgage is itself misleading particularly when taking a borrower’s specific circumstances into account, and that the article appears to, at times, conflate the terms “foreclosure” and “eviction.” One of the USA Today article’s own sources also added a perspective on a perceived incongruity between the use of the terms.

“There is a difference between foreclosure and eviction that isn’t really explained in the article,” said Dr. Stephanie Moulton, associate professor of public policy at Ohio State University in an email to RMD. “We would need to know the proportion of foreclosed loans that ended because of death of the borrower, versus other reasons for being called due and payable (including tax and insurance default).”

HECM evolution since the Great Recession

One of the factual issues underlying some of the ideas of the article is that it presents older problems of the HECM program in a modern context, without addressing many of the most relevant changes that have been made to the program in the years since many of the profiled loans were originated, particularly during a volatile period for the American housing market: the Great Recession.

This was observed by both industry participants, as well as Moulton.

“The other thing to keep in mind about this particular time period is the collapse of home values underlying HECMs that exacerbated crossover risk—which would increase the rate of both types of foreclosures,” Moulton said. “And, this was prior to many of the changes that have been made to protect borrowers and shore up the program, including limits on upfront draws, second appraisal rules, and financial assessment of borrowers.”

This includes the aforementioned protections instituted for non-borrowing spouses, in addition to changes including the addition of a financial assessment (FA) regulation designed to reduce persistent defaults, especially those related to tax-and-insurance defaults that regularly afflicted the HECM program in years prior to its implementation. These newer protections received only cursory mention in the USA Today article.

Industry response

The National Reverse Mortgage Lenders Association (NRMLA) is preparing an industry response to the ideas and conclusions presented by USA Today, according to a statement made to RMD.

“A reverse mortgage is one potential and essential component for many Americans seeking to fund retirement,” said Steve Irwin, executive vice president of NRMLA in a call with RMD. “NRMLA and its members are committed to working with all stakeholders to continually improve the HECM program. NRMLA is developing a response to the piece.”

Read the full investigative article at USA Today.

Source: Reverse Mortgage Daily

Basement-Dwelling Millennials Beware: Reverse Mortgages May Evaporate Your Inheritance

With nearly 90% of millennials reporting that they have less than $10,000 in savings and more than 100 million Americans of working age with nothing in retirement accounts, we have bad news for basement-dwelling millennials invested in the “waiting for Mom and Dad to die” model;

Reverse mortgages are set to make a comeback if a consortium of lenders have their way, according to Bloomberg.

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Columbia Business School real estate professor Chris Mayer – who’s also the CEO of reverse mortgage lender Longbridge Financial, says the widely-panned financial arrangements deserve a second look. Mayer is a former economist at the Federal Reserve of Boston with a Ph.D. from MIT. 

In 2012, Mayer co-founded Longbridge, based in Mahwah, New Jersey, and in 2013 became CEO. He’s on the board of the National Reverse Mortgage Lenders Association. He said his company, which services 10,000 loans, hasn’t had a single completed foreclosure because of failure to pay property taxes or insurance. –Bloomberg

Reverse mortgages allow homeowners to pull equity from their home in monthly installments, lines of credit or lump sums. Over time, their loan balance grows – coming due upon the borrower’s death. At this point, the house is sold to pay off the loan – typically leaving heirs with little to nothing

Elderly borrowers, meanwhile, must continue to pay taxes, insurance, maintenance and utilities – which can lead to foreclosure.

While even some critics agree that reverse mortgages make sense for some homeowners – they have been criticized for excessive fees and tempting older Americans into spending their home equity early instead of using it for things such as healthcare expenses. Fees on a $100,000 loan on a house worth $200,000, for example, can total as much as $10,000 – and are typically wrapped into the mortgage. 

The profits are significant, the oversight is minimal, and greed could work to the disadvantage of seniors who should be protected by government programs and not targeted as prey,” said critic Dave Stevens – former Obama administration Federal Housing Administration commissioner and former CEO of the Mortgage Bankers Association. 

To support his claims that reverse mortgages are far less risky than they used to be, Mayer cites a 2014 study by Alicia Munnell of Boston College’s Center for Retirement Research. Munnell, a professor and former assistant secretary of the Treasury Department in the Clinton Administration (who once invested $150,000 in Mayer’s company and has since sold her stake). Munnell concluded that industry changes requiring lenders to assess a prospective borrower’s ability to pay property taxes and homeowner’s insurance significantly reduces the risk of a reverse mortgage

The number of reverse mortgages, or Home Equity Conversion Mortgages (HECM) in the United States between 2005 and 2018 has not shown a recent upward trend – however that may change if Mayer and his cohorts are able to convince homeowners that reverse mortgages aren’t what they used to be.

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Cleaning up their image

For years, the reverse mortgage industry has relied on celebrity pitchmen to convince Americans to part with the equity in their homes in order to maintain their lifestyle. 

The late Fred Thompson, a U.S. senator and Law & Order actor, represented American Advisors Group, the industry’s biggest player. These days, the same company leans on actor Tom Selleck.

Just like you, I thought reverse mortgages had to have some catch,” Selleck says in an online video. Then I did some homework and found out it’s not any of that. It’s not another way for a bank to get your house.

Michael Douglas, in his Golden Globe-winning performance on the Netflix series The Kominsky Method, satirizes such pitches. His financially desperate character, an acting teacher, quits filming a reverse mortgage commercial because he can’t stomach the script. –Bloomberg

In 2016, American Advisers and two other companies were accused by the US Consumer Financial Protection Bureau of running deceptive ads. Without admitting guilt, American Advisers agreed to add more caveats to its promotions and paid a $400,000 fine. 

As a result, the company has made “significant investments” in compliance, according to company spokesman Ryan Whittington, adding that reverse mortgages are now “highly regulated, viable financial tools,” which require homeowners to undergo third-party counseling before participating in one. 

The FHA has backed more than 1 million such reverse mortgages. Homeowners pay into an insurance fund an upfront fee equal to 2 percent of a home’s value, as well as an additional half a percentage point every year.

After the last housing crash, taxpayers had to make up a $1.7 billion shortfall because of reverse mortgage losses. Over the past five years, the government has been tightening rules, such as requiring homeowners to show they can afford tax and insurance payments. –Bloomberg

As a result of tightened regulations, the number of reverse mortgage loans has dropped significantly since 2008. 

Making the case for reverse mortgages is Shelly Giordino – a former executive at reverse mortgage company Security 1 Lending, who co-founded the Funding Longevity Task Force in 2012. 

Giordino now works for Mutual of Obama’s reverse mortgage division as their “head cheerleader” for positive reverse mortgages research. One Reverse Mortgage CEO Gregg Smith said that the group is promoting “true academic research” to convince the public that reverse mortgages are a good idea. 

Mayer under fire

University of Massachusetts economics professor Gerald Epstein says that Columbia may need to scrutinize Mayer’s business relationships for conflicts of interest. 

They really should be careful when people have this kind of dual loyalty,” said Epstein. 

Columbia said it monitors Mayer’s employment as CEO of the mortgage company to ensure compliance with its policies. “Professor Mayer has demonstrated a commitment to openness and transparency by disclosing outside affiliations,” said Chris Cashman, a spokesman for the business school. Mayer has a “special appointment,” which reduces his salary and teaching load and also caps his hours at Longbridge, Cashman said.

Likewise, Boston College said it reviewed Professor Munnell’s investment in Mayer’s company, on whose board she served from 2012 through 2014. Munnell said another round of investors in 2016 bought out her $150,000 stake in Longbridge for an additional $4,000 in interest.

“Anytime I had a conversation like this, I had to say at the beginning that I have $150,000 in Longbridge,” said Munnell. “I had to do it all the time. I’m just as happy to be out, for my academic life.” 

Source: ZeroHedge

Australians Face Huge Spike in Repayments as Interest-Only Home Loans Expire

Day of Reckoning: Hundreds of thousands of interest-only loan terms expire each year for the next few years.

The Reserve Bank of Australia (RBA), Australia’s central bank, warns of a $7000 Spike in Loan Repayments as interest-only term periods expire.

Every year for the next three years, up to an estimated 200,000 home loans will be moved from low repayments to higher repayments as their interest-only loans expire. The median increase in payments is around $7000 a year, according to the RBA.

What happens if people can’t afford the big hike in loan repayments? They may have to sell up, which could see a wave of houses being sold into a falling market. The RBA has been paying careful attention to this because the scale of the issue is potentially enough to send shockwaves through the whole economy.

Interest Only Period

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In 2017, the government cracked down hard on interest-only loans. Those loans generally have an interest-only period lasting five years. When it expires, some borrowers would simply roll it over for another five years. Now, however, many will not all be able to, and will instead have to start paying back the loan itself.

That extra repayment is a big increase. Even though the interest rate falls slightly when you start paying off the principal, the extra payment required is substantial.

Loan Payments

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RBA Unconcerned

For now, the RBA is unconcerned: “This upper-bound estimate of the effect is relatively modest,” the RBA said.

Good luck with that.

Source: By Mike “Mish” Shedlock

***

Australian Government Rolls Out Universal Reverse Mortgage Plan

The Australian government has proposed a wide-ranging reverse mortgage plan that would make an equity release program available to every senior over the age of 65.

Previously restricted to those who partially participate in the country’s social pension program, the government-sponsored plan will extend to any homeowner above the age cutoff, according to a report from Australian housing publication Domain.

Under the terms of the government-sponsored plan, homeowners can receive up to $11,799 each year for the remainder of their lives, essentially taken out of the equity already built up in their homes. Domain gives the example of a 66-year-old who can receive a total of $295,000 during a lifetime that ends at age 91.

As in the United States, older Australians have a significant amount of wealth tied up in their homes; the publication cited research showing that homeowners aged 65 to 74 would likely have to sell their homes in order to realize the $480,000 increase in personal wealth the cohort enjoyed over the previous 12-year span.

In fact, the Australian government last year attempted to encourage aging baby boomers to sell their empty nests to free up the properties for younger families. Under that plan, homeowners 65 and older could get a $300,000 benefit from the government, a powerful incentive in a tough housing market for downsizers — and in a government structure that counts income against seniors when calculating pension amounts.

“Typically, older homeowners have been reluctant to sell for both sentimental and financial reasons,” Domain reported last year. “Often selling property is costly, and funds left over after buying a smaller home  could then be considered in the means test.”

But the baked-in reverse mortgage benefit represents a shift toward helping seniors age in place instead of downsizing. The Australian government’s “More Choices for a Longer Life” plan also expands in-home care access by 14,000 seniors, according to the Financial Review, while boosting funding for elder physical-fitness initiatives and other efforts to reduce isolation among aging Australians.

The reverse mortgage plan will offer interest rates of 5.25%, which Domain noted is less than most banks, and will cost taxpayers about $11 million through 2022. Loan-to-value ratios are calculated to ensure that the loan balance can never exceed the eventual sale price of the home.

Source: By Alex Spanko | Reverse Mortgage Daily

***

Australia Debating Universal Basic Income Plans

Greens leader Richard Di Natale has proposed a radical overhaul of Australia’s welfare system through the introduction of a universal basic income scheme, but critics believe this would only increase inequality.

Di Natale gave a speech at the National Press Club on Wednesday, outlining why he thought Australia’s current social security system was inadequate.

“With the radical way that the nature of work is changing, along with increasing inequality, our current social security system is outdated,” Di Natale said.

“It can’t properly support those experiencing underemployment, insecure work and uncertain hours.

“A modern, flexible and responsive safety net would increase their resilience and enable them to make a greater contribution to our community and economy.”

 

 

To address this, Di Natale called for the introduction of a universal basic income scheme, which he labelled a “bold move towards equality”.

“We need a universal basic income. We need a UBI that ensures everyone has access to an adequate level of income, as well as access to universal social services, health, education and housing,” he said.

“A UBI is a bold move towards equality. It epitomises a government which looks after its citizens, in contrast to the old parties, who say ‘look out for yourselves’. It’s about an increased role for government in our rapidly changing world.

“The Greens are the only party proudly arguing for a much stronger role for government. Today’s problems require government to be more active and more interventionist, not less.”

However Labor’s shadow assistant treasurer Andrew Leigh, responded on Twitter that Australia had the most targeted social safety net in the world and that Di Natale’s plan would increase inequality.

 

Leigh was unavailable for comment when contacted by Pro Bono News, but in a speech given at the Crawford School of Public Policy in April last year, he explained why he opposed a UBI.

“As it happens, using social policy to reduce inequality is almost precisely the opposite of the suggestion that Australia adopt a ‘universal basic income’,” Leigh said.

“Some argue that a universal basic income should be paid for by increasing taxes, rather than by destroying our targeted welfare system. But I’m not sure they’ve considered how big the increase would need to be.

“Suppose we wanted the universal basic income to be the same amount as the single age pension (currently $23,000, including supplements). That would require an increase in taxes of $17,000 per person, or around 23 percent of GDP. This would make Australia’s tax to GDP ratio among the highest in the world.”

Liberal Senator Eric Abetz described Di Natale’s plan as “economic lunacy”.

“Its catastrophic impact would see the biggest taxpayers in Australia, the banking sector, become unprofitable and shut down and his plan for universal taxpayer handouts would see our nation bankrupted in a matter of years,” Abetz said.

“This regressive and ultra-socialist approach of less work, higher welfare and killing profitable businesses has been tried and failed around the world and you need only look at the levels of poverty and riots in Venezuela.

“Senator Di Natale must explain… who will pay for this regressive agenda when he runs out of other people’s money.”

Despite this criticism, welfare groups said they welcomed a conversation on a “decent income for all”.                                                                

Dr Cassandra Goldie, the CEO of the Australian Council of Social Service, indicated that a UBI would be discussed among their member organisations.

“We are very glad a decent income for all is being discussed. Too many people lack the income they need to cover even the very basic essentials such as housing, food and the costs of children,” Goldie told Pro Bono News.

“We will be discussing basic income options with our member organisations.

“Our social security system has a job to protect people from poverty and help with essential costs and life transitions such as the costs of children and decent housing. It is failing at this. The basic minimum allowance for unemployed people is just $278 per week.

“Budget cuts – including the freezing of family payments – have made matters worse.”

Goldie said that working out if a basic income proposal would increase or reduce inequality depended on the detail.

“We don’t oppose universal payments on principle, but reform of social security should begin with those who have the least. This must be the first priority,” she said.

“The principle that everyone should have access to at least a decent basic income is a good starting point for reform. Let’s have that debate.”

The convenor of the Anti-Poverty Network SA, Pas Forgione, told Pro Bono News that a UBI would only address inequality if payments were set to an adequate level.

“If universal basic income means that everyone gets the same income that people on Newstart gets, roughly $260 a week, then I don’t think that’s going to do much to alleviate poverty,” Forgione said.

“It needs to be set at an adequate level. And I think that involves looking at what it takes to have a reasonable standard of living and a reasonable quality of life in a country like Australia. So it depends on the details.

“If it is set at an adequate level, than it would be a terrific thing for the quality of life for a number of very low income people. I’m not saying that it’s a panacea… but I think you could make a very strong case for looking at a UBI.”

Di Natale’s speech also called for the creation of a nationalised “People’s Bank”, to give more people access to affordable banking services and to add “real competition” to the banking sector.

“A people’s bank, along with more support for co-operatives and mutuals, would inject some real competition into the banking sector,” he said.

“We have a housing crisis that has been created by governments.

“So now is the time for government to step in: through a People’s Bank, by ending policies skewed in favour of investors like negative gearing and the capital gains tax discount, and through a massive injection of funds for social and public housing.”

Source: By Luke Michael | Probono Australia

 

U.S. Home Ownership Rate Slips Versus Other Developed Nations

https://s-media-cache-ak0.pinimg.com/564x/42/0e/8d/420e8d69c3a0b9e5aa2f5ce7d261e01d.jpgVersus other developed nations, the United States is losing ground in terms of the rate of home ownership, new research finds. 

Compared to 17 other first-world countries around the globe, the U.S. home ownership rate has fallen over time, an indicator that the American Dream is becoming less attainable, according to research published by the Urban Institute.

Researchers Laurie Goodman, vice president for housing finance policy at the Urban Institute, and Chris Mayer, professor of real estate at Columbia Business School and CEO of reverse mortgage company Longbridge Financial, prepared the findings.

Among the 18 countries for which home ownership was considered, the U.S. ranked 10th in 1990 with a 63.9% home ownership rate compared with its ranking of 13th in 2015. Several European countries followed a similar shift, with Bulgaria, Ireland, and the United Kingdom seeing slides between 1990 and 2015; the proportion of homeowners also declined in Mexico over that span.

Thirteen of the countries saw increases in their rate of home ownership, including a 39.6% spike in the Czech Republic and a 29.6% gain in Sweden. 

“While cross-country comparisons are difficult, the slip in US home ownership relative to the rest of the world, and the historically low home ownership rates for Americans ages 44 and younger, should motivate us to look at US housing policies,” the researchers wrote in a blog post on the research published by the Urban Institute. 

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Home ownership among the senior demographic has been touted within the reverse mortgage industry as a clear retirement windfall.

Yet even for those who choose not to tap into their home equity, the option to use the property rent-free once the mortgage is paid can play an important role in retirement savings, the researchers noted in discussing the amount of home equity currently held among seniors in European countries.

By Elizabeth Ecker | Reverse Mortgage Daily

Breaking: HUD To Raise Premiums, Tighten Limits On Reverse Mortgages

The Department of Housing and Urban Development on Tuesday will formally announce plans to increase premiums and tighten lending limits on reverse mortgages, citing concerns about the strength of the program and taxpayer losses.

Mortgage insurance premiums on Home Equity Conversion Mortgages will rise to 2% of the home value at the time of origination, then 0.5% annually during the life of the loan, The Wall Street Journal reported Tuesday morning. In addition, the average amount of cash that seniors can access will drop from about 64% of the home’s value to 58% based on current rates, the WSJ said.

“Given the losses we’re seeing in the program, we have a responsibility to make changes that balance our mission with our responsibility to protect taxpayers,” HUD secretary Ben Carson told the WSJ via a spokesperson.

The HECM program’s value within the Mutual Mortgage Insurance Fund was pegged at negative $7.72 billion in fiscal 2016, and the WSJ noted that the HECM program has generated in $12 billion in payouts from the fund since 2009. The value of the HECM program fluctuates over time, however: In 2015, the reverse mortgage portion of the fund generated an estimated $6.78 billion in value; in 2014, the deficit was negative $1.17 billion.

Unnamed HUD officials told the WSJ that without this change, the Federal Housing Administration would need an appropriation from Congress in the next few years to sustain the HECM fund. The officials also said that the drag created by reverse mortgages has prevented them from lowering insurance premiums on forward mortgages for homeowners.

“You have this cross-subsidy from younger, less affluent people who are trying to achieve homeownership,” HUD senior advisor Adolfo Marzol told the WSJ.

The move took the industry by surprise, with the WSJ reporting that leaders were not briefed on the changes beforehand. 

By Alex Spanko | Reverse Mortgage Daily

Seniors Only Keeping < = 75% Of Social Security After Medical Expenses

Concerns over the future of Social Security play a starring role in American seniors’ overall retirement uncertainty — and that’s before considering how much of the benefit might eventually need to go toward unexpected medical expenses.

After factoring in supplemental insurance premiums and other uninsured health costs, the average retiree only takes home 75% of his or her Social Security benefits, according to a new study from researchers at Tufts University and Boston College.

“A substantial share of other households have even less of their benefits left over,” researchers Melissa McInerney of Tufts and Matthew S. Rutledge and Sara Ellen King of BC wrote.

In fact, for three percent of retirees, out-of-pocket health expenses actually exceed their Social Security Old Age and Survivors Insurance (OASI) benefits, the team concludes.

These findings are part of an overall trend: Despite positive steps such as the introduction of Medicare Part D coverage for prescription drugs in 2006, seniors have increasingly paid more for health expenses directly from their pockets.

“Until a slowdown during this decade, out-of-pocket costs for Medicare beneficiaries rose dramatically — costs increased by 44% between 2000 and 2010 — and they are expected to continue to rise faster than overall inflation,” the researchers wrote.

To perform their study, which was introduced at the annual Joint Meeting of the Retirement Research Consortium in Washington, D.C. last week, the team analyzed individual data points for Social Security recipients aged 65 and older between 2002 and 2014. They found a wide range in medical spending among that cohort: For instance, while the median retiree spent $2,400 in 2014, the total group averaged $3,100 per person, with retirees in the 75th percentile logging $4,400.

The researchers also warn that they only analyzed medical expenses, citing a 2017 paper that concluded that housing costs, taxes, and “non-housing debt” eat up about 30% of a retiree’s income.

“Although out-of-pocket medical spending has declined somewhat since the instruction of Part D … these findings suggest that Social Security beneficiaries’ lifestyles remain vulnerable to a likely revival in medical spending growth,” the team concludes.

Read McInerney, Rutledge, and King’s full findings here.

By Alex Spanko | Reverse Mortgage Daily