A small house

Home Equity Rises. Reverse Mortgages Don’t

The housing market has shrugged off the pandemic, and home prices are rising sharply due to historically low interest rates. The market crash more than a decade ago is a distant memory.

Home Equity graphThe total value of the equity in older Americans’ homes has doubled since 2010, hitting $8.05 trillion at the end of last year. The irony is that federally insured reverse mortgages, which allow a long-time homeowner to cash in on tens of thousands of dollars of equity, aren’t very popular.

Last year, only 42,000 Home Equity Conversion Mortgages (HECMs) were sold – half as many as in 2010 – according to the U.S. Department of Housing and Urban Development (HUD).

One reason HECM reverse mortgages haven’t caught on, as the Consumer Financial Protection Bureau notes, is that they might not be suitable to homeowners who eventually sell their house. As the loans accrue interest, the “balance is likely to grow faster than their home values will appreciate,” the agency said.

But most retired homeowners never move, and HECMs are one option for people who are short on income. “We accept it as ‘normal’ to spend-down 401(k) funds, yet somehow home equity is sacrosanct,” said Dave Gardner, a former mortgage broker who sometimes handled reverse mortgages. Retirees, he said, should consider this question: “Could you achieve a better result and extend the lifespan of your nest egg with a reverse mortgage?”

To qualify for the loans, borrowers must be at least 62. They can take the reverse mortgage proceeds in the form of a lump sum, line of credit, or monthly payments – or some combination of these.

Curious homeowners can check out the federal government’s new pamphlet, which explains the basics of reverse mortgages. It’s aimed at people who already have the loans but is just as useful for people who are curious about using one themselves.

Before proceeding with any complex financial transaction, however, it’s critical to do due diligence. A reverse mortgage is no different. …Learn More

Films about Dementia Help Us Understand it

“Supernova” does not have a happy ending. But that’s how stories about Alzheimer’s go, and the film, which recently began streaming, is worth watching.

It’s one of those occasional movies that come along and portray the emotional aspects of this disease with nuance. The films, by using big-name stars like Stanley Tucci and Colin Firth in “Supernova,” lift some of the stigma around dementia that can isolate its victims and their caregivers.

Dementiais still very much a taboo topic,” said Bobbi Matchar, who, as director of the Duke Dementia Family Support Program, facilitates group discussions for people with dementia and their families. “Having movies that more accurately portray the face of dementia is really helpful.”

The newest of these films, “The Father,” is in contention for an Oscar on Sunday, as is its star, Anthony Hopkins.

Julianne Moore also won an Oscar for the lead in the 2014 film, “Still Alice” about a spirited college professor coming to terms with a failing memory. The most powerful scenes are her first realizations – forgetting a class lecture or not recognizing the center of campus, where her jog has taken her. Her denial ends when she admits to her husband (played by Alec Baldwin), “I’ve got something wrong with me.”

In “Away from Her,” Julie Christie is an older woman with Alzheimer’s who wanders the woods near her home on Lake Ontario. For her safety, she and her husband (played by Gordon Pinsent) agree she will move into a nursing home. This movie is about the disintegration of a loving marriage when one partner’s memories fade and then go dark, forcing her husband to grieve while she is still alive.

“Supernova” examines the implications of Alzheimer’s for two men who remain partners until the bitter end. On a road trip, they struggle to communicate about what Tusker’s dementia means for each of them.

Tusker (Tucci’s character) is a writer. His partner, Sam (Firth), becomes angry after discovering Tusker is hiding the extent of his dementia – he finds indecipherable scribbles in a notebook – so as not to burden Sam. …Learn More

First, Money Woes. 6 Years Later, Dementia

Gayle Blanton

Gayle Blanton, the blogger’s mother

My 85-year-old mother is on top of her bills. She pays several of them online, which is impressive enough, and she knows which bill is due when.

So, we should both take some comfort in the fact that she is not having difficulty managing her money, which is an early sign of dementia.

The connection between poor money management and declining cognitive capacity was established in research years ago. An obvious next question – when does this early warning system kick in? – is answered in The Journal of the American Medical Association.

The researchers followed more than 81,000 men on Medicare for more than a decade and linked their medical records to their Equifax credit reports. The men who would eventually be diagnosed with Alzheimer’s disease or dementia started missing the due dates on their bills about six years before the diagnosis.

There are many reasons for the gap between signs of trouble and an actual diagnosis. If family don’t detect a decline in cognitive ability, they won’t ask a doctor to administer a dementia test. Family might confuse early-stage dementia with memory loss, which is a natural part of aging. One financial manager said some of her clients try to hide that they’re having trouble handling their finances – or “do not want to admit the problem to themselves.”

If dementia goes undiagnosed, the financial problems get worse. A second finding in the study was that about 2½ years prior to a dementia diagnosis, retirees’ credit scores were much more likely to slip to subprime levels, or below 620 points. …Learn More

Women of Color Go into Construction Trades

women for color in construction figureThe annual pay for a plumber in Omaha, Nebraska, with three years of experience is around $55,000 a year, while a certified nursing assistant there earns $30,000. Or compare an electrician in the Phoenix area making $62,000 to $39,000 for a dental assistant.

Recognizing that many of the occupations dominated by women don’t pay well, young women of color are increasingly moving into the construction trades. Black, Latina, and Asian women and women of mixed race account for 45 percent of the 308,000 women working in the trades. This exceeds their 38 percent share of the women’s labor force overall, according to an analysis of 2016-2018 data by Ariane Hegewisch of the Institute for Women’s Policy Research. The largest group is Latina women.

Women of color are gravitating to construction jobs – carpenter, electrician, laborer, plumber, mason, painter, and metal worker – because they offer paid apprenticeships, good pay, and benefits to workers who don’t have a college degree. The International Union of Painters and Allied Trades even has maternity leave.

woman cutting woodBeing a sheet metal worker has “given me the financial ability to take care of my family,” Monica Yamada, a member of Local 104 in San Francisco, said in a recent webinar hosted by the policy institute and Chicago Women in Trades.

But working in a man’s world is challenging. Women say they often feel marginalized or harassed, or they receive fewer opportunities for career-advancing training or assignments at the construction site. “Women must fight to advance and to learn new aspects of the trade that men automatically get to do,” said the institute’s study director, Chandra Childers. …Learn More

College grad drowning

A Lot of Student Debt May Never Be Paid Off

student loan chartFor half to two-thirds of the college loans made over the past decade, the former students owe more than they initially borrowed.

This is the result of a federal program that bases monthly student loan payments on the borrowers’ income if they aren’t earning enough to afford the standard payments. But the monthly payments in these much-needed Income Driven Repayment (IDR) plans are often less than is required to fully service the principal and interest on the loans. So instead of getting ahead, borrowers are perennially behind and never chip away at the balances.

People who go into the repayment plans are “trying to bail out a boat with a bucket that has a hole in it,” said Betsy Mayotte, president of The Institute of Student Loan Advisors, a non-profit that gives free information and advice to people needing help with their loans.

Marshall Steinbaum, an economist with the University of Utah, estimates that at least half of all student loans might never be repaid, based on his back-of-the-envelope calculation. That share is also growing, he said in an email, because more and more former students are enrolling in IDR programs.

The inability to pay “is baked into the system,” Steinbaum wrote in The Appeal. …Learn More

The Cares Act

Wisconsin Finds Owners of Lost Pensions

Some people lose old retirement accounts because they forget about them. Others don’t want the hassle required to retrieve small amounts. And workers who change jobs fairly often can leave a lot of small accounts in their wake.

As a result, millions of dollars of retirement wealth – in pensions, 401(k)s, IRAs, profit-sharing plans, and annuities – sit in state repositories of unclaimed property.

So how can workers and retirees be united with their long-lost money?

To answer this question, a new study contrasts what has happened to unclaimed retirement accounts in two states with vastly different approaches to handling them: Wisconsin and Massachusetts.

Wisconsin in 2015 began to use Social Security numbers to automatically match up and return misplaced retirement accounts to their owners. As long as the account has a Social Security number attached to it, the state can find a resident’s current contact information in Wisconsin’s taxpayer records.

Under this system, two-thirds of the accounts were returned in 2016 and 2017, the researchers found.

Over the same two years in Massachusetts, only 3.4 percent of unclaimed retirement accounts were returned to their owners. Massachusetts takes the same passive approach used in most states: individuals must initiate the process by locating an account in the state’s unclaimed property database and then retrieve it themselves.

The University of Wisconsin study also uncovered an explanation for why some people are motivated to track down accounts on their own. …Learn More

Hands fighting over a rope

Top Economists Seek Solutions to Inequality

Something remarkable is happening in the economics profession. Top researchers in the field have begun arguing for policies to alleviate growing U.S. income and wealth inequality.

For decades, inequality wasn’t taken very seriously by economists. But that view “has changed dramatically,” said James K. Galbraith of the University of Texas at Austin, who moderated a Zoom panel at the annual meeting of the Allied Social Science Associations last week.

Inequality, Galbraith said, has “become one of the most important questions economists face.”

And COVID-19, argued Nobel laureate Joseph Stiglitz, a panelist, “has brought out very forcefully the nature of the inequalities in our society” and has “exacerbated those inequalities.”

The pandemic’s effects include larger increases in unemployment for low-wage workers, who are disproportionately Black and Latino and often work for small businesses devastated by efforts to suppress the virus. In addition, front-line workers like home health aides and meat-packing workers are being exposed to the virus but don’t always have paid sick time. There are also growing concerns about the longevity gap and about a widening educational gap between students from poor and high-income neighborhoods resulting from online learning.

The economists, having agreed inequality is a problem, identified the myriad forces driving it. They range from the persistent segregation of Black and white neighborhoods to the ability of the wealthy to invest and accumulate more wealth, while wage workers can barely get by. In a cutthroat global economy, the decline of unions has also stripped workers of their ability to bargain with employers for higher wages, they said.

Another panelist, Teresa Ghilarducci, brought attention to the inequality that exists among retirees. This can be seen in the downward mobility many people experience after they retire and can no longer support the standard of living they had while they were working.

To address these complex problems, the economists said a comprehensive policy agenda is needed that includes beefing up Social Security benefits – the great equalizer – for disadvantaged retirees, more taxation of inheritances, educational equality at the preschool through college levels, sturdier social safety nets, and new labor rules that give workers back some of the power they have lost.

Another panelist, Jason Furman, former chair of President Obama’s Council of Economic Advisers, agrees that an array of policies will be required to combat inequality. But he also argued that the two major relief bills Congress passed last year – a total of $2.9 trillion – probably reduce inequality. …Learn More