End of inheritance for the middle class

[2Cent]

https://www.forbes.com/sites/patriciagbarnes/2019/07/02/a-paradigm-shift-the-end-of-inheritance-for-the-middle-class/#12b057361e7c

For generations people have been working to make a better life for the next generation, but now it seems to me a separation is happening where the larger part will be forever slaving away to pay the bills and another part will just coast on the returns of investments.

[Bloop Bloop]

My opinion: large inheritances - say, beyond the low-to-mid 6 figures - have no positive purpose in society, either at a macro or a micro level.

I sure as hell wouldn't want my kids to wait for any sum of capital from me. I'm happy to teach them to fish, and I'm happy to help pay a little bit for the rod. I'm not gonna supply them the fish though.

If it was up to me I'd be drastically cutting income tax and hugely increasing the estate/inheritance/property transfer tax.

[Metalcat]

My opinion: large inheritances - say, beyond the low-to-mid 6 figures - have no positive purpose in society, either at a macro or a micro level.

I sure as hell wouldn't want my kids to wait for any sum of capital from me. I'm happy to teach them to fish, and I'm happy to help pay a little bit for the rod. I'm not gonna supply them the fish though.

If it was up to me I'd be drastically cutting income tax and hugely increasing the estate/inheritance/property transfer tax.

The point of the article wasn't even really about inheritance though, it was about *why* inheritance is disappearing, how boomers are increasingly resorting to reverse mortgages to fund their retirements.

[marty998]

For one thing, taxpayers are footing the final bill. The Federal Housing Administration, a part of the Department of Housing and Urban Development, insures reverse mortgages, otherwise known as Home Equity Conversion Mortgages or HECMs. As USA Today pointed out, the FHA Fund is in the red more than $13.6 billion because of an increase in claims paid out to reverse mortgage lenders since the recession.

I'm actually in favour of reverse mortgages. You can't take it with you, and rather than relying on the taxpayer to fund your retirement you should be asked to spend down your assets before getting a handout from others.

Also, $13.6 billion over 10 years strikes me as an extraordinarily small amount of money in the US over 10 years... much less than if you set up a welfare program for the entire population.

The writer seems pretty one eyed.... start with a conclusion and then write an article to try and justify the position.

If I could also point out, retirement is not something the generations before the boomers experienced, simply because they didn't live that long. Any savings or investments held were passed down to the next generation because there was little time to actually spend them down... you worked then you died. Or you got killed in war, or died of disease. Name your poison, but life expectancy was lower.

[Metalcat]

For one thing, taxpayers are footing the final bill. The Federal Housing Administration, a part of the Department of Housing and Urban Development, insures reverse mortgages, otherwise known as Home Equity Conversion Mortgages or HECMs. As USA Today pointed out, the FHA Fund is in the red more than $13.6 billion because of an increase in claims paid out to reverse mortgage lenders since the recession.

I'm actually in favour of reverse mortgages. You can't take it with you, and rather than relying on the taxpayer to fund your retirement you should be asked to spend down your assets before getting a handout from others.

Also, $13.6 billion over 10 years strikes me as an extraordinarily small amount of money in the US over 10 years... much less than if you set up a welfare program for the entire population.

The writer seems pretty one eyed.... start with a conclusion and then write an article to try and justify the position.

If I could also point out, retirement is not something the generations before the boomers experienced, simply because they didn't live that long. Any savings or investments held were passed down to the next generation because there was little time to actually spend them down... you worked then you died. Or you got killed in war, or died of disease. Name your poison, but life expectancy was lower.

The article was definitely a little myopic and I had a hard time really getting what her main point was other than "lenders are predatory!!"

Is inheritance of property really that much of a norm?? Isn't downsizing a really common thing???

I was surprised by the end of the article to see that the author was a lawyer and a judge, because her argument was kind of a mess.

[FIREstache]

This article makes complete sense to me, and it's not anything new.  The author makes the case that effective federal, state and local policy initiatives are needed that will allow seniors to stay in their homes and age with dignity.  Social security needs propped up, Congress needs to take more action to protect seniors.

As for inheritance, I think taxes should be paid on inheritances beginning at $200,000 to any individual or family and rise rapidly from there.  That could go to help fund social security and health care for seniors.

[GuitarStv]

https://www.forbes.com/sites/patriciagbarnes/2019/07/02/a-paradigm-shift-the-end-of-inheritance-for-the-middle-class/#12b057361e7c

For generations people have been working to make a better life for the next generation, but now it seems to me a separation is happening where the larger part will be forever slaving away to pay the bills and another part will just coast on the returns of investments.

I have always expected to get nothing (nada, zero, zilch) in inheritance from my parents.  That doesn't mean that I'll have to 'forever slave away to pay the bills' though.

Reverse mortgages are a great idea for older people.  As a parent you don't owe your child a home or inheritance.  You owe them love and support as they grow.  You owe them your time and energy to feed and educate 'em properly.  And you owe them a kick in the ass out the front door if they're expecting much more than that.

This article seems like it was written by someone who was expecting to inherit a bunch of unearned money and didn't.  Now they feel jilted.  That's ridiculous.

[seattlecyclone]

This article makes complete sense to me, and it's not anything new.  The author makes the case that effective federal, state and local policy initiatives are needed that will allow seniors to stay in their homes and age with dignity.  Social security needs propped up, Congress needs to take more action to protect seniors.

Personally, I'd like to break the collective association we have with "seniors staying in the homes they've lived in for decades" and "aging with dignity." Big houses take time and money to maintain. These are two things that elderly people tend to have less and less of as they age. Meanwhile we have a younger generation who is finding it difficult to afford to buy houses big enough for a family, and many are even delaying having kids because they can't afford to house them properly. Seems like a solution to both of these would be to change social norms such that seniors look forward to the day when they can sell their multi-bedroom homes and move into something that better meets their needs as they age.

[2Cent]

My opinion: large inheritances - say, beyond the low-to-mid 6 figures - have no positive purpose in society, either at a macro or a micro level.

I sure as hell wouldn't want my kids to wait for any sum of capital from me. I'm happy to teach them to fish, and I'm happy to help pay a little bit for the rod. I'm not gonna supply them the fish though.

If it was up to me I'd be drastically cutting income tax and hugely increasing the estate/inheritance/property transfer tax.

That would be the end of family owned businesses. It is really strange to me to see that on a forum of people singing praises about financial independence, people don't want their children to be financially independent unless they earn it themselves. So if your father left you a huge sum, or the family house or farm or business, would you refuse it because you want to earn it for yourself? A lot of doors in the world don't open unless someone has a helping hand. I think if I can manage I would like my kids to be able to choose a more meaningful occupation without having to worry about money. They would probably be in their 40's or 50's, so they would be quite mature.

It doesn't say whether they helped them through other means, but I get the feeling this is people who did no future planning and are forced to remortgage their house to pay the bills. Of course if they can't they can't, but these are people who managed to pay off a house. I get the feeling if they had lived a bit more carefully their kids, and kids kids could have benefited.

[KBecks]

https://www.forbes.com/sites/patriciagbarnes/2019/07/02/a-paradigm-shift-the-end-of-inheritance-for-the-middle-class/#12b057361e7c

For generations people have been working to make a better life for the next generation, but now it seems to me a separation is happening where the larger part will be forever slaving away to pay the bills and another part will just coast on the returns of investments.

I have always expected to get nothing (nada, zero, zilch) in inheritance from my parents.  That doesn't mean that I'll have to 'forever slave away to pay the bills' though.

Reverse mortgages are a great idea for older people.  As a parent you don't owe your child a home or inheritance.  You owe them love and support as they grow.  You owe them your time and energy to feed and educate 'em properly.  And you owe them a kick in the ass out the front door if they're expecting much more than that.

This article seems like it was written by someone who was expecting to inherit a bunch of unearned money and didn't.  Now they feel jilted.  That's ridiculous.

The problem is that reverse mortgages can be set up to be predatory -- just sign here, grandpa.  I take issue with seniors getting shafted out of their homes' value. 

Seniors can stay in their homes as long as they want to.  I have several 80+ year old neighbors and they don't owe anybody anything.

[KBecks]

This article makes complete sense to me, and it's not anything new.  The author makes the case that effective federal, state and local policy initiatives are needed that will allow seniors to stay in their homes and age with dignity.  Social security needs propped up, Congress needs to take more action to protect seniors.

Personally, I'd like to break the collective association we have with "seniors staying in the homes they've lived in for decades" and "aging with dignity." Big houses take time and money to maintain. These are two things that elderly people tend to have less and less of as they age. Meanwhile we have a younger generation who is finding it difficult to afford to buy houses big enough for a family, and many are even delaying having kids because they can't afford to house them properly. Seems like a solution to both of these would be to change social norms such that seniors look forward to the day when they can sell their multi-bedroom homes and move into something that better meets their needs as they age.

This article does not seem to be talking about well off seniors in suburban McMansions. It is talking about struggling middle class seniors in middle class, average homes. Anyone looking to score off grandma and grandpa financially has the wrong motivation, let them have their peace and their decision.  Seeing the financial industry "helping" is not always as it seems.

Saying that seniors should generously give up their homes for the next generation (and society should sell that idea) is not far off from devaluing seniors' lives in other ways.

On the other hand, weren't we just looking at another financial pitch to give millenials payday loans for rent?? It's vulgar.

[GuitarStv]

The middle class is the group of people who earn between two thirds and double the median income.  None of those people are struggling, unless they've made tremendously stupid decisions with their money.

EDIT - forgot that this was the US.  They could easily be struggling if they have health conditions, thanks to for profit medical care.

[FIREstache]

https://www.forbes.com/sites/patriciagbarnes/2019/07/02/a-paradigm-shift-the-end-of-inheritance-for-the-middle-class/#12b057361e7c

For generations people have been working to make a better life for the next generation, but now it seems to me a separation is happening where the larger part will be forever slaving away to pay the bills and another part will just coast on the returns of investments.

I have always expected to get nothing (nada, zero, zilch) in inheritance from my parents.  That doesn't mean that I'll have to 'forever slave away to pay the bills' though.

Reverse mortgages are a great idea for older people.  As a parent you don't owe your child a home or inheritance.  You owe them love and support as they grow.  You owe them your time and energy to feed and educate 'em properly.  And you owe them a kick in the ass out the front door if they're expecting much more than that.

This article seems like it was written by someone who was expecting to inherit a bunch of unearned money and didn't.  Now they feel jilted.  That's ridiculous.

The problem is that reverse mortgages can be set up to be predatory -- just sign here, grandpa.  I take issue with seniors getting shafted out of their homes' value. 

Seniors can stay in their homes as long as they want to.  I have several 80+ year old neighbors and they don't owe anybody anything.

Agreed.  And the article mentioned them even losing their homes because they can't pay the high property taxes and homeowner's insurance, which doesn't surprise me the way they keep going up on top of the ever increasing costs of medical care, prescriptions, and everything else.

[nereo]

For generations people have been working to make a better life for the next generation, but now it seems to me a separation is happening where the larger part will be forever slaving away to pay the bills and another part will just coast on the returns of investments.

to me this is just another symptom of rising wealth inequality.  Most will pass on an inheritance of very modest size (thousands to tens-of-thousands).  The top quartile or so will pass on seven figures or more, which will be minimally taxed thanks to changes in the estate tax.  The progeny of the wealthy few will be financially secure, as will their progeny.

In short; we're moving back towards having a wealthy aristocracy.

[GuitarStv]

Wealth concentration is how capitalism is designed to work.

[KBecks]

In short; we're moving back towards having a wealthy aristocracy.

There's been a wealthy aristocracy for centuries.

[iris lily]

This article makes complete sense to me, and it's not anything new.  The author makes the case that effective federal, state and local policy initiatives are needed that will allow seniors to stay in their homes and age with dignity.  Social security needs propped up, Congress needs to take more action to protect seniors.

As for inheritance, I think taxes should be paid on inheritances beginning at $200,000 to any individual or family and rise rapidly from there.  That could go to help fund social security and health care for seniors.

From the article

 “...“It is disappointing  for adult children to discover too late that their parents tapped out the equity of a home that, in some situations, their parents had inherited from their parents. It is  tragic when their inheritance disappeared into the coffers of a predatory lender. But what are older homeowners supposed to do in the absence of effective federal, state and local policy initiatives that allow them to age in place with dignity?...”

I don’t think it’s tragic that any equity is tapped out, and I don’t buy that trope of age in  place with dignity.

This is one of my pet peeves.  Why the hell do we assume elderly  people need to be “supported” in their ancient 3000 square-foot house? Why? It is a damn luxurious style of living they can’t afford. They are special or unique just because they are old.

 Speaking as a senior citizen myself,  I’ve never lived in a 3000 square-foot house. There are 3000+ square-foot houses all over my old Victorian neighborhood where little old people have withered away in their giant decaying house. Some are not even 3000 square-foot, they are 1500 square-foot but they are old and they need constant maintenance.

 Interestingly enough, my baby boomer fellow residents are making unique, thoughtful choices to stay in our neighborhood of giant Victorian houses. They are making creative solutions Such as building a new house with everything on the first floor, adding an addition to their Victorian house where everything is on the first floor, building a small carriage house behind their existing Victorian behemoth. These solutions do not include clinging To their  giant house in an attempt to keep everything exactly the way it’s always been and refusing to face reality.

I also have friends, people in their mid 80s, who  have jettisoned their giant 5000 square-foot house and moved  to no maintenance condo ps in our neighborhood.  Not surprisingly, these people in their 80s are mentally active and with it and I respect them because They're realists.


 My close friend, almost 70 years old, just gave up her city house and moved across the country to buy a 3000 square-foot house out in the country on more than an acre with a reverse mortgage. This is someone who is not at all physically active. She doesn’t know how to maintain a house.She never does yardwork. I think it’s a big mistake for her although she has said out loud she doesn’t care if she leaves a property as part of her estate and I completely support her in that. But I think she will have reality bite her in the ass when that mortgage company does their inspections and points out that she needs $10,000 worth of new windows, that old barn She thinks is so picturesque needs $10,000 worth of maintenance, etc.

[BTDretire]

Can anyone give me any data on actually how much a reverse mortgage costs a homeowner.
 Example" 66 yrs old, $300,000 home. Say you want to collect reverse payments, What would it pay?

btw, I have no interest in a reverse mortgage, just wonder about the numbers..

[bacchi]

Can anyone give me any data on actually how much a reverse mortgage costs a homeowner.
 Example" 66 yrs old, $300,000 home. Say you want to collect reverse payments, What would it pay?

btw, I have no interest in a reverse mortgage, just wonder about the numbers..

https://www.reversemortgage.org/About/Reverse-Mortgage-Calculator

Check out the fees on a reverse mortgage for a $300k house: $13.8k. Yowza.

Apparently, you can take a large amount immediately and then collect the rest as monthly payments. Or take ~$850 every month.

[FIREstache]

This article makes complete sense to me, and it's not anything new.  The author makes the case that effective federal, state and local policy initiatives are needed that will allow seniors to stay in their homes and age with dignity.  Social security needs propped up, Congress needs to take more action to protect seniors.

As for inheritance, I think taxes should be paid on inheritances beginning at $200,000 to any individual or family and rise rapidly from there.  That could go to help fund social security and health care for seniors.

From the article

 “...“It is disappointing  for adult children to discover too late that their parents tapped out the equity of a home that, in some situations, their parents had inherited from their parents. It is  tragic when their inheritance disappeared into the coffers of a predatory lender. But what are older homeowners supposed to do in the absence of effective federal, state and local policy initiatives that allow them to age in place with dignity?...”

I don’t think it’s tragic that any equity is tapped out, and I don’t buy that trope of age in  place with dignity.

I get it, there are some who don't like old people, and they don't care if they suffer, lose everything, can't afford to pay for their medications, can't afford to buy groceries, etc.  But, we're not talking about everyone having 3000 sq. ft. houses.  See this passage from the article:

However, borrowers can face foreclosure while living if they fall behind on property taxes or homeowner’s insurance.

USA Today recently did an investigation of foreclosure actions related to reverse mortgages and found they are disproportionately concentrated among poor minority homeowners in urban areas, including San Francisco, Chicago, Miami and Philadelphia.

It should come as no surprise that older Americans need income in retirement.

This is one of my pet peeves.  Why the hell do we assume elderly  people need to be “supported” in their ancient 3000 square-foot house? Why? It is a damn luxurious style of living they can’t afford. They are special or unique just because they are old.

It sounds like you hate old people.  Here's another passage from the article that should help shine a light on the plight of struggling seniors who are relying on social security to survive, which doesn't pay nearly enough to afford the ever-increasing expenses of seniors.  Telling them they should have saved more or gotten a job with a pension doesn't help with their bills:

The average Social Security benefit in 2019 was $17,532 but the actual benefit is far lower for women and minorities due to pay gaps, discrimination and other challenges. These groups also tend to lack pensions and savings. The Social Security Administration says 43% of single Social Security recipients aged 65+ depend on Social Security for 90% or more of their income. Meanwhile, Go Banking Rate recently estimated the cost of a comfortable retirement in the least expensive state (Mississippi) in the United States is more than $50,000 a year.

[former player]

The article seems to presume high levels of home ownership as a tradition, but a significant part of the population never own their own home, and it is only relatively recently in human history that so many people do own homes.

For instance, neither set of my grandparents in the UK ever owned a home, they were professional people and lifelong renters.  My parents and their siblings on the other hand, with the post WWII boom, all did.  My generation came in on the back of that and are also all home owners.  Without inheritance the next generation would struggle, especially given high house prices in large parts of the UK - but it could well be that it is just a return to normal and it is the last couple of generations who have lived through an anomaly of large amounts of house building and the capital costs of housing being low in comparison to incomes.

I have no problem with requiring people to sell or reverse mortgage a home to finance their old age, and would do it myself if necessary.  After all, if the people who own houses don't pay for their own care, the costs will fall on the people who don't own houses.  There's nothing fair about that.

[nereo]

In short; we're moving back towards having a wealthy aristocracy.

There's been a wealthy aristocracy for centuries.

I could have been more clear.  A wealthy aristocracy has always existed in the US, but from the 1930s through roughly the end of the 20th century the gap between the median earners and those on the far right of the wealth spectrum had steadily decreased.  That trend has reversed in the last two decades, and is accelerating. Any way you slice and dice the numbers more wealth is now concentrated among a smaller subset of the population than anytime since before WWII.

[Cranky]

If I could also point out, retirement is not something the generations before the boomers experienced, simply because they didn't live that long. Any savings or investments held were passed down to the next generation because there was little time to actually spend them down... you worked then you died. Or you got killed in war, or died of disease. Name your poison, but life expectancy was lower.

What? I'm a boomer - and both of my grandfather's retired. My maternal grandfather had a small family business that he sold and retired in his 50's, as a matter of fact. My paternal grandfather was a coal miner, and had a good union pension by the time he retired.

[BTDretire]

Can anyone give me any data on actually how much a reverse mortgage costs a homeowner.
 Example" 66 yrs old, $300,000 home. Say you want to collect reverse payments, What would it pay?

btw, I have no interest in a reverse mortgage, just wonder about the numbers..

https://www.reversemortgage.org/About/Reverse-Mortgage-Calculator

Check out the fees on a reverse mortgage for a $300k house: $13.8k. Yowza.

Apparently, you can take a large amount immediately and then collect the rest as monthly payments. Or take ~$850 every month.

Wow, that comes out as a 0.4% payment on your equity if amortized over 30 years.
 I know there is competition and risk on the lenders side, ( I don't know if they get the house free and clear when the borrower dies or if a balance can be inherited by heirs). If not that seems very low!
 btw, they grab 4.6% up front. $13,800.

[FIREstache]

I have no problem with requiring people to sell or reverse mortgage a home to finance their old age, and would do it myself if necessary.  After all, if the people who own houses don't pay for their own care, the costs will fall on the people who don't own houses.  There's nothing fair about that.

These seniors paid taxes their entire lives paying for the education of children and many other things.  Why should we abandon seniors when they need finally something back so that they can stay in their homes and live with dignity?

Even if they don't own homes, that would mean they are likely paying the ever-increasing high rentals costs with a shrinking social security check that already doesn't cover their bills.  So, they still need more support.  The article mentioned some ways to address that.

[SwordGuy]

It is possible, just for the record, to take a balanced position on this instead of the extreme "we must give seniors everything they want just because they want it" or the "let the old people die in squalor if they didn't save enough" positions.  Neither of those positions is reasonable or fair.

As for the premise, that this is the end of inheritance for the middle class, that's hogwash.  This group has PROVEN that is a false premise.  The middle class (barring catastrophic legal or medical woes or long term job loss) has all the resources it needs to get wealthy and pass on a healthy inheritance.   
 

[FIPurpose]

Can anyone give me any data on actually how much a reverse mortgage costs a homeowner.
 Example" 66 yrs old, $300,000 home. Say you want to collect reverse payments, What would it pay?

btw, I have no interest in a reverse mortgage, just wonder about the numbers..

https://www.reversemortgage.org/About/Reverse-Mortgage-Calculator

Check out the fees on a reverse mortgage for a $300k house: $13.8k. Yowza.

Apparently, you can take a large amount immediately and then collect the rest as monthly payments. Or take ~$850 every month.

Wow, that comes out as a 0.4% payment on your equity if amortized over 30 years.
 I know there is competition and risk on the lenders side, ( I don't know if they get the house free and clear when the borrower dies or if a balance can be inherited by heirs). If not that seems very low!
 btw, they grab 4.6% up front. $13,800.

If lenders got the house free and clear after death, this would happen a lot more. No, it's a reverse mortgage. Ie the lender slowly pays for the equity of the house + some amount of interest applied on top. (IE a loan slowly paid out that is backed by the house).

[iris lily]

It is possible, just for the record, to take a balanced position on this instead of the extreme "we must give seniors everything they want just because they want it" or the "let the old people die in squalor if they didn't save enough" positions.  Neither of those positions is reasonable or fair.

As for the premise, that this is the end of inheritance for the middle class, that's hogwash.  This group has PROVEN that is a false premise.  The middle class (barring catastrophic legal or medical woes or long term job loss) has all the resources it needs to get wealthy and pass on a healthy inheritance.   

Haha, yes please.

I dont hate seniors, I am one.  What a silly accusation.

I dislike impractical ideas of  people who live above their means and then cry Waaaaaanh  when they cannot afford where they live. There’s nothing wrong with small and simple housing, that is not “squalor.”

[FIREstache]

It is possible, just for the record, to take a balanced position on this instead of the extreme "we must give seniors everything they want just because they want it" or the "let the old people die in squalor if they didn't save enough" positions.  Neither of those positions is reasonable or fair.

As for the premise, that this is the end of inheritance for the middle class, that's hogwash.  This group has PROVEN that is a false premise.  The middle class (barring catastrophic legal or medical woes or long term job loss) has all the resources it needs to get wealthy and pass on a healthy inheritance.   

Haha, yes please.

I dont hate seniors, I am one.  What a silly accusation.

I dislike impractical ideas of  people who live above their means and then cry Waaaaaanh  when they cannot afford where they live. There’s nothing wrong with small and simple housing, that is not “squalor.”

OK.  Well, I said it "sounds" like it, but I was hoping that wasn't the case.  I am pleased to hear you don't hate your fellow seniors.  :)  I've still got over 10 years to go until I hit SS/Medicare age, but I have seen first hand the struggles of many seniors.  Sure, some live in mansions and such, but some are losing relatively small and simple housing as well, and housing aside, look at the large number who are living mostly off social security as their primary means of survival.

[KBecks]

I dislike impractical ideas of  people who live above their means and then cry Waaaaaanh  when they cannot afford where they live. There’s nothing wrong with small and simple housing, that is not “squalor.”

The photo with the article is not a 3,000 sq ft house, it is a modest home.

[roomtempmayo]

I think underneath articles like this one is a vaguely implied idea that Boomers have and will transfer a smaller percentage of their lifetime earnings to their children's generation than their parents did.  It's a bit premature to call the question, but is there any data to back up the idea that Boomers are consuming more and transferring less than their parents did?

[Metalcat]

I think underneath articles like this one is a vaguely implied idea that Boomers have and will transfer a smaller percentage of their lifetime earnings to their children's generation than their parents did.  It's a bit premature to call the question, but is there any data to back up the idea that Boomers are consuming more and transferring less than their parents did?

Yeah, by the time I finished the article I was like "um...where are the stats? facts? info? anything????"

[roomtempmayo]

I dislike impractical ideas of  people who live above their means and then cry Waaaaaanh  when they cannot afford where they live. There’s nothing wrong with small and simple housing, that is not “squalor.”

The photo with the article is not a 3,000 sq ft house, it is a modest home.

In a country where something like 40% of households don't own their homes, I always find it strange that once people are homeowners they somehow have a right to stay in that house regardless of whether they can afford it.

Few people are writing articles implying that we should all be outraged that low income young people can't buy houses and have to rent, yet when a low income/wealth older person can't afford a house they already live in and they're forced to rent it's an abomination. 

Why do we value the homeownership of existing homeowners above the homeownership of people priced out of the present market?  I don't see an answer that doesn't involve class and generational entitlement.

Perhaps it's because I don't see renting as a great indignity, but I'd like to see income tax go way down and property tax go way up.  It would provide some incentives for movement toward an efficient allocation of housing instead of a current system where people move into a house and don't need to reevaluate the status quo for the next fifty years.

[KBecks]

I'd like to see income tax go way down and property tax go way up.  It would provide some incentives for movement toward an efficient allocation of housing instead of a current system where people move into a house and don't need to reevaluate the status quo for the next fifty years.

I doubt that's a plan that would get anyone elected into office.  What would be an "efficient allocation of housing", exactly?  Right now we have the free market.

http://kommunalka.colgate.edu/cfm/essays.cfm?ClipID=376

[FIREstache]

I dislike impractical ideas of  people who live above their means and then cry Waaaaaanh  when they cannot afford where they live. There’s nothing wrong with small and simple housing, that is not “squalor.”

The photo with the article is not a 3,000 sq ft house, it is a modest home.

In a country where something like 40% of households don't own their homes, I always find it strange that once people are homeowners they somehow have a right to stay in that house regardless of whether they can afford it.

Few people are writing articles implying that we should all be outraged that low income young people can't buy houses and have to rent, yet when a low income/wealth older person can't afford a house they already live in and they're forced to rent it's an abomination. 

Why do we value the homeownership of existing homeowners above the homeownership of people priced out of the present market?  I don't see an answer that doesn't involve class and generational entitlement.

Perhaps it's because I don't see renting as a great indignity, but I'd like to see income tax go way down and property tax go way up.  It would provide some incentives for movement toward an efficient allocation of housing instead of a current system where people move into a house and don't need to reevaluate the status quo for the next fifty years.

It sounds like you hate old people.  Remember, it's not just the homeowner seniors that are struggling.  There were some statistics about seniors living on SS in the article.  Your taxes should be increased to help provide for them, prop up SS, increase their benefits, and lower their high Medicare/health care related costs.  If you want higher property tax, move to a state like New Jersey or Illinois so you can join in the fun of paying high property taxes, but don't think that will get you out of high income taxes, as they are going up, too!

[Metalcat]

I dislike impractical ideas of  people who live above their means and then cry Waaaaaanh  when they cannot afford where they live. There’s nothing wrong with small and simple housing, that is not “squalor.”

The photo with the article is not a 3,000 sq ft house, it is a modest home.

In a country where something like 40% of households don't own their homes, I always find it strange that once people are homeowners they somehow have a right to stay in that house regardless of whether they can afford it.

Few people are writing articles implying that we should all be outraged that low income young people can't buy houses and have to rent, yet when a low income/wealth older person can't afford a house they already live in and they're forced to rent it's an abomination. 

Why do we value the homeownership of existing homeowners above the homeownership of people priced out of the present market?  I don't see an answer that doesn't involve class and generational entitlement.

Perhaps it's because I don't see renting as a great indignity, but I'd like to see income tax go way down and property tax go way up.  It would provide some incentives for movement toward an efficient allocation of housing instead of a current system where people move into a house and don't need to reevaluate the status quo for the next fifty years.

It sounds like you hate old people.  Remember, it's not just the homeowner seniors that are struggling.  There were some statistics about seniors living on SS in the article.  Your taxes should be increased to help provide for them, prop up SS, and increase their benefits, lower their high Medicare/health care related costs.  If you want higher property tax, move to a state like New Jersey or Illinois so you can join in the fun of paying high property taxes, but don't think that will get you out of high income taxes, as they are going up, too!

I'm really not getting the "hating seniors" thing that you are...

[roomtempmayo]

I'd like to see income tax go way down and property tax go way up.  It would provide some incentives for movement toward an efficient allocation of housing instead of a current system where people move into a house and don't need to reevaluate the status quo for the next fifty years.

I doubt that's a plan that would get anyone elected into office.  What would be an "efficient allocation of housing", exactly?  Right now we have the free market.

http://kommunalka.colgate.edu/cfm/essays.cfm?ClipID=376

The housing market is distorted in innumerable ways.  Two of the biggest are high transaction costs, and artificially low (i.e. subsidized with income tax) warehousing or holding costs.  Lowering the transaction costs and reducing or eliminating subsidies would reduce friction and put idle resources (i.e. empty square feet) to use.

[roomtempmayo]

It sounds like you hate old people.  Remember, it's not just the homeowner seniors that are struggling.  There were some statistics about seniors living on SS in the article.  Your taxes should be increased to help provide for them, prop up SS, increase their benefits, and lower their high Medicare/health care related costs.  If you want higher property tax, move to a state like New Jersey or Illinois so you can join in the fun of paying high property taxes, but don't think that will get you out of high income taxes, as they are going up, too!

I think you misunderstand what I'm saying, which is not hating the elderly. 

Taxes disincentivize the goods or services on which they're levied. 

So, assume a fixed amount of money needs to be raised using taxation, since we're not talking about the total tax burden here, just the distribution of that burden on different goods.

Should we put that tax on incomes, which have been growing exceedingly slowly in the U.S.?  That seems like a bad idea since it will lead to lower incomes, but that's what we do.

Or should we put that tax on homes, which have been growing at an obscene pace for little demonstrable benefit.

Personally, I'd rather see more income and fewer square feet rather than the other way around.

[BTDretire]

Can anyone give me any data on actually how much a reverse mortgage costs a homeowner.
 Example" 66 yrs old, $300,000 home. Say you want to collect reverse payments, What would it pay?

btw, I have no interest in a reverse mortgage, just wonder about the numbers..

https://www.reversemortgage.org/About/Reverse-Mortgage-Calculator

Check out the fees on a reverse mortgage for a $300k house: $13.8k. Yowza.

Apparently, you can take a large amount immediately and then collect the rest as monthly payments. Or take ~$850 every month.

Wow, that comes out as a 0.4% payment on your equity if amortized over 30 years.
 I know there is competition and risk on the lenders side, ( I don't know if they get the house free and clear when the borrower dies or if a balance can be inherited by heirs). If not that seems very low!
 btw, they grab 4.6% up front. $13,800.

If lenders got the house free and clear after death, this would happen a lot more. No, it's a reverse mortgage. Ie the lender slowly pays for the equity of the house + some amount of interest applied on top. (IE a loan slowly paid out that is backed by the house).

So then what happens if you out live the balance on your reverse mortgage? Do they kick you out?

[former player]

I have no problem with requiring people to sell or reverse mortgage a home to finance their old age, and would do it myself if necessary.  After all, if the people who own houses don't pay for their own care, the costs will fall on the people who don't own houses.  There's nothing fair about that.

These seniors paid taxes their entire lives paying for the education of children and many other things.  Why should we abandon seniors when they need finally something back so that they can stay in their homes and live with dignity?

Even if they don't own homes, that would mean they are likely paying the ever-increasing high rentals costs with a shrinking social security check that already doesn't cover their bills.  So, they still need more support.  The article mentioned some ways to address that.

Who said anything about abandoning them?  And who said anything about forcing them out of their homes?  I don't understand what point you are trying to make.  Of course there should be safety nets, and there are, but I don't see why people, even old ones, shouldn't provide for themselves if possible before relying on the state to provide for them.

[Rosy]

In my opinion, this article was written in support of this upcoming social security bill discussed towards the end of the article:

Congress has done nothing to help retirees. However, State Rep. John B. Larson, D-CT, the Ranking Member of the House Ways & Means Subcommittee on Social Security, has  proposed the  Social Security 2100 Act, HR 1902, which would increase Social Security benefits by about 2% and set the minimum benefit at 25% above the poverty line.

It would ensure the Social Security cost-of-living adjustment reflects actual costs incurred by seniors and would cut taxes for more than 12 million Social Security recipients.

Moreover, the bill, which has 210 cosponsors (all Democrats), would increase funding coming into the system. Presently, payroll taxes are not collected on wages over $132,900. This legislation would apply the payroll tax to wages above $400,000, which would affect the top 0.4% of wage earners. Initially, earnings between $139,900 in 2019 and $400,000 would not face payroll taxes but this “donut hole” would eventually disappear. The bill also would phase in an increase in the contribution rate so that by 2043 workers and employers would pay 7.4% instead of 6.2% today.

Several hearings have been held on the bill, which was originally introduced in 2017 and is supported by the NAACP, NOW and Latinos for a Secure Retirement. A final version, incorporating amendments, is expected this fall.

It is obvious we all read different things into this article:) - I think the article is misleading in a click bait and switch sort of way, but appreciate knowing about this bill coming up for a vote in the fall.

The size of your house is a personal choice, so are each person's views on whether it is important to them to leave something to their children.
 It seems to me that the for-profit medical system in the US causes great harm in many ways from bankruptcy to bleeding dry those boomers who would get by just fine if it weren't for the government-sanctioned greed of the big pharma.

She also makes the point about women receiving considerably less SS for various reasons. It made me think about other countries where women receive supplemental payments, for instance for when they took time out from work to raise their children.
I know way too many women who receive a pitiful amount of SS like below $850, by the time housing is paid for they find themselves in full-on poverty mode.

This bill would ensure that while the minimum payment is at least equal to the poverty level, they would also receive 25% on top of that. Even if they water it down to 10% it will make a difference and alleviate some of the financial hardship some seniors are faced with for the rest of their lives.

It shouldn't have to come down to the only remaining choice being a reverse mortgage but it is preferable to being homeless. There are plenty of boomers who choose to share their homes with other seniors because that is the only way they can survive financially and stay where they are.
A decent sized home has the advantage that you have a bedroom for live-in help so you don't have to go to an Assisted Living Facility, but it also provides intergenerational help in that your son and daughter can move in when things in their lives fall apart.

I do agree that while the title talked about the middle class this really does not relate to the middle class. The article even referenced this

USA Today recently did an investigation of foreclosure actions related to reverse mortgages and found they are disproportionately concentrated among poor minority homeowners in urban areas, including San Francisco, Chicago, Miami and Philadelphia.

Poor minority homeowners are hardly middle class.

[BTDretire]

Perhaps it's because I don't see renting as a great indignity, but I'd like to see income tax go way down and property tax go way up.  It would provide some incentives for movement toward an efficient allocation of housing instead of a current system where people move into a house and don't need to reevaluate the status quo for the next fifty years.

 I don't get this at all! First, Property taxes are local, where I live we don't have a state income tax, so now we have county tax and Federal income tax. Not related.
 Second, do you think landlords just absorb all Property taxes? They don't!
So, whether you rent or own, you pay the property taxes.
 I don't get your logic.

[FIPurpose]

Can anyone give me any data on actually how much a reverse mortgage costs a homeowner.
 Example" 66 yrs old, $300,000 home. Say you want to collect reverse payments, What would it pay?

btw, I have no interest in a reverse mortgage, just wonder about the numbers..

https://www.reversemortgage.org/About/Reverse-Mortgage-Calculator

Check out the fees on a reverse mortgage for a $300k house: $13.8k. Yowza.

Apparently, you can take a large amount immediately and then collect the rest as monthly payments. Or take ~$850 every month.

Wow, that comes out as a 0.4% payment on your equity if amortized over 30 years.
 I know there is competition and risk on the lenders side, ( I don't know if they get the house free and clear when the borrower dies or if a balance can be inherited by heirs). If not that seems very low!
 btw, they grab 4.6% up front. $13,800.

If lenders got the house free and clear after death, this would happen a lot more. No, it's a reverse mortgage. Ie the lender slowly pays for the equity of the house + some amount of interest applied on top. (IE a loan slowly paid out that is backed by the house).

So then what happens if you out live the balance on your reverse mortgage? Do they kick you out?

They can't evict you as the house is not owned by the lender, but they can start a foreclosure. This is a huge problem right now and I suspect many of the loans that were made in 2008-2010 are coming due which is causing a string of foreclosures, mostly in poorer neighborhoods

https://www.usatoday.com/in-depth/news/investigations/2019/06/11/seniors-face-foreclosure-retirement-after-failed-reverse-mortgage/1329043001/

[FIPurpose]

Perhaps it's because I don't see renting as a great indignity, but I'd like to see income tax go way down and property tax go way up.  It would provide some incentives for movement toward an efficient allocation of housing instead of a current system where people move into a house and don't need to reevaluate the status quo for the next fifty years.

 I don't get this at all! First, Property taxes are local, where I live we don't have a state income tax, so now we have county tax and Federal income tax. Not related.
 Second, do you think landlords just absorb all Property taxes? They don't!
So, whether you rent or own, you pay the property taxes.
 I don't get your logic.

Taxes and market prices are not one-to-one. So you really have no idea if landlords will have to absorb it or not. Perhaps they'll raise the price, but the price is based on supply/demand not on taxes. Just like it doesn't matter if the cost of a house in a neighborhood is $400k, if the rent in the area is $1k per month that's all you're going to get.

You'd say that that isn't sustainable. Maybe so. Raising property taxes doesn't necessarily lead to increased rent; it could just as easily lead to decreased housing prices.

[FIREstache]

Should we put that tax on incomes, which have been growing exceedingly slowly in the U.S.?  That seems like a bad idea since it will lead to lower incomes, but that's what we do.

For very high dollar homes, over $300,000, perhaps they should pay at a higher rate than someone with a house worth only $200,000.  I think senior citizens should be excluded from those new rules / taxes.

Homes in my area have gone up less than inflation over the last 17 years, including my own, yet my taxes have gone up 70%.

On the other hand, average incomes have grown faster than inflation, so the trick is to tax higher income households at a higher tax rate - the whole idea of progressive taxes.

[FIREstache]

I know way too many women who receive a pitiful amount of SS like below $850, by the time housing is paid for they find themselves in full-on poverty mode.

The same is true for men that paid the same amount into the system and starting taking distributions at the same age, although women on average draw on SS for more years due to life expectancy.

One thing I never really liked were spousal benefits, for a husband or wife, where a spouse qualifies for social security benefits despite having never paid a nickel into the system simply because they were married to someone who has earned benefits.  This just takes more out of the SS coffers unfairly to pay SS benefits to people who didn't earn them despite the fund running low.  Another things that irks me is that the income threshold for SS taxation were set in 1983, and they were reasonable, but they have NOT been indexed with inflation, so after all these years, far more people are having to pay taxes on SS benefits.  In fact, it got worse, because another threshold was added subjecting even more SS benefits to taxation.  This is just piling on to the struggles seniors are facing with SS and ever-increasing expenses.

[FIREstache]

I have no problem with requiring people to sell or reverse mortgage a home to finance their old age, and would do it myself if necessary.  After all, if the people who own houses don't pay for their own care, the costs will fall on the people who don't own houses.  There's nothing fair about that.

These seniors paid taxes their entire lives paying for the education of children and many other things.  Why should we abandon seniors when they need finally something back so that they can stay in their homes and live with dignity?

Even if they don't own homes, that would mean they are likely paying the ever-increasing high rentals costs with a shrinking social security check that already doesn't cover their bills.  So, they still need more support.  The article mentioned some ways to address that.

Who said anything about abandoning them?  And who said anything about forcing them out of their homes?  I don't understand what point you are trying to make.  Of course there should be safety nets, and there are, but I don't see why people, even old ones, shouldn't provide for themselves if possible before relying on the state to provide for them.

OK, I thought you said, "I have no problem with requiring people to sell or reverse mortgage a home."

[Cassie]

No one in my family has ever gotten a  inheritance. Everyone lived long enough to spend their money. As a boomer both my parents and grandparents retired.  We downsized in retirement.  If we live long enough we may downsize again into a condo in our later years. I would do that before getting a reverse mortgage.

[Wrenchturner]

It's pretty hard to assess what a reasonable cutoff would be...presumably not the same for Vancouver and Saskatoon, for instance.  COL varies widely.

It would be interesting to hear an Asian perspective on the matter, since Asian families tend to value and make decisions based on familial wealth moreso than western families.  There are reasonable arguments on both sides.

[former player]

I have no problem with requiring people to sell or reverse mortgage a home to finance their old age, and would do it myself if necessary.  After all, if the people who own houses don't pay for their own care, the costs will fall on the people who don't own houses.  There's nothing fair about that.

These seniors paid taxes their entire lives paying for the education of children and many other things.  Why should we abandon seniors when they need finally something back so that they can stay in their homes and live with dignity?

Even if they don't own homes, that would mean they are likely paying the ever-increasing high rentals costs with a shrinking social security check that already doesn't cover their bills.  So, they still need more support.  The article mentioned some ways to address that.

Who said anything about abandoning them?  And who said anything about forcing them out of their homes?  I don't understand what point you are trying to make.  Of course there should be safety nets, and there are, but I don't see why people, even old ones, shouldn't provide for themselves if possible before relying on the state to provide for them.

OK, I thought you said, "I have no problem with requiring people to sell or reverse mortgage a home."

Either/or - which gives someone the choice to sell up and move on or stay in place.  Did you misread that?