At 94, Sylvia Merlin is stuck.
The widow can't sell her home or fall back on her investments. She's lost $200,000 in the stock market since the beginning of 2008, she says. Like a growing number of seniors, she's been unable to move into the retirement community she had planned to because of the shattered housing market and her dwindling retirement portfolio.
And Merlin is running out of time: Her health is deteriorating, and her home is increasingly unlivable.
94 and nowhere to go
"Older Americans are getting whacked twice," says Thomas Shapiro, the director of the Institute on Assets and Social Policy at Brandeis University, and the co-author of a study titled "Living Longer on Less." "Home equity, which is their largest reservoir of wealth and their largest expense, has taken a tremendous hit. Portfolios have taken the same hit as everyone else, but seniors don't have the same length of time to dig themselves out."
Elderly Americans with fixed incomes are increasingly being compelled to make seemingly impossible decisions, Shapiro says, such as choosing between paying their housing bills or their medical costs.
More than 54% of all senior households "do not have sufficient financial resources to meet median projected expenses based on their current financial net worth, projected Social Security and pension incomes," according to the Brandeis study.
Some seniors are moving in with their children because they can't pay all the bills. Census reports show multigenerational families are on the rise in part, experts say, because of the housing and larger economic crisis. An estimated 3.6 million parents (not all of them elderly) live with their adult children, according to 2007 census data, up from 2.3 million in 2000, an increase of 57%. In those households, the number of parents 65 and older was up 62%.
Others are turning to reverse mortgages, loans available for seniors 62 and older that allow them to get cash based on the value of their home with no monthly mortgage payments. Such a loan is repaid out of proceeds from the eventual sale of the home or from the borrower's estate after his or her death. Should you get a reverse mortgage?
But there are downsides to reverse mortgages. They include expensive origination fees that can run 5% to 6% of a home's value. There were 112,100 reverse mortgages from October 2007 through September 2008, according to the National Reverse Mortgage Lenders Association, a record for the industry and an increase of 4% since 2007. That's more than two and half times the number of reverse mortgages granted in 2005.
Merlin had counted on selling her spacious two-bedroom apartment in Bala Cynwyd, a Philadelphia suburb, for $300,000. But as of last week, she hadn't received any offers since the condominium was put on the market in May. She wants to use money from a