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Fixed Income Sources for Seniors
Fixed incomes oftentimes lead to a low yearly allowance with which to live off of. It is estimated that almost 15 million Americans over the age of 60 live below the poverty line of $25,760/year. With this in mind, knowing your financial assets and opportunities is crucial to find and retain a low-income housing situation that can stretch your dollar the furthest.
As a senior in retirement years, you are likely familiar with the many different funding sources available to your particular situation. From those seniors with retirement savings to those on pensions, and all seniors eligible for social security benefits, knowing how to best utilize these funding arrangements to suit your monthly expenditures is an important task. We look at each of these situations and programs in detail to discuss the potential impact on housing options.
Social Security
While we are working, we have a portion of each paycheck set aside by the government for us in the form of Social Security withholding. There are also programs for spouses of those who had paid into Social Security to receive benefits should the spouse who had paid into the program pass away. Knowing your eligibility for Social Security is crucial to draw the most benefit for your situation. You may begin drawing on your Social Security benefits starting at age 62, but you should keep in mind that the amount you may draw each month goes up the longer you are able to wait to begin drawing on these benefits.
The average Social Security amount that was utilized this year by seniors was around $1,400/month. As is evident, this amount is not meant to be a primary source of income for a retiree, however with the economic impact of COVID and the worldwide strain on finances, this amount becomes a liferaft for many seniors. With this kind of limited income, it becomes vitally important to find housing that doesn’t wipe out this benefit on a monthly basis.
Pensions
A pension plan is an agreed upon amount that a retired worker is paid from an investment account paid into by a previous employer upon reaching a certain number of years worked for the company. Pensions are becoming a less-prevalent benefit in the current working environment, as a majority of employers now prefer offering contributions to personal retirement accounts that the worker predominantly pays into. A pension is another form of fixed monthly income that oftentimes can supplement the Social Security benefit of a retired individual. This benefit is not typical however, and does not stretch very far in terms of housing coverage either.
Financial Assistance Programs
There are a variety of other financial assistance programs available to low-income seniors in a multitude of different sectors aimed at reducing the monthly financial burden. The Medicare health benefit provides healthcare coverage for a large number of items to ensure seniors don't go bankrupt for health related purposes. Medicaid is another program aimed specifically at the low-income community and their healthcare costs to help offset the financial burden as well. There are food stamp programs available for qualifying low-income individuals that help put food on the table when the money is tight. There are even special local programs in individual communities that can assist with transportation needs, utilities and more. In relation to housing, there are housing vouchers that we will discuss in further detail.
Housing Options for Seniors
There are a few different scenarios a senior can consider when making housing decisions in retirement. Some seniors choose to “age in place”, which is a term for those who utilize their resources to continue living in the home they kept while they were working. There are obvious benefits to this choice: not having to relocate your life and life’s accumulations, knowing the familiarity of your property, and keeping the emotional attachment alive in your home.
Other seniors, either by circumstance or convenience, choose to find apartment living arrangements for their retirement years. Some reasons for this option are fiscal: the expenses can be less, the upkeep and maintenance of the living spaces are paid for by rent and maintained by the property managers, and sometimes the seniors may not need as much living space as they had previously maintained.
Regardless of the decision made to age in place or find new housing, there are programs aimed at helping a senior obtain or maintain the living situation they most prefer. In a low-income scenario, finding the appropriate resources available for the unique situation you are trying to maintain or find is important to knowing how to keep yourself afloat.
Staying in Your Home
If you are a retiree who is opting to remain in your home, there are benefits that are available to you that help alleviate the costs associated with your mortgage. Whether it be from financial planning years ago or utilization of current programs, knowing your financial opportunities is crucial when choosing this option. The most popular option to stay in one’s home when your income is fixed below a certain level is known as a reverse mortgage.
Reverse Mortgage
In essence, a reverse mortgage is a loan taken against the equity of your house. This type of loan is available to seniors, typically over the age of 62, who have built up significant equity in their house over the years. A reverse mortgage is structured as a loan without monthly repayment. Either a lump-sum payment to the homeowner, or a structured monthly payment to the homeowner is established. The structure of the loan is one in which the equity of one’s home becomes available for expenses before the death of the homeowner. Once the homeowner does pass away, the value of the home is assessed and utilized to pay back the balance of the reverse mortgage loan, and is properly structured to not incur additional costs for surviving family members upon the time of death.
Finding Housing
A more common scenario in today’s economy is attempting to find affordable senior housing. Whether one hasn’t had a mortgage to pay over the years, or if maintaining a home is becoming financially or physically too large of a burden, alternative living arrangements are a common endeavor once a senior has retired. With rent pricing soaring higher than ever, a senior on a fixed income needs resources to aid with locating an appropriate apartment that will suit their needs and economic interests.
Public Housing
Public housing are a variety of different living arrangements and apartments that were designed for people in low-income economic situations to have a safe rental arrangement in which to live. Seniors often qualify as eligible for public housing areas due to their low and fixed income arrangements, as well as their advanced needs.
There are strict guidelines for public housing, and income limits are among the most stringent. In order to be eligible for public housing, you must be considered low-income based on your gross yearly income; you qualify more readily if you are considered elderly or disabled; and you must be a United States citizen or legal immigrant. You will undergo a background check and have references checked to ensure you would be a good tenant. Keep in mind that the income requirements for public housing are based on local area income rates, so you won’t be expected to meet exponential requirements that aren’t applicable to your particular region. If you meet the criteria, you would apply for public housing through the local housing authority in your region. The programs are overseen by the U.S. Department of Housing and Urban Development.
You must keep in mind that public housing is in high demand. As such, the process to apply, be accepted, and then able to move into public housing arrangements can be a lengthy one. Especially post-pandemic, the wait list for public housing is longer than ever. If public housing is the most appropriate venture for you, beginning the process as early as possible is a prudent effort in order to secure housing when you will need it.
Housing Choice Vouchers
An alternative to public housing for low income seniors is the federally run program for Housing Choice Vouchers. Also referred to as “section 8”, this program is designed to help very low income families, seniors and individuals to lease or purchase privately-owned rental housing. It’s a program designed to allow the voucher holder to find any housing that meets the standards of the program, once they’ve been accepted into the program and found eligible. One of the biggest items worth mentioning with the housing choice vouchers is that the owner of the property must agree to accept the housing choice voucher for housing/rent costs.
These vouchers are paid directly to the landlords of the voucher recipients, pending the rental property meets health and safety standards. Eligibility is determined by the annual gross income of the individual applying, so a fixed-income senior making at or below poverty level would be able to apply. An additional consideration, like with public housing, is that there are many applicants for the housing voucher program and there can be a long waiting period for approval of benefits.
Whether or not you choose to retire and stay in your home, or relocate and find a senior apartment or public housing option, there are a multitude of government programs to assist you with stretching out your monthly budget. Utilization of a combination of programs to assist with food, utility and medical costs while employing a housing program like the housing choice vouchers or public housing units are the best ways to maximize your monthly budget, especially when it is from a fixed source. Evaluate your personal financial situation and discuss with your local housing authority to find out the best low-income housing opportunities that are available for you.
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