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Record Inflation is Taking Aim at Retirement Plans as Retirees Explore Options

The U.S. Bureau of Labor Statistics reported in July that consumer prices increased 9.1 percent — the most since 1981 — from June 2021 to June 2022, with energy prices taking the biggest hit. This includes motor fuel, electricity, and natural gas. 

Since many in retirement tend to live on fixed incomes, inflation spikes can take a serious toll on monthly budgets, especially when essentials like utilities are affected. 

“Higher expenses introduce additional risk to a retirement plan,” Brian Walsh, Senior Manager of Financial Planning at SoFi, told Forbes. “First, expenses may rise at a faster rate than their fixed income. This creates the need to either reduce spending or withdraw more money from investments during a bear market.” 

The conclusion — if you are in retirement or about to retire, the increased inflation may leave you feeling especially vulnerable as your purchasing power is significantly reduced. This is especially true if you are receiving fixed payments from Social Security, pensions, and other retirement accounts.  

Inflation began to go up during and following the pandemic as consumers began to demand goods more than services while the nation was also facing supply chain disruptions, according to the Council of Economic Advisers’ 2022 Economic Report of the President

In the pre-pandemic year of 2019, the Consumer Price Index (CPI) rose 2.3 percent; in 2021 alone, the CPI increased 7.0 percent, the council reported.  

Options for Retirees in the Face of Record Inflation 

But there is some good news for retirees. As consumer prices have gone up, so have home values.  

From September 2020 to September 2021, the Case-Shiller U.S. National Home Price index increased 18.6 percent, peaking in June 2022. While it has fallen slightly since then, the drop has not been significant, according to the most recent measurements.   

This increase in home values gives retirees several options for tapping into their increased equity. Options include selling their homes, taking out a home equity loan, a home equity line of credit (HELOC), or a home equity conversion mortgage (HECM), also known as a reverse mortgage. 

For those wanting to relocate in retirement, selling the home may be the way to go, especially if you are looking to downsize or move to an area where home prices are lower than your current location.  

Home equity loans and HELOCs can be used for major home renovations, consolidating debt, or covering unplanned expenses. However, the downside to these loans is that they will need to be paid back in the form of monthly payments either right away or at some point in the future.  

Grab this free guide to learn more about your options.

How a Reverse Mortgage May Help 

The solution that may give retired homeowners the most options while keeping monthly costs low is a HECM reverse mortgage loan.  

A HECM reverse mortgage is backed by the Federal Housing Administration (FHA), which is part of U.S. Department of Housing and Urban Development (HUD), and it is only available to homeowners who are 62 years of age and older.  

A reverse mortgage loan works by converting home equity into cash, and the FHA increased the lending limit for reverse mortgage loans in 2024 to $1,149,825 to account for rising home values.  

The HECM reverse mortgage helps thousands of senior homeowners and their families increase their monthly cash flow by reducing or eliminating their monthly mortgage payments. Homeowners are still required to pay property taxes, homeowner’s insurance, and maintain the home.  

For the remaining equity, borrowers have the option of receiving their funds in one or two lump sums, having the money distributed to them on a monthly basis in the form of monthly payments, keeping the funds in a line of credit they can access at any time, or any combination of the three.  

There are no rules for how the money may be used, and since the money is a loan, it is not considered income, and no taxes are paid on it.  

If you are 62 years old and have significant equity in your home, you may qualify to apply for a reverse mortgage loan offered by Mutual of Omaha Mortgage.  

To learn more, download this free reverse mortgage guide here or contact us today to talk to a reverse mortgage loan advisor who will be able to answer any questions you have about your specific situation.  

Borrower must occupy home as primary residence and remain current on property taxes, homeowner’s insurance, the costs of home maintenance, and any HOA fees.  

This information is intended to be general and educational in nature and should not be construed as financial advice. Consult your financial advisor before implementing financial strategies for your retirement. 

Get Your Free Reverse Mortgage Guide Here!
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