By Judd Matsunaga, Esq.
In October, Social Security announced a 2.5% Cost-of-Living-Adjustment (COLA) for 2025, the smallest since 2020. This will boost the average monthly benefit to $1,976 (up from $1,927 in 2024), or $3,089 for a couple who are both receiving benefits (up from $3,014 in 2024).
In other words, the average single person’s monthly increase is a measly $52 per month, which will barely covers a lunch for two people.
Advocates for seniors contend that the annual increase does not reflect the retirees’ actual expenses, which are disproportionately affected by the rising cost of housing and health care.
According to an article in The Kiplinger (www.kiplinger.com, Nov. 4, 2024), a survey found that 96% of seniors receiving Social Security benefits feel the 2.5% COLA increase is inadequate, and 80% are dissatisfied with the adjustment.
According to a Dec. 15, 2024 article on www.gobankratese.com, there are three ways seniors plan to supplement Social Security Income. The first is part-time work. The article shows that 35% of seniors are considering side hustles, 27% are exploring freelance work, and 24% are planning to take on part-time employment. Side hustles and freelance work, in particular, allow seniors to set their own hours and work at their own pace.
The second way to supplement Social Security income is to draw from retirement savings., i.e., dip into their savings. This can significantly deplete funds intended for future needs. Nearly one in five seniors (19%) said they will be drawing from retirement savings to compensate for the lower COLA. This approach, while tempting in the short term, can have lasting consequences that leave seniors vulnerable in their later years.
The third way seniors plan to supplement Social Security income is selling or downsizing their home. The survey found that 11% of seniors are planning on selling or downsizing their assets. This decision might provide immediate relief but could limit long-term financial flexibility or stability. So, it’s important to prioritize sustainable options over quick fixes.
You say, “But Judd, I can’t go get a ‘side-hustle’ job — I’m a super-senior (80+ years).” And I agree. Also, many super-seniors have already started to deplete their life savings and having no savings for a rainy day — too stressful. Lastly, most seniors want to age-in-place in their own homes for as long as possible. Downsizing from their $1 million home to a $500,000 condo is only a measure of last resort.
This Rafu Shimpo article is designed to help seniors who are struggling to make ends meet. There is a little-known program called the Property Tax Postponement (PTP) Program administered by the State Controller’s Office (SCO). You must be a homeowner, so not all Rafu readers will be able to qualify. However, hundreds (possibly thousands) of families can — AND SHOULD — apply for benefits.
Under the PTP, eligible homeowners are allowed to postpone payment of current-year property taxes on their primary residence. For example, if you are currently paying $3,000-$6,000 per year in property taxes, this deferment can add an additional $250-$500 every month into your wallet (e.g., $6,000 per year divided by 12 equals $500 each month). Who wouldn’t want that?
I know we’re not talking about huge sums of money (e.g., not playing the lottery). But if the extra $250-$500 per month would allow you to have lunch at the senior center, or occasionally go out to dinner with friends, or keep bowling in the senior bowling league, I advise you to apply. Your doctor will even tell you that staying active will keep you physically healthy. Better yet, staying socially active will keep you mentally healthy.
To be clear, it’s not a “forgiveness,” it’s a “deferment” of current year property taxes. The taxes will eventually have to be repaid, but not by you, and not due until your death. Your children will have the deferred property taxes upon your death with 5% interest. But do the math: 5% interest on a $5,000 property tax deferment is $250. But your $800,000 home appreciates 6.5% (probably more), so the value of your home goes up by $66,000. It makes sense!
Repayment is secured by a lien against the real property. The homeowner may pay all or part of the balance to SCO at any time. However, postponed property taxes and interest become immediately due and payable when the homeowner does any of the following:
- Moves or sells the property;
- Transfers title;
- Defaults on a senior lien;
- Refinances or obtains a reverse mortgage for the property;
- Dies and does not have a spouse, registered domestic partner, or other qualified individual who continues to reside in the property.
To qualify for the PTP, a homeowner must be at least 62 years of age, and live in the home as primary residence. The other criteria are: - Have a total household income of $53,574 or less;
- Have at least 40 percent equity in the property; and
- Not have a reverse mortgage on the property.
You might say, “But Judd, our combined household income is greater than $53,574, can we still get property tax relief?” Actually, it’s quite possible — get divorced. We do this all the time to get seniors qualified for In-Home-Supportive-Services. More often than not, we use something called a “legal separation.” It doesn’t sound so harsh as divorce. They’re still your husband or still your wife, and you can still live together and love each other. That doesn’t change. It’s just a piece of paper signed by a judge that allows you to qualify for benefits.
One scenario where a legal separation won’t make sense is if one spouse is making significantly more than the other. Why? If the higher-income spouse were to die first, the surviving spouse may not get survivor’s benefits. However, I read something on the Social Security website (www.ssa.gov) about still being able to receive survivor’s benefits if the marriage lasted at least 10 years. I still need to investigate this further.
Some of you will say, “Divorce? That’s out of the question.” I can respect that. But if you need additional income every month to make ends meet and: (1) you’re running out of savings; (2) can’t get a part-time job; (3) are not ready to downsize to a smaller home or condo; and (4) don’t qualify for the PTP program because your total household income is too high, there is still one possible solution.
If you own your own home, you are sitting on a gold mine. Did you know that the median sale price of a home in Los Angeles was $1 million last month, up 4.3% since last year (according to www.redfin.com)? Even if you still owe a mortgage (and are making monthly payments), chances are you still have $500,000 or more in equity. Why not ease your financial stress by tapping into the equity in your home? This is called a Home Equity Conversion Mortgages (HECM) — also known as reverse mortgage.
A HECM is a loan that does not require you to make any monthly payments toward the principal and interest to the lender. Since it is geared toward seniors, they have placed certain safeguards in place to protect seniors. Lenders cannot loan you more than you can afford, given your home value and equity. They won’t even let you be approved for the loan until you complete a counseling session with an FHA approved, third party counseling organization.
How do you qualify? Home Equity Conversion Mortgages (HECMs), the most common type of reverse mortgage loan, are a special type of home loan available to homeowners who are at least 62 years old. Aside from age, other HECM (reverse mortgage) requirements include that your home must be your principal residence, meaning you live there the majority of the year.
An HECM offers some compelling advantages if your circumstances fit:
- You can plan on staying in your “forever” home, where you are settled, and can perhaps renovate it, allowing you to age in place.
- You can enjoy a reliable cash flow in order to provide more comfortable senior years.
- You need not make monthly payments on the loan balance.
- Your spouse can usually remain in the home even if you die or move to another accommodation.
- You can pay off debt balances, such as medical bills.
- You can use the proceeds to pay off existing mortgages and thereby prevent foreclosures.
- You can fund a grandchild’s education or any other meaningful purpose.
You can take a lump sum of money, a fixed monthly payment, a line of credit where you draw money out of when you need it, or a combination of these. If you have a current mortgage on your home, this will be paid off first, then the remaining loan can be accessed through the methods above. You can continue to draw more funds until you reach the maximum amount. What’s more, you may spend the money however you like, for either urgent or more discretionary spending.
Furthermore, I’m not suggesting you take every penny out of your home, i.e., leaving nothing for your children to inherit. What I am suggesting is to take enough equity out of your home to live “comfortably.” For example, if your home is worth $1 million, you could take out $200,000-$400,000 to add to your savings. If you live another 10 years, and homes keep appreciating in value, there’s a good chance you’ll still be leaving your children $1 million as their inheritance.
In conclusion, if you’re not ready to take out a HECM, but are interested in the Property Tax Postponement program, applications will be accepted from Oct. 1 to Feb. 10 each year and will be processed in the order received. Funding is limited and distributed on a first-come, first-served basis. Due to funding limitations, all who qualify may not be approved. Only current-year property taxes are eligible for postponement.
Judd Matsunaga, Esq., is the founding partner of the Law Offices of Matsunaga & Associates, specializing in estate/Medi-Cal planning, probate, personal injury and real estate law. With offices in Torrance, Hollywood, Sherman Oaks, Pasadena and Fountain Valley, he can be reached at (800) 411-0546. Opinions expressed in this column are not necessarily those of The Rafu Shimpo.