A bipartisan group that is led by two U.S. senators — Angus King (I) and Bill Cassidy (R) — is reportedly considering a plan that would gradually raise the retirement age under the Social Security program to 70 in order to keep the trust fund solvent, according to Semafor.

“This is an example of two leaders trying to find a solution to a clear and foreseeable danger,” the senators’ spokespeople told Semafor in a statement. “Although the final framework is still taking shape, there are no cuts for Americans currently receiving Social Security benefits in our plan. Indeed, many will receive additional benefits.”

The proposal would also include a sovereign wealth fund that could be seeded with $1.5 trillion in borrowed money as a way to impact stock investments, according to Semafor. Failure to generate a return of 8% would cause both maximum taxable income and the payroll tax rate to increase, which would aim to put the Social Security trust fund on solvent ground for the next 75 years.

If Congress fails to act on making the Social Security trust fund more solvent, then people who rely on the program could see a reduction in their benefit payments as soon as 2032. That estimate was recently revised downward from other estimates that speculated benefit reductions would occur in 2035.

Historic levels of inflation are also adding to the complexity, as the past two years have seen historic increases in the program’s cost of living adjustment (COLA) to account for higher living costs. However, research concluded that while the larger Social Security benefit payments were welcome, the larger COLA failed to outpace inflation in 2022.

Many American seniors are dependent on Social Security benefits, and they often interact with the reverse mortgage business as a result. The reverse mortgage industry has long contended that using the product could be a way for more seniors to delay taking Social Security until the maximum benefit kicks in, currently at age 70.

While the Consumer Financial Protection Bureau (CFPB) has warned in the past that using this tactic could be expensive, commentators have said that home equity could be a viable path toward maximizing the program’s benefits.

“You may still face big bills or have trouble making ends meet in retirement,” wrote personal finance columnist and financial planner Liz Weston in 2021. “In that case, your home’s equity could be helpful. You could access your home’s value by selling it, using a reverse mortgage or getting a home equity line of credit. But you can’t tap equity you don’t have. In 2016, 46% of homeowners age[s] 65 to 79 still had mortgage debt, according to Harvard University’s Joint Center for Housing Studies. The median balance owed was $77,000.”

Another common use case for a reverse mortgage loan outside of Social Security is moving into a transaction that does not require a monthly mortgage payment.

March 7, 2023, 12:33 pm By Chris Clow