A 76-year-old widower and former schoolteacher recently inquired about her Social Security income, which made headlines. She claims that her monthly Social Security benefits amount to approximately $5,600. Her property taxes have rapidly increased during her 49 years of residence in Edmonds, Washington. In 2025, property taxes are predicted to reach $20,000 or higher; she believes that home sales, not renovations, are what raise property taxes. With an IRS deduction cap of $10,000, she lacks the funds to pay these taxes.
Despite earning more than $5,000 in Social Security benefits, she won’t be able to afford her taxes
Inflation, particularly healthcare and housing inflation, has the potential to dramatically impair Social Security benefits as we live longer in retirement. The expense of maintaining and paying taxes on a home is typically proportional to its value, making compounding both advantageous and negative. Certified financial adviser Mark Struthers advises against this scenario. However, there are some steps you might wish to take, such as seeking low-cost or free financial counsel. Here are some possibilities to examine, as well as where you may get affordable professional help.
Kenneth Robinson, a CFP with Practical Financial Planning, believes that homeowners may be eligible for a modern reverse mortgage due to Home Equity Conversion Mortgage (HECM) regulations, which have alleviated many of the concerns connected with reverse mortgages. Despite their initial disdain, many homeowners now consider reverse mortgages to be the most effective method to stay in their houses. In essence, a reverse mortgage is a loan in which standard monthly payments are exchanged for the surrender of home equity. The mortgage and interest are therefore paid back when a homeowner sells their house or dies, but they are no longer required to make mortgage payments while they are still residing in the house.
Most significantly, as long as you reside in the house, you are exempt from loan repayment. According to Robinson, the lender can only utilize the house as collateral to repay the debt. The line of credit will increase at a rate decided upon at the beginning of the reverse mortgage if the loan turns out to be greater than the value of the house. The gap cannot be made up from other assets. On the other hand, Gordon Achtermann, a CFP at Your Best Path Financial Planning, recommends that if your Social Security benefits are fixed and your expenses continue to rise, you may not be able to afford to live in the most expensive section of the country, indicating that something must change.
It is important to consider that if property values are rising rapidly, you must have a sizable amount of home equity, even though you don’t mention having a mortgage. See if you can buy a house for cash with the money you make from selling your existing one and think about relocating to a region with a lower cost of living, advises Achtermann. You will have a nest egg to invest in once you move if you don’t have a mortgage. Moreover, a fee-only financial adviser can recommend investments based on risk tolerance and life expectancy. A free, no-obligation consultation can be arranged to discuss difficulties and potential solutions. Financial consultants can also assist with budgeting and mitigating the effects of rising property taxes.
For example, the state of Washington offers several relief options for low-income homeowners and seniors who rely only on Social Security benefits, such as property tax exemptions and deferrals. These programs can have a big impact on your bottom line, so it’s worth checking to see if you qualify. There are also pro bono solutions that provide valuable guidance at no cost to the client. Keep in mind that hourly planners, who typically charge between $150 and $450 per hour, are ideal for clients who don’t need a lot of assets. They can help explore options with the government or other options that may allow the client to stay in their home, as hiring a professional is about making better decisions and ensuring nothing is overlooked regarding your Social Security income and future financial well-being.
by Sandra F.