An editorial from the New York Times laments that retirees are suffering from very low returns on their “cash” investments, e.g. CDs and money market accounts which they depend on to supplement their Social Security income. My first reaction to the article is, “Why don’t they transfer the funds to other investments? The stock market is booming.” Or better yet, why don’t they spend the funds and help stimulate the economy?
The article goes on to say that faced with this lower interest income, many seniors have taken out “reverse mortgages” to supplement their incomes, which is, “another example of how Americans’ wealth is being sapped.”
This nonsensical line of reasoning led me to reflect on why do we invest? What is the point of putting your money in things that will generate money?
One of my mother’s favorite adages was, “There are no pockets in a shroud,” meaning, “you can’t take it with you.” Presumably you invest to provide for your future or that of your offspring. The reverse mortgage is simply a way of cashing in on your investment. And for the seniors who do it, you have to be 62 or older, the future is now.
My sister and I convinced my mother to take out a reverse mortgage in which one borrows against the equity in your home. The added income allowed her to stay in her home comfortably. After a couple of years my mother told me she was worried that the equity in her home would run out under this mortgage. I told her that at the then present increase in home values in her neighborhood and the payout she was receiving the equity would be depleted by the time she was 100 years old. I assured her that no one would kick a 100 year old lady out of her home.
“But,” my mother added, “I will have nothing to leave my children.” I responeded by saying that my brother and I were already retired and our sister was well positioned in a good job and comfortable home so we really didn’t need anything from her. She continued with ther reverse mortgage.
So my mother had in fact invested for her future. But what about that other factor, investing for your progeny? I have two daughters who are bright, beautiful and well educated. They are productive members of society. As far as I am concerned there is nothing I can do for them that they cannot do even better for themselves. I certainly don’t look to a CD or money market account or even stock portfolio as the most important thing I can give them. Instead I already gave them all that I could by helping them grow into such wonderful people.