A Homeowner With No Savings, But Some Options

Susanna Wilson, 70, makes little girls’ dresses to supplement a meager Social Security check.

If you’re worried that you haven’t saved enough for retirement, you’re probably right. Most of us haven’t. In fact, the Employee Benefit Research Institute found the majority of American workers had put away less than $25,000 for their golden years.

But even those people are in better financial shape than Susanna Wilson, 70, who saved nothing.

Her only dependable income is a Social Security check of about $900 a month.

I can never retire,” she said, her voice trembling as she stared at the floor of her living room in Grass Valley, Calif. “Probably about every two weeks when the bills are due, that’s when I get really worried. I think ‘How am I going to pay this one?’ ”

It should never have come to this. Ms. Wilson attended the University of California, Berkeley, in the late 1950s, though she left before graduating to move to New York and marry her college sweetheart, the Minimalist sculptor and sometime rock musician Walter De Maria.

Ms. Wilson spent her prime earning years engaged in various creative endeavors in New York, mostly as a designer. Her clothing line, O’Susanna, found a home in the late 1970s at Saks Fifth Avenue and Bloomingdale’s. Glamour and Seventeen magazines featured Perfumes by Susanna, including a popular fragrance called Strawberry Love.

In her 40s, Ms. Wilson moved to California and became a publicist. At her peak, she made around $65,000 a year, she said, and not a penny of that made its way into a retirement fund. “One thing kind of led to another,” Ms. Wilson said. “I’ve always put all my money into my businesses. And I always thought the business I was in was going to be a great success.” She also raised a daughter, Corie, 36, who lives in Los Angeles with her two children and is not in a position to help her mother financially.

Now twice divorced and living alone with her Shetland Sheepdog, Rooney, Ms. Wilson subsists on those government checks, plus a one-day-a-week job at a local jewelry store that pays $12.50 an hour. She received no alimony from either divorce. Ms. Wilson also makes little girls’ dresses under her O’Susanna label, at a vintage Singer Featherweight sewing machine in her dining room. But she sells only about six a month for around $200.

Grass Valley, an old gold mining town of 12,300 residents in the foothills of the Sierra Nevada, near Lake Tahoe, isn’t an expensive place to live. But Ms. Wilson isn’t the only one struggling. Her friend Molly Fisk, 55, a poet and teacher, was visiting the house and joked that her retirement planning was “all tied up in MasterCard futures. Sad but true.”

Ms. Wilson would probably manage on her current income, though not without sacrifice, were it not for the debt she had accumulated. All told, she averages about $1,400 in monthly income, including Social Security (adjusted for one of her former husbands’ earnings). A third of that goes toward fixed expenses like utilities. She pays $300 toward a mortgage balance of $5,477. She inherited the house, fully paid off, from her parents, but took out the mortgage a few years ago to pay for repairs.

The balance of her income goes toward the monthly minimum payments on $9,000 in credit card debt, racked up for daily living expenses. “I think I might just have to declare bankruptcy,” she said. “I just can’t live with that.”

Before she takes that drastic step, Ms. Wilson should consider some other options, said Elizabeth Rutter Baer, a certified financial planner in Lansing, Mich. She worries that Ms. Wilson is “extremely close” to the edge and isn’t getting anywhere with her debt payments because she keeps putting more expenses, like food, on her credit cards.

Yes, she could try to find other income, Ms. Baer said. But that’s a short-term solution. At some point, despite her excellent health, Ms. Wilson may not be able to work. “Bankruptcy is possible, but my advice is, let’s liquidate assets and get those debts paid off,” Ms. Baer said.

To that end, Ms. Baer recommended something she said she had never before suggested: a reverse mortgage. Such mortgages allow homeowners to tap existing home equity to receive a lump sum or monthly checks. Unlike a home equity loan, however, borrowers don’t have to make any repayments until they no longer live in the home. The strategy can be risky, with high fees and sometimes poor counseling for borrowers. Reverse mortgages are available only to homeowners 62 or older.

“Susanna is the ideal candidate,” Ms. Baer said. “This is one instance where it could work.”

The house is valued from $150,000 to $200,000. Ms. Baer said Ms. Wilson should work with a bank to see if she could wrap the current mortgage into a reverse and then take cash out. Ms. Wilson is already making phone calls to explore the idea.

Ms. Baer also noted that Ms. Wilson was part owner, with her two brothers, of several tracts of timberland in northern California. The land’s value has dropped because of the economy, but Ms. Baer said that shouldn’t stop them from selling it.

“Whatever the purpose of this land was before, today’s the rainy day,” she said. “It may not be that much, but at this point $25,000 would change her life, totally.” Ms. Wilson said she was discussing this with her brothers and a real estate agent.

Ms. Baer, who is 67 and single, said there were particular financial difficulties facing single people as they aged. Even people in a relationship should make financial plans that can work even if they were to be single during retirement, she said, adding, “Nobody knows who’s going to be there at the end.”

Ms. Wilson agreed with that assessment. “I have friends, and they’re two people together, and it’s a lot easier.” At that point she again spoke through tears. “My Mom would say, ‘Why don’t you just go and get married?’ and that’s just not me,” she said. “I believe you have to love somebody.”

Ms. Baer’s advice provided a push for her to explore some options she had already thought about, but hadn’t followed through on, Ms. Wilson said, because she had been paralyzed by the fear of what might happen if she could no longer generate extra income. Overcoming that fear will be key to recovering her financial health. And she’s confident that will happen.

“I don’t want to be a Pollyanna,” Ms. Wilson said. “But tomorrow is another day.”

by Tess Vigeland