Smart options for paying for healthcare in retirement
Thanks to ongoing advances in medical care, people are living longer than ever before. But that longevity comes with a cost.
According to the U.S. Department of Health and Human Services, roughly 70 percent of Americans over age 65 will require some type of long-term care services in their lives — costing potentially hundreds of thousands of dollars. And as healthcare costs continue to rise, unforeseen medical needs can easily derail a family’s retirement plans without a smart financial strategy.
Thinking ahead about future health costs
Whether you’re planning for your parents or thinking about your own retirement, it’s important to consider how you’ll fund a post-retirement lifestyle — including paying for healthcare. How much will you need to save? How much should you be prepared to spend on insurance premiums and the care itself? It can seem overwhelming, but you can check out AARP’s customized calculator to ballpark your costs.
To help manage healthcare expenses in retirement, many people consider options like these:
Long-term care insurance (LTCI): LTCI may be the logical choice for many older Americans, as the funds can be used in a variety of ways — from assistance with daily activities to skilled care provided by medical professionals. But with LTCI, premiums increase with age. And each year after age 60, it becomes less likely that you or a loved one will medically qualify for coverage. LTCI often works best when purchased at age mid-50.
A traditional home equity line of credit: While a conventional home loan can provide the capital to pay off debts, make home repairs and help cover medical costs, it requires a minimum monthly payment on any funds taken — which in time could become burdensome.
Reverse mortgage loan: An often-overlooked option is a reverse mortgage loan. Practically speaking, a reverse mortgage can give you access to a new source of funds without the time-sensitive restraints of long-term care insurance, or the limitations of a conventional home equity loan. It’s very similar to a traditional home equity loan or home equity line of credit, but it’s designed with the needs of older adults in mind, and offers much more flexibility.
The benefits of a reverse mortgage loan
The reverse mortgage loan, or a Home Equity Conversion Mortgage (HECM), can support your healthcare needs and so much more. Similar to a traditional home equity loan or home equity line of credit, a reverse mortgage provides access to funds that can be used as needed to cover retirement healthcare costs, including:
- Monthly prescription bills
- Care not covered by major medical insurance
- Medical and non-medical in-home care, such as a physical therapist or home health aide
- An alternative or supplement to your long-term care policy
Considering that healthcare needs often arise from unexpected events — a heart attack, stroke or fall — a reverse mortgage line of credit can help you build a more comprehensive financial defense against the unknown.
For example: A married couple can use a reverse mortgage line of credit to pay for any care that’s required outside of the home — temporary or permanent — providing one borrowing spouse continues to live in the home as their primary residence. They will receive funds to help pay for the one spouse’s long-term nursing home care or assisted living expenses, and the line of credit is still available if one borrowing spouse outlives the other.
One big advantage of a reverse mortgage is its flexible repayment feature: No principal and interest payments are required until the last surviving borrower passes away or moves out. However, you can opt to pay down your principal and interest if and when you choose; no pre-payment penalties apply. As with any mortgage, you must meet your loan obligations, keeping current with property taxes, insurance, maintenance and any homeowners association fees.
And with an FHA-insured† reverse mortgage, known as a Home Equity Conversion Mortgage (HECM), borrowers and their heirs will never owe more than the home is worth when the loan is repaid. This is known as the “non-recourse” feature.
Sleep easier about covering future healthcare costs
Figuring out how to pay your medical bills as a retiree doesn’t have to be stressful. At Reverse Mortgage Funding LLC (RMF), we can help alleviate the worry for you and your loved ones, and secure the financial resources for peace of mind in the years ahead. Talk to a licensed reverse mortgage specialist — call 888-277-1567 for a convenient phone appointment to learn more about your options.
SEE WHAT FUNDS YOU MAY HAVE AVAILABLE
If you have equity in your home and believe you meet the eligibility requirements, a HECM may be the option that could help you retire smart.