With that said, the article continues by saying that most Americans are sorely behind in their savings for retirement.  The statistics they reported indicated that 36% of working Americans over the age of 55 have less than $25,000 in retirement savings.  Not enough to retire on let alone if there is a major health event.   Health care costs rise faster than even inflation does.  So this means that even if inflation has been taken into account for retirement plans, a major health event could still suck those savings and retirement funds faster than planned.

The article was even more pessimistic when it talked about Reverse Mortgages as an option for retirement.  It mentioned Yale economist, Robert Shiller, as beleiving that home prices could possibly decline by 30%.  Wit this scale of decline, there is no equity left to do a Reverse Mortgage.  Downsizing is all that is left…

This artilce seemed all doom and gloom.  We all see the problems out there…has anyone seen someone with solutions?

I think that this is a great way to promote ways for Seniors to live independently, but I have a few questions about how they are doing it.  Senior Independent Living Month isn’t in a month for them, it runs from May 15th to June 15th.  That seems like half of two months – why not just pick a month like every other cause out there?  They are promoting this by partnering with the National Association of Homebuilders, Rebuild Together,  and the National Committee of Grandparents for Children’s Rights (NCGCR) for different publicity events.  These are some GREAT organizations and they should have some good success with them, but I find it VERY interesting that they aren’t trying to partner with National Aging in Place Council (NAIPC) who has their own annual event in October called National Aging in Place Week.

I guess if they can bring more publicity to the issues of long term care, who is going to provide it and who is going to pay for it, I’m all for it.  We’ll see what kind of press they get…

The site has some good information on understanding, planning and paying for long term care.  They also have a planning kit that they can mail to you.  There is also a great page of related links that can help in your research.

A really good section is on the paying for the long term care.  They have a great section on private funding which includes long term care insurance, annuities, trusts, etc.  I didn’t see Reverse Mortgages listed which surprised me since 90% of Reverse Mortgages are government insured products.

Of all the websites I’ve seen, I believe that this is the best one I’ve seen to get people started in their own planning or in the planning for their family members.

So far…ok.  I understand the logic of these limitations.  Anything deferred with penalties involved defeats the purpose of the reverse mortgage.  This type of mortgage can be structured similar to an immediate annuity, so I am not sure why that isn’t on the list too.  If you can structure the reverse mortgage to make immediate payments to you, why would you spend additional fees and a commission to someone to then set up an annuity?  If anyone knows what the benefit might be, please let me know.

Glad to see that Long Term Care insurance is still on the "good" purchase list!

Reverse Mortgages, while good solutions to many of the cash poor/equity rich seniors’ problems, are probably not the best planning method for your long term care.  In basic terms, a Reverse Mortgage (of which, approximately 95% are FHA insured HECMs) permits a senior 62 years old or older to convert part of the equity in their home into tax-free payment streams without having to leave their home.  This is wonderful news for those who have the ability to stay in their homes for the entirety of their retirement.

However, a Reverse Mortgage DOES have some drawbacks.  It is an expensive loan as most the costs are up-front at closing and can eat up around 5% of the equity.  Another drawback to a using a Reverse Mortgage as your long term care funding plan is that the funds that are available to you is tied to the value of your home, which as we’ve seen lately, can fluctuate in a negative direction.

Perhaps the most important thing to remember with a Reverse Mortgage with regards to long term care is that if you haven’t lived in your home for 12 consecutive months, the loan technically becomes due.  This is bad news for seniors who enter into an assisted living facility or nursing home and their stay is longer than a year.  So according to the mortgage documents, if you are in the facility for more than a year, you might not have a home to come home to.

All in all, a Reverse Mortgage could be PART of the solution as it does have the potential to help those who need at home services as it unlocks equity AND allows the senior to stay in their home.  It can also help out in situations where one spouse is in a nursing home or assisted living facility while the other can still live at home.  But your long term care plan should be more comprehensive than relying solely on this choice of private funds.

Right now there are varying levels of home health care from non-medical types of in home care such as grocery shopping, light cleaning types of positions that are paid for out of private funds (family or Reverse Mortgages) to the full on Medicare-certified skilled home care for medical type situations (which may or may not be covered by Medicare).  There are varying degrees between these two, but you get the idea and it is the same old story – we want to spend our retirement at home but we need to find the funds to do it.

Affordability and quality care need to both get better if we want to retire in our homes:

Quality Care:

1.  New technology needs to begin to drive costs down.  At home monitoring, online medical records, etc. all mean that more can be done by fewer people.

2.  The health care industry needs to recognize home health care as a major growth area and begin training their workers for quality care.  They also need to look at compensating their employees accordingly.  The Star article suggests that home health care workers currently earn $7.50 to $12 per hour when their skill level should put them around $16-$18 per hour. 

Affordability:

1.  Government needs to shift their funding focus, make their policies easier to understand, and provide provisions for better home health care.

2.  MOST IMPORTANTLY!  Boomers need to not  count on any of this – they need to plan if they want to stay home and this calls for education.  Look into things like Long Term Health Care insurance, Reverse Mortgages, understanding your health insurance plans, Medicare and Medicaid will also be helpful.

How are you going to ensure your retirement is at home?  Let me know your thoughts…

This would be great to tie into a reverse mortgage.

Adjustable Rate and Home Equity Conversion Mortgages?Additional Index

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