Rising retirement health care costs are creating new financial challenges for older Americans. See what the research says — and how some homeowners are preparing for future medical expenses.
Here’s a number worth sitting with for a moment: $469,000. According to findings from the Employee Benefit Research Institute (EBRI), some couples may need to save over $400,000 to cover healthcare costs in retirement.1 Not travel. Not home repairs. Not helping the grandkids with college. Just healthcare.
If that number surprised you, you’re not alone. Many Americans underestimate retirement healthcare costs and how significantly those expenses can affect long-term financial security. And if it got you thinking about whether your own retirement plan is prepared for the reality of rising medical costs, keep reading — because your home may already hold the solution.
What the Research Says About Healthcare Costs in Retirement
Every year, EBRI projects how much Medicare beneficiaries need to save to have a reasonable chance of covering their healthcare expenses in retirement. Their recent findings show those savings targets have gone up again, and the numbers vary quite a bit depending on your situation.
For those enrolled in a traditional Medicare Medigap plan with average premiums, a 65-year-old man would need $120,000 saved to have a 50% chance of covering his costs and $212,000 for a 90% chance. For a 65-year-old woman, those figures are $146,000 and $252,000 respectively.1 Why the difference? Women, on average, live longer than men, which means more years of premiums, prescriptions, and out-of-pocket costs.2
Couples enrolled in a Medigap plan would need $267,000 saved for a 50% chance of covering their healthcare costs in retirement, and $405,000 for a 90% chance. And if that couple has particularly high prescription drug expenses the number climbs to $469,000 — again, just for healthcare.1
So what happens when your savings don’t quite reach those savings targets? Or when a health issue arrives earlier than expected? For older homeowners, there’s a powerful resource that many people overlook: the equity they’ve built up in their home.
Your Home Can Help Cover Healthcare Costs in Retirement
If you own your home, chances are it represents one of your most significant financial assets. A reverse mortgage allows you to access a portion of that equity as income tax-free proceeds3 without having to sell your home or take on a new monthly mortgage payment. That’s right: with a reverse mortgage, monthly mortgage payments are optional as long as you meet your loan obligations, like keeping current with property taxes, homeowners insurance, and home maintenance.
The most common type of reverse mortgage is the Home Equity Conversion Mortgage (HECM), which is insured by the Federal Housing Administration (FHA) and available to homeowners 62 and older. For homeowners with higher-value properties, a proprietary reverse mortgage — like Platinum by Longbridge — can offer access to even more of your equity, with flexible options tailored to your situation. Plus, Platinum is available to homeowners as young as 55!4
Depending on your goals, you can receive your proceeds as a lump sum, as monthly disbursements, as a line of credit, or even a combination of these options.5 You’re in control of when and how you use it. That flexibility can help you manage both planned medical expenses and unexpected healthcare costs without immediately drawing down retirement savings accounts.
For covering healthcare costs in retirement specifically, a reverse mortgage line of credit can be especially useful. It gives you a ready pool of funds to draw from as medical expenses arise.
Ways Reverse Mortgage Proceeds May Help Cover Retirement Healthcare Costs
Everyone’s healthcare journey looks a little different. Some costs are predictable and ongoing, while others can arrive unexpectedly. For some homeowners, reverse mortgage proceeds can provide added flexibility to help manage a range of retirement healthcare expenses as they arise. Some common expenses often only partially covered by insurance (or simply not covered at all) include:
- Prescription drugs
- Unexpected procedures, hospitalizations, and specialist visits
- Long-term or in-home care support
- Ongoing Medicare premiums
Of course, reverse mortgage funds aren’t limited to medical costs and can be used however you’d like, including everyday expenses like gas and groceries, bigger projects like home repairs or upgrades, and even pursuing your hobbies or taking a trip.
While every situation is unique, having an additional source of accessible funds can help create more financial flexibility and confidence in retirement.
Understand Your Options Before Healthcare Costs Become Urgent
It’s clear that healthcare in retirement costs more than most people plan for, and those costs are trending in one direction.
If you’ve spent years building equity in your home, that equity doesn’t have to sit idle while you stress over what Medicare will and won’t cover. It can work for you — helping you stay in your home,6 stay financially stable, and face retirement’s unknowns with greater confidence.
Want to see how home equity could fit into your retirement planning strategy? A Longbridge reverse mortgage specialist can provide a no-obligation estimate based on factors such as your age, home value, and current loan balance.
The first step is simple: contact our team or use our online calculator.