How Can You Cover Rising Health Costs on a Fixed Budget?

A reverse mortgage can create a source of funds to help pay for healthcare in retirement.

Healthcare costs continue to increase at a staggering pace. Recent estimates put the total cost of healthcare in retirement, for a couple age 65, at more than $250,000.1 This applies to older adults with traditional Medicare insurance coverage and does not include the cost of a nursing home or other long-term care.

Even those who have healthcare insurance can face out-of-pocket expenses such as copays, prescription drugs, in-home care, physical therapy, medical supplies, and more.

How can people on a fixed budget pay for it all—without draining their savings accounts, 401(k)s, and investments? One helpful (but often-overlooked) source of funds is home equity.

A Home Equity Conversion Mortgage is available to homeowners age 62 and older. Commonly known as a reverse mortgage, it’s an FHA-insured program that allows you to tap into your home equity to get needed cash. It was designed specifically for older adults to help improve their cash flow in retirement.

You can get a lump sum, monthly payments, line of credit, or any combination—tax-free2 proceeds you can use for any purpose, including healthcare. A line of credit, in particular, can be useful as a “safety net” to prepare for sudden, unexpected health care costs.

You do not have to make monthly mortgage payments. In fact, the loan doesn’t come due until the last borrower leaves the home. You continue to own the home as long as you live in it as your primary residence—all you have to do is continue to pay for property taxes, insurance, and home maintenance.

Things to consider about reverse mortgages to make an informed decision:
• They’re designed for people who wish to remain in their homes long-term.
• You don’t have to be mortgage-free to get one—but the more equity you have in your home, the more money you’ll be able to access.
• The proceeds are first used to pay off your existing mortgage, then you receive the rest of the money as you choose.
• Like any mortgage, there are closing costs and fees which vary by lender. A qualified financial advisor or trusted lender can help you determine if it’s right for you.

Will a reverse mortgage affect your Social Security or Medicare benefits? Typically, it doesn’t—but you should refer any specific questions you have to these government agencies. Keep in mind that an additional source of income, such as a reverse mortgage, may help you delay taking your Social Security benefits long enough to get the maximum benefit.

Questions? At Longbridge Financial, we’re here to help. To learn more, call (855) 523-4326 or visit longbridge-financial.com.

1 https://www.fidelity.com/viewpoints/retirement/retiree-health-costs-rise
2 Consult a financial advisor and appropriate government agencies for any effect on taxes or government benefits.