Funding Long-Term Care Without Draining Retirement Savings: How Reverse Mortgages Can Help

As seniors age, many require long-term care services, whether in the form of in- home care, assisted living, or skilled nursing facilities. However, these services come at a steep cost. According to Genworth’s Cost of Care Survey, the median
annual cost of home health care exceeds $60,000, while assisted living facilities can cost upwards of $50,000 per year. Skilled nursing facilities often exceed $100,000 annually.

For many seniors, the challenge isn’t just affording care—it’s doing so without rapidly depleting their retirement savings. Traditional methods of funding long-term care, such as personal savings, pensions, or investment withdrawals, can put retirees at risk of outliving their assets. A reverse mortgage offers a powerful solution, allowing seniors to convert their home equity into tax-free funds that can
be used to cover long-term care costs without disrupting their financial stability.

A Home Equity Conversion Mortgage (HECM) is a government-insured reverse mortgage designed for homeowners aged 62 and older. Unlike a traditional home
loan, it allows seniors to access a portion of their home equity without having to make monthly mortgage payments. The loan is repaid only when the homeowner
sells the property, moves out permanently, or passes away.

This financial tool is particularly useful for covering long-term care expenses because it provides flexible funding that can be used as needed. Borrowers can
receive funds in multiple ways, including:

Lump Sum – A one-time disbursement for immediate needs, such as a down payment for an assisted living facility.
Monthly Payments – Regular deposits to help cover ongoing in-home care costs.
Line of Credit – Funds that can be accessed when necessary, ensuring seniors have a financial cushion for future care needs.

Seniors often rely on a mix of retirement accounts, pensions, and Social Security benefits to cover living expenses. However, withdrawing from investment accounts too quickly can lead to financial instability. A reverse mortgage offers a strategic way to:

Reduce the need for early withdrawals – Tapping into home equity instead of drawing down retirement savings helps preserve assets for future expenses.

Protect investment growth – Allowing investments to grow over time instead of selling assets at an inopportune time can significantly improve long-term financial security.

Ensure access to quality care – Instead of settling for lower-cost care due to financial limitations, seniors can afford the level of care they truly need.

A reverse mortgage provides the financial flexibility needed to afford a variety of long-term care options, including:

In-Home Care Services – Seniors who wish to age in place can use reverse mortgage proceeds to hire home health aides, personal care assistants, or skilled nurses.
Assisted Living Facility Fees – A reverse mortgage can help pay for move- in fees or monthly costs associated with assisted living.
Adult Day Care Programs – Seniors who need occasional supervision and social engagement can use the funds for adult day care services.
Respite Care for Family Caregivers – Family members who serve as primary caregivers can use reverse mortgage funds to pay for temporary professional care, allowing them to take necessary breaks.

Despite their benefits, some seniors and their families hesitate to explore reverse
mortgages due to misconceptions. Here are key points that address common concerns:

Seniors retain ownership of their home – The lender does not take ownership; borrowers remain on the title.

The loan is flexible – Borrowers can choose how they receive funds based on their unique needs.

Heirs have options – When the homeowner passes away, heirs can repay the loan and keep the home, sell the home to settle the loan, or allow the lender to handle the sale.

It’s a non-recourse loan – Seniors and their heirs will never owe more than the home’s market value, even if the loan balance exceeds it.

For in-home care providers and assisted living communities, reverse mortgages
offer a valuable way to help seniors afford care without financial strain. By educating families on this option, providers can:

Help seniors access care sooner – Many seniors delay necessary care due to financial concerns. A reverse mortgage removes that barrier.

Reduce stress for family members – Families often struggle to find ways to pay for care without jeopardizing their own finances.

Increase occupancy in assisted living facilities – Seniors who may have initially thought they couldn’t afford assisted living can use reverse mortgage proceeds to cover costs.