You've probably read the statistics numerous times: according to the Centers for Medicare & Medicaid Services, about nine million men and women over the age of 65 will need long-term care this year. By 2020, this number will jump to 12 million. A study by Genworth Financial found that the average cost is $190 per day, and to qualify for government help is next to impossible. Therefore, you may have decided that long-term care insurance is the best alternative.
But what if you have checked out long-term care policies and found you just cannot fit the premiums into your budget? There could be another way to come up with the money to pay for a policy without cutting back on your other expenses.
Seniors who find themselves in a cash flow bind because of increasing expenses or a drop in their investment income may want to look into tapping one of their most valuable assets: their homestead. There are several ways to do this. You could sell the home, but you would have to move. Or you could take out a loan against it, which would leave you with payments to make each month. A third choice is a reverse mortgage.
A reverse mortgage is a non-recourse loan that lets homeowners over 62 years old convert the equity in their house to cash, yet it allows them to still live there, and retain title and ownership. The lender will give you the payout all at once, as a fixed monthly income (up to lifetime), as a line of credit, or as a combination of these.
The money will have to be paid back with interest when you die, sell the home, or permanently move out. But you or your heirs have the option to pay off the reverse mortgage at anytime and keep the house. And the amount that must be repaid can never surpass the value of the home. Furthermore, if the sales price exceeds the amount owed, the excess will go to you or your estate.
There is no income or medical requirement to qualify for a reverse mortgage. And you can use the money anyway you wish, for example, to pay daily living costs, medical bills, or travel expenses.
The size of the reverse mortgage depends on several factors, including the youngest homeowner's age, the home's value, and current interest rates. The money you receive will be tax-free and will not affect Social Security or Medicare benefits. However, it could influence Medicaid qualification.
If you would like an estimate on how much income you could receive from a reverse mortgage to pay for a long-term insurance plan, contact a reverse mortgage specialist.
Another option to avoid annual payments for long term care protection is "asset based" long term care. Ask your financial advisor about this and if he is unaware, find a different advisor to consult.