Long-Term Care Insurance and Reverse Mortgages – Can They Be a Couple?

Can reverse mortgages and Long-Term Care Insurance work together to help fund an appropriate plan to address the costs and burdens of aging? For some families, this 'couple' can open cash flow to protect your assets.

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Long-Term Care Insurance and Reverse Mortgages – Can They Be a Couple?
7 Min Read March 25th, 2021

Long-Term Care Insurance and Reverse Mortgages are two totally different products. They are two totally separate industries. But when combined, they can literally bring Long-Term Care Insurance to millions of people that may otherwise not be able to afford it.

Reverse mortgages can be a financing option for Long-Term Care Insurance that can help make the affordability of LTC Insurance available to many more people, perhaps you.

Long-Term Care Insurance has always been marketed heavily towards the upper-middle-class income consumer. The upper-middle-class, aka the mass affluent, is loosely defined as individuals with a net worth or investable assets between $500,000 to $2 million.

Some also define the upper middle class as those who are college-educated with incomes in the top 15%. A top 15% income is roughly $100,000 or greater for households or $65,000 or greater for individuals.

The Middle-Class is Different 

You probably already know the middle class is different from the upper-middle class. The Pew Research Center defines the middle class as those earning between 67% and 200% of the U.S. median household income. That is between $42,330 and $126,358, using the U.S. Census Bureau's 2018 median income of all households.

We can also define the middle class in terms of net worth. According to the U.S. Census data, the average net worth for U.S. households in 2016 (latest data available) was $299,700. In other words, wealth is concentrated at the top.

No wonder the Long-Term Care Industry concentrates its marketing efforts towards the top! What about you? In this author's opinion, middle-income families need Long-Term Care Insurance the most! A 2019 Survey of Consumer Finances shows that the average retirement savings for all families is only $255,130.00! 

The Money in Your Home

Since the above figures do not include home equity, it is clear that the great majority of seniors have much, if not the great majority of their net worth, trapped inside their home. And the term that "trapped equity" is being referred to as is "housing wealth."

Forbes article published in 2019 quotes a study that says eight million middle-class income seniors will struggle to afford housing. 

The author, Bruce Japsen, writes, "More than half of U.S. seniors considered "middle income" won't be able to afford assisted living and other forms of senior housing a decade from now, according to new research published Wednesday in the journal Health Affairs."

The study, led by NORC at the University of Chicago and researchers from Harvard Medical School, shows a critical void in future U.S. housing needs at a time when more than 10,000 baby boomers are turning age 65 each day.

Though the housing market for Americans in need of assisted and independent living has greatly expanded, the cost is often out of reach for an increasing number of people considered middle income who are 75 and older.

Planning for the Future Costs and Burdens of Aging is Essential

These numbers are exactly why middle-income seniors need to have the protection of Long-Term Care Insurance today! These facts are precisely why Long-Term Care Insurance and Reverse Mortgages can work together to offer the asset protection and other benefits to those who may otherwise not afford a plan for long-term health care.

With the latest figures topping $18 trillion (yes, trillion) in home equity in the United States, it appears that millions of homeowners between the ages of 55 and 75 certainly have a funding source to purchase Long-Term Care Insurance but have not discovered a way to tap into it.

Now, let me be clear, a reverse mortgage is not the only option for a consumer to tap into their home equity. In fact, since the ideal age for purchasing Long-Term Care Insurance is in your fifties, a reverse mortgage is not even an option since you must be aged 60 or older to obtain a reverse mortgage.

Options Available for Those in Their 50s and 60s

If you are in your fifties and into the sixties, there are options available for you. Let us look at those options.

  • Refinancing the present mortgage- 

With interest rates at a 30-year all-time low, it may be very possible to refinance your current mortgage to a much lower interest rate, thus "creating the needed cash flow" to afford a Long-Term Care Insurance policy.

  • A Debt Consolidation Loan – 

This is another form of a refinance, but not necessarily to decrease your present interest rate. The pure goal here is to consolidate debts that you may have accumulated over the years. 

These debts could include but not be limited to:

    • high-interest rate credit cards
    • auto loans 
    • second mortgages 
    • student loans 
    • home improvement loans 

It is not uncommon to save hundreds, and sometimes into the thousands of dollars per month, with a loan of this type. This gives otherwise cash flow scrapped individuals the needed cash flow to purchase LTC Insurance and additional cash flow for other needs as well. 

  • A Home Equity Line of Credit (HELOC) – 

Some seniors have paid their home off and currently have no mortgage. They can establish a HELOC. This type of loan is usually "prime sensitive" and will obligate the client to a monthly payment. This type of loan also always has a "call feature," making the entire balance due at some point in time in the future. 

  • A Reverse Mortgage – 

With the minimum age of at least one of the borrowers needing to be 60 years old, this option clearly comes with a few advantages over our other choices. So, let's take a look at some of these advantages:

    • There is no obligation to make a monthly principal and interest payment.
    • If used to eliminate your present mortgage payment, the savings in most cases will exceed the cost of the Long-Term Care policy you are purchasing. Thus, in many cases, you have the additional cash flow to maintain or increase your quality of life.
    • If used to eliminate your present mortgage payment and other outstanding debts, the result could very easily change the entire landscape of your retirement.
    • If you prefer to purchase a single premium insurance product (hybrid Long-Term Care Insurance), there would be no monthly payments on policy whatsoever. The many options offered with these types of policies, such as life insurance, may very well offset the cost of the reverse mortgage.
    • If you establish a reverse mortgage line of credit, the unused portion of that credit line will continue to grow, resulting in a very strong hedge against inflation. 
    • If you are a middle-income American, you can enjoy the same protections throughout the retirement segment of your life, as an upper-income American, without it affecting your monthly cash flow!

Don’t Ignore Long-Term Care Planning – You May Have Options

Most people today understand the need to have some plan to address changing health due to a future illness, accident, or the impact of aging. The costs of long-term health care services continue to increase and adversely impact your income, assets, lifestyle, and legacy. Plus, the stress and burdens that can be placed on your family.

Planning is essential. Now, you may have additional funding options so you can enjoy the peace-of-mind and asset protection that a long-term care plan provides.

62 who knew?Don’t forget to watch my TV show “62 Who Knew” as we discuss many topics related to aging, finances, long-term care and more – visit the show’s website and watch shows online!

*Please note that all mortgage options discussed in this article are based on, but not limited to, qualifications of the borrower(s), equity in the property, and current interest rates. Please note current rates and terms are subject to change without notice.

Don't miss my next article - how people with millions of dollars in equity in their homes can access a portion of those millions to fund their retirements.

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Editor's Note

There are several obstacles you face when planning for a successful future retirement. You don't want to lose your independence. Avoiding dependency is critical for most people. 

The fact is long-term health care is a significant cash flow issue. LTC Insurance addresses this problem. But, long-term care is also a family issue. Without any plan in place, the family will go into crisis mode. The result can be a disaster for you and your family, and your wishes may take a back seat.

An LTC policy keeps you in control and helps avoid becoming dependent on your children decades from now. You will have access to guaranteed tax-free benefits that will pay for your choice of quality care, either in-home or in a facility. 

You can safeguard your 401K, IRA, and other assets and maintain your lifestyle once you retire. However, Long-Term Care Insurance is medically underwritten, so you must have reasonably good health to obtain coverage. Plus, premiums are calculated on your age, health, family history, and other factors.

Most people want to avoid the lifestyle changes that happen when you have high health-related costs. Most of these costs are long-term care services. 

Plus, most people want to avoid placing the future responsibility of caregiving or managing future paid care services on their adult children. The role of the family caregiver is physically and emotionally demanding. 

Affordable Long-Term Care Insurance will give help you avoid dependence on your family in addition to protecting your income and assets. You will have access to your choice of quality care, including in-home care, which most people prefer. 

Research Tools on LTC NEWS

LTC NEWS offers many resources to learn about the available options and learn about long-term health care issues. Click here and discover these resources. 

This comprehensive guide is an outstanding first-read -  The Ultimate Long-Term Care Guide. Be sure to take notes so you can ask the appropriate questions when you speak with a qualified and trusted Long-Term Care Insurance specialist.

This conversation is one you should have with a specialist as most financial advisors, or insurance agents lack the knowledge required in underwriting, policy design, tax implications, and claims. Find a specialist who works with the major companies by clicking here.

Discussion Points with a Specialist

When you speak with a specialist, be sure they discuss with you the following:

  • Partnership – Most states offer special policies that provide dollar-for-dollar asset protection. The Long-Term Care Insurance Partnership Program might be one of the best-kept secrets in retirement planning. Make sure the specialist explains this program and how it might help you.
  • Tax incentives – There are federal tax incentives available for some people. If you own your own business, be sure to ask.
  • Health Savings Accounts – If you have an HSA, you can use the pre-tax money in your account to pay for the premium.
  • Asset-Based or Hybrid policies – These are life insurance or annuities with a rider for long-term care. Careful, only a handful are actually a long-term care benefit. However, one of these policies can provide you with the flexibility of both a long-term care benefit or a death benefit. They are expensive but can be paid with a single premium.
  • Health and Family History - Make sure the specialist asks you detailed questions about your health, family history, and retirement plans. Underwriting criteria vary with each insurance company. If they are not asking you detailed questions, then find another specialist.

LTC NEWS Cost of Care Calculator

Take a moment and find the current and future costs of long-term care where you live. This information helps you see the financial impact of long-term care on your savings and helps you decide the amount of coverage appropriate for you in your situation. 

Find your location and use the LTC NEWS cost of care calculator by clicking here.

Be Published on LTC NEWS

LTC NEWS offers many resources to help families address the consequences of long-term care, aging, health, caregiving, and other retirement issues. You can be part of the effort to help educate consumers throughout the U.S. and around the world.

Write a story for publication on LTC NEWS and let America hear what you have to say. Be sure your article fits the LTC NEWS target audience of adults 40-70.

Topics can include stories on:

  • Aging
  • Caregiving
  • Health
  • Long-Term Care
  • Retirement Planning

There are numerous other related topics, as well. You can even promote yourself, your business, and your website or blog. It must have editorial content exclusive for LTC NEWS and cannot be just an advertisement. It can include links to other sites, and you can share the article link once published on your website or social media.

Email your story idea or article: newsroom@ltcnews.com or click here

Marketing and Advertising on LTC NEWS

Readers of LTC NEWS are researching retirement issues, including aging, health, caregiving, and long-term care. Other readers seek information for a parent or other loved one who is experiencing declining health or aging issues and require extended care.  

There are many marketing opportunities available, including sponsored content articles. Sponsored content offers you a long-form way to sell yourself, your company, and your ideas.

LTC NEWS can be an affordable way to drive consumers to your website or business - or promote products and services.

Learn more about how LTC NEWS can help you market your business - click here.

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