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Is a reverse mortgage really a viable alternative to a long-term care policy?

Individuals in their 50s and 60s who are close to retirement feel both excitement and trepidation. The former relates to leaving the workforce, while the latter relates to longevity of assets. People have rightful concerns about health care expenses rapidly consuming their retirement savings.

Is long-term care (LTC) insurance the answer? Experts aren’t always sold on LTC policies given their skyrocketing premiums.

Some professionals recommend protecting retirement assets from medical expenses via so-called hybrid LTC policies. Others suggest a reverse mortgage, which is a product with a varied reputation.

What exactly is a reverse mortgage?

A reverse mortgage enables homeowners age 62 and older to convert their home equity to cash. The amount borrowed is based on the age of the homeowner and of their homes value. Payments are subsequently made by the bank and the funds can be used for anything the homeowner chooses. The bank is repaid when the borrower dies or permanently vacates the residence.

How would this even benefit someone in terms of paying for health care?

Experts state that reverse mortgages can provide an income stream while a person remains in their home.

Consistent revenue is significant given that the latter years of one’s life are often when people see medical costs skyrocket.

In order to maximize the benefit from a reverse mortgage, the homeowner should be being able to do the following:

  • Continue living in their residence for several decades
  • Pay property taxes
  • Purchase and retain homeowners’ insurance
  • Cover maintenance costs

What are the cons to reverse mortgages?

One notable con of a reverse mortgages is the high closing costs and fees.

Is a reverse mortgage is a viable alternative to an LTC policy?

Everyone’s situation is different and financial advisors will create different plans for helping clients extend and augment their retirement savings.

The purpose of this conversation was to shed light on an approach some financial planners are now taking. The ultimate decision on funding health care into retirement rests with you.

What are your thoughts?

Source: MarketWatch, “This adviser says not to buy long-term-care insurance — and to do this instead,” June 13, 2017

DarrasLaw is Americas' most honored and decorated disability litigation firm in the country. Mr. Darras has seen more, evaluated more, litigated more, and resolved more individual and group long term disability and long-term care cases than any other lawyer in the United States.

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