The analysis conducted by the National Council on Aging and the LeadingAge LTSS Center @UMass Boston in 2023 revealed that up to 80% of older Americans lack the means to afford more than four years in an assisted living facility or two years in a nursing home. This situation is particularly challenging for individuals in the monetary middle, who have an annual household income ranging from $52,000 to $156,000, as they do not qualify for government assistance but also do not have enough assets to pay for long-term care. Unfortunately, Medicare does not cover long-term care either, leaving 47 million households with older adults facing this dilemma.
Fortunately, there are alternative options available for those who cannot afford the necessary care. One such option is a reverse mortgage, which can provide a reliable source of income if you have significant equity in your home and are at least 62 years old. A reverse mortgage allows you to tap into your home’s equity and repay the loan when the home is sold. While there are downsides, such as high closing costs and leaving less for heirs, it can be a viable choice, especially if you plan to receive home care or if a spouse still resides in the home.
Another avenue to consider is long-term care insurance. Even though it is recommended to purchase this insurance by age 65, it may still be obtainable until age 79. While premiums can be expensive, it is important to note that the cost of long-term care can far exceed the cost of insurance premiums. Additionally, there are hybrid insurance policies, such as permanent life insurance policies with long-term care riders, which allow you to use part or all of the death benefit to cover long-term care expenses during your lifetime.
Some nursing homes and assisted living communities offer benevolent care, which means they provide care for individuals who cannot afford the full cost of care. These facilities have benevolent funds that cover the difference when someone runs out of money, typically using Social Security and pension payments to help cover the costs. Faith-based communities often have these benevolent care funds, so searching for faith-based facilities in your area may present viable options.
Lastly, if you have a life insurance policy that you are considering letting lapse or cashing in, a life settlement may be a better choice. In a life settlement, a third party buys your insurance policy, and you receive a percentage of the death benefit value. This can be an option in a financial crisis, although it is typically considered a last resort.
In conclusion, there are several avenues to explore for individuals who cannot afford long-term care. Through options like reverse mortgages, long-term care insurance, facilities with benevolent funds, and life settlements, it may be possible to find a solution that suits their financial circumstances and care needs. It is important to weigh the pros and cons of each option and consider consulting a certified financial planner to make an informed decision.
This article was written by NerdWallet and was originally published by The Associated Press.
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Kate Ashford, CSA® writes for NerdWallet. Email: [email protected]. Twitter: @kateashford.
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