Why home equity should be in the long-term care conversation

Retirement in America comes with a lot of concerns related to finances and health, with both of these issues often being intertwined.

Long-term care is emerging as a key concern for older Americans, especially since its costs will most likely need to be covered from a fixed income. This is one reason why home equity can be a notable difference-maker and should be part of the conversation.

This is according to Sandra Block, a personal finance editor at Kiplinger, in an article about navigating retirement hurdles and the considerations that go into later-life spending.

More than half of 65-year-old adults will need some kind of long-term care, according to 2019 data from the U.S. Department of Health and Human Services (HHS).

“At the same time, only 8% of Americans have long-term-care insurance, so most seniors will have to rely on their savings and government assistance to pay for long-term care,” Block wrote.

Creating a timeline of expenses and obligations can be important to determine a path forward, particularly if an older person does not want to wait until their death for an assistive inheritance payout to a family member. Long-term care should be a key consideration, and one potential way to address these costs and other spending goals is to incorporate home equity, according to Block.

Citing data from the National Reverse Mortgage Lenders Association (NRMLA), senior-held home equity rose to more than $13 trillion in first-quarter 2024. Deploying this equity by converting it into liquid funds may be an option for the right person, she explained.

“Seniors often use proceeds from the sale of their homes to pay for care in an assisted-living facility or nursing home,” the article reads. “If you prefer to age in place, you may be able to use a reverse mortgage to pay for in-home care. Creating a source of guaranteed income that ensures you’ll have funds coming in no matter how long you live could make it easier to give away money while you’re still alive.”

An increasing number of Americans believe that retirement at the traditional age of 65 is “unrealistic,” according to data from financial services provider Equitable.

Senior debt levels are also growing based on data from the Employee Benefit Research Institute. But seniors have also recently expressed more optimism about meeting their retirement goals as the bite of inflation has diminished in recent months, according to survey data from Charles Schwab.

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