For some reverse mortgage borrowers, choosing to apply a loan’s proceeds towards some kind of long-term care (LTC) goal — whether to fund it directly, or to apply them toward LTC insurance — is often spoken about as a potential selling point for certain clients. However, the LTC needs of seniors can vary greatly depending on a number of individual factors, according to new research from the Boston College Center for Retirement Research (CRR) and reported on by CNBC.
“Many people may end up requiring little care if they need any at all, according to new research from the [CRR],” the report reads. “About 20% of 65-year-olds will not need any long-term care during the rest of their life, and another one in five will need only minimal support. At the same time, though, about 25% will need significant help for more than three years. Another 38% will fall somewhere in the middle, needing a moderate amount of care for one to three years, the study shows.”
One potential barometer that researchers say can indicate how much care a person will end up needing very late in life is how healthy and mobile they remain in their late 60s, according to the research. Marital status can also play a role in the potential need for LTC, CRR detailed.
“For women, 19% of those who are married will need none at all, compared with 14% of those who are single,” CNBC reports based on the study. “For men, 17% need no support if they are married, compared with 13% who are unmarried. The uncertainty of long-term care is a challenge when it comes to retirement planning, experts say. In other words, it can be tricky to determine how to prepare for an unknown cost.”
The costs associated with LTC can be a major concern, which leads to seniors making a wide variety of choices in determining how such care can be funded. This can include the employment of a reverse mortgage loan to tap into a home’s equity, and use the proceeds to fund care directly, CNBC explains.
“Some retirees choose to ‘self-insure’ — that is, rely on their own assets — to fund the unpredictable cost,” the report reads. “That could mean eventually spending retirement savings, getting a reverse mortgage or, say, selling a vacation home. Other options include leaning on family members or spending down (or shielding) assets to qualify for Medicaid-sponsored nursing-home care.”
LTC insurance is generally the most “straightforward” solution to this issue, but has become too expensive an option for many consumers.
“[This has contributed] to a 60% drop in sales from 2012 to 2018, according to the Secure Retirement Institute,” reports CNBC. “With claims exceeding expectations, many insurers also have fled the space.”