Assisted living is a service that many Americans may be interested in exploring for their later years, but the issue at the center of it surrounding cost could determine whether or not such a service is possible. The costs associated with assisted living are on the rise, and finding a way to pay for it could be challenging. A reverse mortgage is one potential option, however, according to a column at CNBC.
“Facilities that provide [assisted living] care come with an average monthly price tag of $4,057 (or $48,684 yearly) in the U.S., according to research from Seniorly, a website that helps users compare senior living communities,” the CNBC column reads. “That cost per month ranges from an average $3,045 (or $36,540 yearly) in Georgia to $5,893 ($70,716 yearly) in New Jersey.”
While assisted living is generally considered a less expensive option than something like a nursing home, long-term care is not a core part of existing Medicare coverage outside of specific circumstances. This could create issues for a senior looking to finance such an option.
“There is no cheap way of paying for it,” said David Mendels, a certified financial planner and director of planning at Creative Financial Concepts in New York to CNBC.
Some retirees may choose to “self-insure,” which can include a number of different methods up to and including certain financial products like reverse mortgages, the column reads.
“[Self-insurance means seniors] rely on their own assets to fund the cost,” the column 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 assets to qualify for Medicaid-sponsored nursing-home care.”
Reverse mortgages require the borrower to live in the home as their primary residence, but a borrower may not need to immediately pay the loan back if they are away from the home for more than 12 consecutive months in a healthcare facility or have a co-borrower or eligible non-borrowing spouse (NBS) living in the home, according to guidance from the Consumer Financial Protection Bureau (CFPB).
Aging in place is quickly emerging as a dominant preference for seniors all over the world. A 2021 survey by Heartland Bank which consisted of approximately 2,000 respondents at or over the age of 50, asked for their thoughts on homeownership, retirement, national pensions, reverse mortgages and other relevant topics. The results increasingly point to a preference for aging in place over relocation into a dedicated senior living facility or even moving in with family.
The trajectory of uptake for equity release products in the U.K. – sometimes referred to as “lifetime mortgages” or “retirement mortgages” in Europe – is visibly on an upswing, and it’s the hope of the industry in the U.K. and for members of the European Pensions and Property Asset Release Group (EPPARG) to expand what has been seen to more of the territory.
In the U.S., an overwhelming majority of surveyed seniors revealed that they would prefer to age in place in their current home, as opposed to moving into some kind of an assisted living facility according to “Importance of Home” survey results released in October, 2021 by American Advisors Group (AAG), the leading reverse mortgage lender in the United States based on industry endorsement data.
Read the column at CNBC.