Using Reverse Mortgages for In-Home Care Expenses
Consider for a moment that 76 million babies were born in the U.S. from 1945 to 1964. That means the population known as “Baby Boomers” are now between the ages of 71 and 52. Many of them who are facing retirement are choosing to age in place, rather than downsize or move into a retirement community. As this trend grows, older Boomers may be confronted with the extra expense of in-home care.
Many are considering the benefits of receiving funds through a Home Equity Conversion Mortgage or HECM program, which allows senior homeowners to take out a portion of their property’s equity. Those who do, would have the choice of withdrawing the funds through a line of credit, a fixed monthly amount, lump sum, or combination of all three.
According to the Genworth 2016 Cost of Care Survey, “the median annual cost of homemaker services is up 2.56 percent from 2015 and now sits at $45,760. The median cost of home health aide services increased by 1.25 percent since 2015 and is now $46,332 annually.” The study also revealed that since 2011, costs for residential homemaker service have risen up by 11.1 percent and the cost of health aide services has increased by 6.6 percent.
Genworth’s CEO and president, Tom McInerney explained that although the high-cost of long-term care in the U.S. is viewed as the “new normal”, the reality at the heart of the problem is that among those Americans over the age of 65, seventy percent of them will be in need of some type of long-term health care services.
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Cost of In-Home Care
One very unfortunate aspect of this scenario is that so many folks have misconceptions regarding the cost of in-home care for senior adults. Americans surveyed reportedly thought that the average cost for such services rings up at around $417 per month. In actuality, Genworth reports that, “the national (monthly) median for an in-home aide is $3,861 and $3,813 for homemaker care.”
One explanation for the great disparity between the actual cost of in-home care and the true expense is that most people have never really needed to look into it and make false assumptions. Now, with millions of Baby Boomers approaching their golden years, the demand for in-home care is rapidly on the rise. Genworth CEO, McInerney explains that, “it’s so important for families to educate themselves about the costs and plan ahead for how they will pay for those costs before it’s too late.”
That’s why the idea of using an HECM to offset those expenses is so attractive for so many Americans. Finally, their home’s equity can be used to their advantage! The reason so many prefer to try and “age in place” is due to two factors: seniors prefer to stay in familiar surroundings and then there is the exorbitant cost of nursing home care.
Genworth’s 2016 survey discovered that the average monthly cost for a private room in a nursing is up 1.24 percent from last year to a whopping $7,698. Assisted living facility costs were up as well, and now average $3,628 per month.