The rising costs of health care these days can quickly eat away at your retirement funds. In fact, according to AARP, the average couple over 65 can expect to spend about $240,000 in medical bills over the course of their retirement. This combined with the fact that about a third of Americans over 65 rely entirely on social security for retirement income, creates a difficult situation for managing these costs. Therefore, rather than waiting for Washington or the health care industry to come up with a solution, seniors are beginning to take matters into their own hands. Below are a few ideas that you may not have considered to help manage the cost of health care during your retirement years.1
While it’s tempting to start collecting social security as soon as you’re eligible, there is a huge benefit to waiting, if at all possible. Deferring your benefits until age 70 can increase your benefit amount by as much as 75%. The extra income can come in handy to pay for unexpected medical costs down the road.1
If medical bills or health insurance premiums have become unmanageable, another option to consider is selling your life insurance policy through what’s called a life settlement. “A life settlement is the sale by the owner of a life insurance policy to a third party for an amount greater than its cash surrender value and less than the death benefit. The seller of the policy receives a cash payment. The buyer of the policy assumes all future premiums payments and receives the death benefit upon the passing of the insured.”2 Many people do not realize this can be done; however, life insurance is an investment that can be sold, much like stocks and bonds. “In fact, 90 percent of seniors who allowed their policies to lapse without knowing that selling their life insurance was an option, would have considered selling if someone had told them about it.”1
If you own a home, another way to help pay for medical costs is with a reverse mortgage. A Home Equity Conversion Mortgage (HECM), commonly known as a reverse mortgage, is a Federal Housing Administration insured loan (FHA). A reverse mortgage enables seniors 62 or older to access a portion of their home’s equity to obtain tax free3 funds without having to make monthly mortgage payments.4
If you’re currently healthy and take care of yourself, it’s hard to imagine you might someday need extra care. However, planning ahead can make a huge difference. “The costs of living in a nursing home or hiring a home caretaker can be staggering.” Long term care insurance can help with these exorbitant costs, but the premiums can be costly. If you purchase long term care while in your early to mid-50’s, you may be able to buy it at a much lower and more affordable rate.1
As with any financial decision, it’s best to consult a trusted financial professional. If you’d like to learn more about how a reverse mortgage could help you pay for health care costs, please use our Reverse Mortgage Calculator or call us at 800-218-1415.
1 4 Creative Ways to Tackle Rising Health Care Costs When Planning for Retirement – lhvc.com, 10/26/16, http://www.lhvc.com/online_features/senior_living/creative-ways-to-tackle-rising-health-care-costs-when-planning/article_0018d128-1a8f-51af-9947-31190cdcd439.html?&tc=eml
2 Life Insurance Settlement Association – lisa.org, http://www.lisa.org/life-policy-owners
3 Consult your financial advisor and appropriate government agencies for any effect on taxes or government benefits.
4 You must live in the home as your primary residence, continue to pay required property taxes, homeowners insurance and maintain the home according to Federal Housing Administration requirements.
Author: Meredith Manz