Today, many elderly Americans who cannot afford the ongoing cost of home care, assisted living or nursing home care are faced with the decision of whether or not to use their homes as a source of funding to pay for care. As many seniors have significant equity in their homes and since Medicare does not pay for assisted living or personal care at home, using one's home to finance long-term care can be a good option and sometimes it is the only option.
Authors of a new study say that as the wave of aging baby boomers advances, the middle-income elderly population could find itself in a particularly problematic situation—at least when it comes to finding housing that can accommodate declining mobility and increased care needs. By researchers' estimates, in as few as 10 years, over half of middle-income adults 75 and older, won't be able to afford many of the private seniors' housing options available today.Among the study’s findings:
1 in 5 middle-income seniors will have 3 or more chronic conditions and 1 or more limitations in activities of daily living (ADL) by 2029—and 60% will have mobility limitations that could prevent them from living independently.
If current prevalence levels continue, 20% of middle-income seniors will classify as "high needs," and 3 in 5 will have significant mobility limitations—factors that increase the chances that they will require more assistance in living arrangements. Additionally, an estimated 6% of middle-income seniors 75-84, and 15% of those 85 and older, are expected to have cognitive impairments.
An estimated 54% of middle-income seniors won't have enough annual financial resources to pay for average assisted living costs and medical expenses—and that's a best-case scenario.
Researchers say that in 2014 dollars, the annual average cost for assisted living rent and "estimated medical out-of-pocket spending" is about $62,000. Only 46% of the middle-income population will have that much available to them. The percentage drops even further among middle-income seniors who lack equity in housing, where only 19% are anticipated to have enough money to pay for average costs.
According to Forbes, “The average retiring American has roughly twice as much value in home equity ($200,000) as they do in their other savings.” Your house may be increasing in value, it’s not providing you with monthly income—unlike retirement accounts that pay out dividends. In fact, it may be costing you more than you realize.
Financial experts note that some retired homeowners forget to factor house-related expenses (HOA fees, maintenance, utilities, unexpected repairs, etc.) into their budgeting plan. Simply put, if you don’t sell your home after retirement, you’ll be spending more in expenses than you need to—all while sidelining your most valuable asset.
Selling your home to pull out the equity means you can put your best asset to work for you—especially if you put a good portion of the home sale proceeds into investment opportunities, like dividend-paying stocks or annuities. Invested wisely, those dividends can cover your rent and monthly expenses for years to come.
The benefits of a home sale are numerous. The proceeds of which can be used to cover the moving and move-in costs for assisted living. Paying off any outstanding mortgage will reduce monthly expenses as will the lack of home maintenance costs. Once the home is sold, the homeowners or their family members no longer have to manage the logistics of owning or renting a home.
Another consideration when selling the home is how to pay for care in the time it takes to sell a home. As of 2018, it takes on average 3 months to sell a home. While obviously this depends on the local real estate market, it is worth noting that homes that have not been modernized take even longer than average to sell. Most homes owned by seniors have not been modernized. Fortunately, there are companies that offer a quick solution to cash out on your biggest asset.
LaPlace Transforms, LLC, is a reputable home buying company in Eastern Pennsylvania that offers cash for homes in a simple, quick process. This allows for sellers to move onto the next chapter of their life without the stress of having to find extra money to fund the things they want and need. Their process is simple and transparent – you call to make an appointment, a Home Sale Specialist comes out to look at your house and makes you a cash offer in 30 minutes. No obligation and no strings attached. Selling your home for cash is a great alternative to a traditional home sale, saving you time and thousands of dollars in fees, commissions and repairs.
As you’re deliberating “Should I sell my house when I retire?”, just remember to weigh the impact your decision will have on all aspects of your life and financial situation, including your monthly income and your benefits. With the right strategy, accepting a quick, cash offer from your home can help you achieve a relaxing, fully-funded retirement.
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