Education and planning are the keys to making decisions especially when it involves care while aging. You need to be proactive and know what resources and options are available. With the education and a plan you have more options and can be proactive rather than reactive.
As Forest Gump said, “Life is like a box of chocolates, you never know what you’re gonna get.” This is especially true for aging. I was fortunate to participate in and be considered a trusted advisor at a Minnesota Private Duty Home Care Conference, “Keeping Mom and Dad at Home”. During the conference attendees were encouraged to plan the future as they would a trip, looking at what would they put in their suitcase for the journey of aging and be prepared for what isn’t known to happen along the way.
Conference attendees reviewed what is known about seniors and their families. We looked at what is known about seniors:
- They underestimate their situations
- They don’t want to worry or be a burden to their children
- So seniors don’t tell their children what’s going on
- They want their families help
- Families often don’t have the time or the financial means to help
- Role reversal is uncomfortable
- They are fearful of nursing homes and moving
- 93% say they want to stay in their home
Then we looked at what we know about the families of seniors:
- They want to help
- They are busy; they are the sandwich generation dealing with their own family, careers, life
- They see changes but don’t know what they mean or what the warning signs are
- They may become frustrated with their parents denials
- Role reversal is uncomfortable
- It’s generally women who are doing the caregiving.
Consider what’s important to the seniors, what do they want for their journey? It’s important to involve the seniors in the process, the plan, and have them agree with the plan. Discuss their wishes along with what you think is needed. What will provide them their security, independence, dignity and control of their life? Including a mediator and/or trusted advisor is a good idea. If they are resistant to bringing someone else in, discussing their options, or accepting outside help, tell them that they may not need this but that you do.
By being educated and having your plan in place if a crisis occurs means more options will be available along with decreased costs. Being reactive at a time of crisis means less options are available along with greater costs. Emotional and reactive decisions make for poor choices and actions made from regret and guilt.
Part of the education and planning means getting the facts. Unfortunately we have been conditioned to think that seniors will end up in a nursing home; that an assisted living facility provides all the care needed; that home care is short-term and the nursing home and/or assisted living is safer than being at home.
We need to recondition our thinking:
- Seniors can live at home indefinitely
- Home care can provide a nursing level of care at home
- Living at home can be safer; you receive a 1 to 1 ratio of care versus 1.5 or more of care per person
- Living at home is affordable
Let’s compare the costs of some options:
|Home Care 1||$1,404/month||3-hour visits, 4 days a week, $27/hour|
|Home Care 2||$3,276/month||4-hour visits, 7 days a week, $27/hour|
|Home Care 3||$4,914/month||6-hour visits, 7 days a week, $27/hour|
|Home Care 4||$8,500/month||24-hour or live in care, one-on-one care, $275/day; includes a live in caregiver and frequent visits from a RN|
|Assisted Living Rent||$3,585/1-bedroom/month||Care packages range from $300 – $2,700; additional care would be charged per hour by a home care agency|
|Assisted Living Rent & Home Care 1||$4,989/month||One bedroom apartment rent plus additional care at 3-hour visits, 4 days a week, $27/hour from home care agency|
|Assisted Living Rent & Home Care 2||$6,861/month||One bedroom apartment rent plus additional care at 4-hour visits, 7 days a week, $27/hour from home care agency|
|Assisted Living Rent & Home Care 3||$8,499/month||One bedroom apartment rent plus additional care at 6-hour visits, 7 days a week, $27/hour from home care agency|
|Nursing Home||$8,000 – $12,000/month||Single or double room, level of care and facility amenities|
This information and these home care and senior housing figures are a compilation provided by the home care agencies; are approximations and can vary by company and geographic area. Additional home care and senior housing costs were obtained from Genworth Financial, Inc. Cost of Care Survey.
Living in assisted living vs staying at home with a reverse mortgage:
|Selling||Staying in home with a Reverse Mortgage|
|Details: Home Value $200,000; 80 year old borrower||(reverse mortgage funds available will depend on age, generally the older one is more funds available and the program chosen)|
|Third Party Closing Costs||$1,811||$1,811|
|Less Real Estate Agent/RM Origination Fee & FHA Mortgage Insurance Premium||$12,000 (6%)||$8,000 (2% origination + 2% FHA MIP)|
|Net Proceeds||$186,119||$102,788 in line of credit; $673 a month tenure-for life of the term of the loan and abiding by the terms of the loan; or term draws structured as needed (based on rates of 2/6/2018; rates change weekly.|
Now let’s take the net proceeds and compare living in an Assisted Living to living at home and receiving home care.
|Selling and Living in an Assisted Living1||Living at Home using a Reverse Mortgage2|
|$186,119 ÷ $3,585 (rent only) = $43,020/year or 4 years 4 months
No remaining equity from home.
|No rent or mortgage payment as long as you live in the home as your primary residence
The tenure draw of $673 would cover property charges
Borrower is still responsible for household maintenance, i.e., taxes, insurance, utilities and stay in your home as long as primary residence (i.e., approximately $585/month for a $200,000 home)
May have retained equity depending on how long you stay in the home and the home appreciation. The loan is non-recourse.
|$186,119 ÷ $4,989 (rent and Home Care) = $59, 868/year or 3 years 1 months
No remaining equity from home.
|Roof over head; funds to cover home care 1 with term draws from RM = 5 years 4 months3
Additionally it is likely that there would still be retained equity in the home after the 5.3 years. (Based on 4% appreciation $99,318 in equity would be remaining.)
|$186,119 ÷ $6,861 (rent and Home Care 2) = $82,332/year or 2 years 3 months
No remaining equity from home.
|Roof over head; funds to cover Home Care 2 with term draws from RM = 3 years 4 months3
Additionally it is likely that there would still be retained equity in the home after the 3.33 years. (Based on 4% appreciation $93,098 in equity would be remaining.)
|Then where will you go?
Some assisted living will accept Medical Assistance or other public programs such as Elderly Waiver, however, your choices may be less.
|You can stay in your home and have a roof over your head without rent or mortgage payment even after funds from a reverse mortgage are used.
Medical Assistance or other public programs such as Elderly Waiver or Alternative Care can be received even with a reverse mortgage. Reverse mortgage does not impact receiving Medicare or Social Security.
1These rates do not take into consideration rent increases (3%-4% annual according to Genworth Financial, Inc.); it’s likely that the number of years the net proceeds would cover will be less.
2With the reverse mortgage there is a growth rate factor that is passed along to the borrower.
3This time can be extended if you are receiving Medical Assistance or other public programs such as Elder Waiver or qualify for Medicare covered Home Care.
You have choices and can have control over where want to live and the care you receive. You have the right to say, I want to stay in my home (or keep my parents in their home). When educated and with a plan for the journey, life will be easier.
If you’d like to remain at home and have funds for financing your home care, contact us if you are in Minnesota. As your local broker, we work with several lenders and provide free information and facts with no obligation, meeting in person whenever possible.
For other states, contact your local reverse mortgage specialist who is a broker, one who works with several lenders, has their Broker License/NMLS and preferably holds the Certified Reverse Mortgage Professional (CRMP) designation.
© 2018 Beth Paterson, CRMP, Beth’s Reverse Mortgage Blog, 651-762-9648
This material may be re-posted provided it is re-posted in its entirety and without modifications and includes the contact information, copyright information and the following link: https://wp.me/p4EUZQ-1Ou
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