The topic of aging in place is on just about everyone’s mind these days, and for good reason. For most retirees, living out their “golden years” in the home they know and love seems to be the best choice, in terms of finances and health. While aging in place isn’t right for everybody, it’s the clear preference of most seniors, particularly since the COVID pandemic wreaked so much havoc in retirement homes in the past two years.
Because the idea is so timely, we wanted to share this article we found some months ago on the NextAvenue website, which explains that successful aging in place demands careful preparation and planning – and, we would add, careful budgeting.
Aging in Place is Cost-Effective, but It’s Not Free, Experts Say
Judy Stringer wrote the NextAvenue piece. She says, “Most older Americans hope to live at home for as long as possible, a practice referred to as ‘aging in place.’ In a recent survey, in fact, AARP found that 3 out of 4 adults 50 and older want to live in their homes and communities as they age.” This is consistent with every survey we’ve ever seen: between 75 and 80 percent of seniors state that staying in their own home as they age is their top choice.
Stringer spoke with Orion Bell, head of the Benjamin Rose Institute on Aging in Cleveland. His research shows that aging in place is clearly the most cost-effective option for most seniors. “So, if that’s what they want to do, then that’s the ideal scenario,” said Bell. “But it’s a mistake to think aging in place just happens. Older adults and their families need to be active in creating a plan.”
Planning is Essential for Today, and for the Long Term
The need for careful planning around housing becomes especially acute as seniors age. Bell told NextAvenue that roughly three-fourths of people 85 and older are permanently limited (at least to some degree) in performing many of the activities of daily living, such as eating, bathing, dressing, toileting and mobility. That means what works well today in terms of home layout and degree of needed support will probably be insufficient a decade or so from now.
The other critical component of planning for aging in place, Bell adds, is money – specifically, the funds necessary to make the home suitable as a safe place to grow old. “Even minor changes to make a home more accessible can add up quickly,” NextAvenue reports. What’s more, “people who’ll stay in their homes as they age should expect to incur costs associated with upkeep they’ll no longer be able to do — like lawn mowing and housecleaning.” Then, there’s the real possibility, even the real likelihood, that today’s independent senior will someday require help with personal or medical care. “Medicaid, in some limited situations, will cover personal care assistance,” says the article. “Medicare does not.”
For Most Homeowners, Paying for Upgrades Means Tapping Home Equity
We found this Aging in Place Remodeling Checklist on the website of the National Association of Home Builders, and while some of the roughly 120 items are relatively cheap – such as new light switches and easy-to-read thermostats – most of them will carry price tags ranging from several hundreds to tens of thousands of dollars. That means tapping home equity. “Whether it’s a one-time expense like a residential modification, ongoing care or both,” says the article, “[experts] suggest older homeowners and their families consider using home equity to help cover the cost of staying there.”
There are a few main ways to access home equity, NextAvenue suggests. Which route you choose depends on your financial condition and personal preferences, but before you decide, we strongly advise you to consult a qualified financial planner to make certain you’ve taken all the variables into account.
The Home Equity Loan and the HELOC
At first, the two most common ways of accessing home equity – the home equity loan and the HELOC – would seem to be the same loan, but they have some key differences. Home equity loans and home equity lines of credit, referred to as HELOCs, are two of the best aging-in-place funding options, the article says, since both require fairly short turn-around time and the upfront costs are relatively low – or even zero, depending on the loan.
So, what’s the difference? Home equity loans are paid to you in one lump sum, and your payment amount is fixed for a predetermined time period. These loans, says NextAvenue, are ideal for large one-time expenses, typically projects that exceed $15,000, such as a one-time remodeling project or a significant home repair. “HELOCs, on the other hand, are more like a credit card,” the article explains. “The homeowner is given a set credit limit and can withdraw money as needed, which makes these credit lines better for ongoing expenses.” This can be best if your projects are being done over time, not all at once.
In either case, there are drawbacks. Both the home equity loan and the HELOC are going to lay some potentially stringent financial and credit requirements on you that that could be hard for you to meet. On top of that, both these loans will demand monthly payments, which can be risky if you’re on a fixed income. Because these loans are secured by your house, you could lose your home if you fall behind.
The Home Equity Conversion Mortgage (HECM), or Reverse Mortgage
Another option for tapping home equity is the reverse mortgage, technically referred to as the HECM, a government acronym for Home Equity Conversion Mortgage. Many seniors and financial planners look on reverse mortgages with suspicion, and often for good reason, says NextAvenue. Cleveland real estate broker Sonya Edwards told reporter Stringer that reverse mortgages are among the costliest loan products on the market, and homeowners who take out an HECM stand to lose a lot of their equity.
Still, the HECM can be a boon for some. “Reverse mortgages allow homeowners over 62 to access a portion of the equity of their home as cash,” the article explains. “Borrowers don’t make monthly mortgage payments as long they continue to live in the home.” Credit requirements are often less strict, and monthly payments are a non-issue until the homeowner dies or the home is sold. You do need to stay current with taxes, insurance, and maintenance.
Proceeds from a reverse mortgage can be taken as a lump sum, as a monthly payment, or as a line of credit. But be forewarned, says NextAvenue: “because interest is added to the loan each month — and homeowners are not making payments — the balance on reverse mortgages grows over time.” That’s why advice from an expert, objective counselor is so essential.
Coming to the Right Decision: Explore All the Options
There may be other funding options, says the article, especially for low-income seniors. “Older adults may also be able to take advantage of specialized programs designed to cover the cost of home modifications,” Stringer writes. “Many states and municipalities, for example, offer grants and low-cost loans to make homes age-friendly and some organizations provide funds for veterans to adapt their homes at no cost.”
We found this link to a U.S. Department of Agriculture web page describing a special program for low-income seniors in rural areas to help them make basic home repairs. Some senior services organizations such as Homage, located north of Seattle, will help with safety related home improvements at a subsidized cost. Check out senior resources in your area. Also a qualified home care agency is often equipped to provide expert advice and resources.
But the decision to age in place is about much more than dollars and cents. We encourage you to evaluate your present situation objectively. Talk to your family. Make your housing decision part of your overall LifePlan. Then whatever choice you make, you can make it with confidence.
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(originally reported at www.nextavenue.org)