Using a Reverse Mortgage to Cover Medicare Costs


Unlike many costs in retirement that go down, health care is unfortunately not one of them. Plus, health care costs are expected to grow about 6.5% in the next year, according to the Research Health Institute, making the challenge to meet health care costs in retirement even more challenging.

Some attribute the rising health care costs to over-regulation and excessive taxation within the health care industry and specifically among pharmaceutical companies. But whatever the cause, consumers need to be prepared to bear these costs.

You may have saved accordingly, but even if you have been working and setting aside retirement resources throughout your career, the truth is that savings sometimes are not enough. Many retirees are surprised to find unexpected health care costs that are not covered by Medicare in retirement.

It is estimated that a 65-year-old couple retiring in 2016 will need about $260,000 to cover health care costs in retirement, which is 6% higher than last year’s estimate of $245,000. This year’s estimate is also the highest estimate since 2002, according to Fidelity’s Retiree Health Care Cost Estimate.

The costs may sound daunting, but for many people, the solution is right in front of them: their homes.

If you own a home and are planning to stay in place for a while, a reverse mortgage may be able to cover costs for Medicare as well as other health care costs.

If you are age 62 or older, you can apply for a reverse mortgage and use the proceeds to help with these expenses as they arise. Even if you are healthy right now, there is always a possibility that down the road you may need an unexpected procedure or surgery.

Uses for reverse mortgage proceeds

With a reverse mortgage, you do not have to make monthly mortgage payments like in a traditional mortgage. Instead, you have the option to choose either a lump sum, fixed payments, a line of credit or a combination of the options to receive your loan proceeds.

Payment options source: Reverse.Mortgage Learning Center

Keep in mind that reverse mortgage loans do not have to be repaid until the borrower passes away or otherwise leaves the home for more than a year. As a borrower, however, you do need to keep up with your home’s property taxes and insurance. If you don’t, the loan may become due and payable.

But once you have the loan and choose your payment method, you can use the proceeds however you’d like. Medicare can sometimes fall short in paying for certain things, so the proceeds from a reverse mortgage could pick up the slack.

Depending on if you have Medicare Part A, B, or D, Medicare can cover many things like medically necessary hospital visits, home health, hospice care, preventive care, durable medical equipment, hospital outpatient services and many others. But there are many things Medicare doesn’t cover.

A reverse mortgage could help cover the items that Medicare doesn’t cover. Those services include: most dental care, eye exams related to prescribing glasses, dentures, cosmetic surgery, acupuncture, hearing aids and exams for fitting them and routine foot care.

There are also other medical services that can be covered by a reverse mortgage that most insurances don’t cover:

  • One-time procedures not covered by insurance
  • Long-term care
  • Visits to specialists like psychologists or nutritionists
  • Prescription medication
  • Covering deductibles
  • Emergency medical care

Even if you’re just toying with the idea of getting a reverse mortgage, it may be something to look into seriously if you are worried about making ends meet as you age. Looking into it sooner rather than when you’re in a last resort situation will make handling this very important aspect of your retirement a lot less stressful.

If you are looking for more information on how you could utilize a reverse mortgage to help cover Medicare costs in retirement, contact your trusted adviser or a HUD approved reverse mortgage counselor.

photo credit: alicia.garbelman Barkerville145 via photopin (license)

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