I’ve noticed talk lately about the different ways people plan to use their assets to fund their retirement. Some of the ideas are great and some are a stretch.
One of these ideas that seems to be pushing the limits of realistic possibilities is that of using your housing assets as your main retirement plan.
Using Your House as a Financial Plan
Betting on the value of your house for your retirement income might sound tempting, but it’s probably not the soundest solution to your financial worries. Granted, the value of your house may have increased over time, so you think selling it in several years and downsizing is a great opportunity to cash in a lot of extra money. There are other aspects of that situation to consider, though, as mentioned in a recent commentary piece.
Besides the fact that home value fluctuates often and it is not a sure bet in any way, shape, or form, it’s also crucial to remember that if the value of your house has gone up, it’s likely that other costs have risen, too.
Even if the asset value of your home has doubled since you moved in, chances are so have the cost of living and the cost of health care. Is that really a risk you are willing to take?
Big Costs in Retirement
In Texas, one year in a nursing home will cost you an average of $61,320. That number might seem like a feasible amount to cover, but that’s certainly not the only external cost you will be facing. Fidelity estimates that the average 65-year-old couple retiring in 2013 will need $220,000 just to cover health care costs that aren’t included in Medicare benefits.
Dental health, eye exams, over the counter medication, and of course, long term care, are much more expensive than most people plan for, and assuming your home asset will cover the costs is a big risk.
If costs are higher than you expected, you end up needing long term care, and your house can’t cover it all, chances are you will have to turn to an unpaid family caregiver or spend down your assets to qualify for Medicaid. Are you really willing to take that gamble?
A Different Solution
Instead of betting your retirement on your house, look for more tangible, reliable options like Long Term Care Insurance. The amount that policyholders pay into their plans is typically quite minimal to the actual cost of care, which is only projected to increase.
Investing in a policy and transferring that huge financial risk can be a smart move for those who can afford premiums. Read more about Long Term Care Insurance in Texas and how it can help you not only keep your home, but receive care there, too.
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