Minding the gap: funding the space between end of health and end of life

Laurie MacNaughton © 2020

It’s called health span – and though I only recently became aware of the term, turns out…not a new idea.

This odd-sounding term refers to how long one’s impairment-free health lasts. Some experts refer to this as “healthy life years,” and it is a concept separate from lifespan. What makes this topic significant is that for many older adults there is a year’s-long gap between the end of health and the end of life.

And though this isn’t (yet?) a term, for many there is another gap – a “finance gap.” That is to say, at some point in retirement many Americans will run short on money, and this gap is usually associated with health problems.

So how do you fund that gap, the gap between the end of health and the end of life? Where does one turn for money once health is declining and finances are depleted?

If you’re very lucky, your adult kids can help. However, rarely is this the best option, as that means the kids are using dollars they should be saving for their own retirement. Also, monies gifted to parents typically are not tax deductible by the gifter, and under some circumstances gift money may imperil certain benefits.

Though it’s an easy default position to judge those whose finances have grown thin, it’s not fair: when today’s retirees started working, lifespans were notably shorter. While it’s entirely possible to work 40 years and save enough for 5 years of retirement, it’s a whole other proposition to save enough for 25 or 30 years of retirement. And, people now routinely live for years with conditions that once were quickly fatal.

Standard recommendations to improve finances include sticking to a budget, taking a part-time job, and by becoming a “life-long saver,” meaning putting a small amount by each month. But these measures often are not possible when a serious health condition arises.

This is where a reverse mortgage can be a true lifesaver. A reverse mortgage is a seniors’-only home equity line of credit that is repaid when the last titleholder permanently leaves the home; all remaining equity goes to the homeowner, the heirs, or the estate.

I will be the first to say there is never a one-size-fits-all financial product. Financial needs vary and homeowners’ circumstances differ from person to person.

But this much is certain: none of us is likely to get by on just our Social Security. Few will survive on just an IRA, a 401(k), or pension – or, for that matter, on a reverse mortgage. But when added together, all these can contribute to financial health in retirement, and a reverse mortgage can play a very important role in financial wellness in the retirement years.

If you would like to discuss your financial needs, or those of a loved one, give me a call. I always love hearing from you.