New York Estate Planning & Elder Law Blog
Millions of people find themselves in a middle class bind as they enter the midpoint of their retirement period. A good eight (8) to ten (10) years into retirement, many individuals are able to physically continue to live in their home and afford the upkeep and maintenance of their home with their retirement savings
Especially if the individual’s home is single-story, as health problems mature, many individuals will be physically able to maneuver their way around their home with little assistance. Multi-story homes become more difficult because climbing stairs may be a problem. Individuals in the midpoint of their retirement are generally still able to care for themselves. Many of them even hold permanent part-time jobs.
The sources of income for individuals in retirement are the fixed income they receive from a pension, an individual retirement account (IRA), Social Security, and 401K savings. Variable income is received through part-time job wages and other financial instruments like an annuity and cash savings.
An increasing number of people have no retirement savings and may even still be paying off the mortgage in their home as they enter mid-retirement. Even though individuals income are fixed and any extra money comes from a job or side-gig, these individuals still make too much money to qualify for Medicaid or subsidized housing but not enough to pay for long term health care or full-time help at home.
How much income makes me middle income?
There’s no general answer to this question. Some individuals need care that is highly specialized and will need 100% assistance taking care of their daily living activities like cooking, bathing, and dressing. Others will be able to maintain a mobile and active lifestyle with the assistance of medical devices like canes, walkers, or wheelchairs and need minimal outside assistance.
A study by Health Affairs titled, “The Forgotten Middle,” estimates that in 2029 people between the ages of 75 to 84 would need between $25,000 to $75,000 annually in current dollars to pay for long-term care. At 85 years and older that number needed jumps to $95,000 annually.
Home equity is another pocket of money older Americans may be able to tap into to maintain their living conditions. However, since many homes still carry a mortgage and there’s a wide disparity on how much equity remains in the home among communities, a group of policy experts, the Long Term Care Financing Collaborative found that people 65 to 74 years old still living in their home had home equity of about $100,000.
If as the Health Affairs study says people need between $25,000 to $75,000 annually in current income to remain in middle income, selling the home will only provide financial assistance for 1 ¼ to 4 years. Rentals may not be the answer either because market rate is high even if the home is an apartment, assisted living facility, or community living facility.