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How to Prepare for the Risk of Changing Housing Needs in Retirement

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Housing choices are very important and have a big impact on people’s comfort and economic situation, according to a report recently published by the Society of Actuaries.

For most elderly households, housing is the biggest element of cost; for many, it is their largest asset.

But housing needs will likely change in retirement. In an interview, Anna Rappaport, a co-author of the report and a member of the Society of Actuaries' Committee on Post-Retirement Needs and Risks, discussed this risk and the ways to manage it.

According to the report, here are some of the ways to address the risk.

Make affordable choices: Housing is financed mainly from personal assets and current income. People nearing and in retirement will want to make sure that their housing choice is affordable.

Consider a range of financial strategies: Depending on a retiree’s situation, paying off the mortgage and remaining debt-free may be a good strategy. For others, taking a reverse mortgage may be a good strategy.

Choose location well: It is a good idea for retirees to select an area where family may be nearby to assist, in-home care is available, or other care facilities exist.

Understand the options: Many seniors enjoy availability of a wide variety of different housing options offering different costs, services, social environments, and levels of support.

Make timely decisions: Some options require the retiree to move in while still in good health. Some have waiting lists. It is easier for retirees to move when they have fewer limitations.

Finance support when major help is needed: Support can be expensive when a retiree needs major help. Financing can come from savings, current income, selling a house, or long-term care insurance for those eligible for benefits.

Be smart about buying insurance: Insurance coverage for long-term care provides support for those with disabilities so severe that the person needs assistance with daily activities, such as bathing, dressing and eating.

Understand public programs: Medicare provides only limited, short-term care benefits in certain circumstances; it does not provide care for the long term. It requires a hospital stay prior to payment of subacute benefits. Medicaid coverage varies by state.

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