Housing Wealth and the Long-Term Care Gap: A Hidden Solution for the Mass Affluent

Retirement planning has long focused on market risk, income needs, and longevity. Research continues to show that the high cost and significant likelihood of needing health care represent a major risk that is often overlooked. This is not a minor concern. For many clients, particularly single women, facing a health issue is the most likely event that could disrupt their entire financial plan.

According to data presented by the Employee Benefit Research Institute and Morningstar, long-term care costs are proving far more damaging than most clients or advisors anticipate. The numbers are sobering.

More than 40% of retirees are projected to require paid long-term care. Most studies have pegged the broader lifetime risk as high as 70%. Among those who do, the average cost for a single woman is $248,000. Even among clients who have diligently saved, that kind of expense late in life can force asset liquidation, accelerate tax exposure, and unravel estate or charitable plans.

The financial impact is uneven. At the lower end of the income spectrum, many will already rely on Medicaid. At the top, some can self-insure. But for the mass affluent, those with $500,000 to $2.5 million in net worth, it’s a real dilemma. Too much to qualify for assistance. Not enough to absorb the risk comfortably.

That is where their housing wealth can be beneficial. Not as a last resort, but as a proactive approach.

A Different Kind of Liquidity

For clients who own their homes outright or have significant equity, a Home Equity Conversion Mortgage line of credit offers a way to create liquidity without sacrificing optionality or future flexibility.

Unlike a traditional HELOC, the HECM line grows over time if unused, regardless of home value. It cannot be canceled or reduced if credit or property values change. It is guaranteed, assuming basic loan terms are followed. And it provides tax-free access to funds at the client's discretion.

Set up early, ideally in the client’s 60s, the line of credit becomes a strategic reserve that can later be tapped for care needs. This means clients are not forced to sell securities in down markets, liquidate IRAs with heavy tax impact, or disrupt legacy plans by drawing on intergenerational assets.

Why It Matters for Single Women

Morningstar’s research shows that 52 percent of single women who require long-term care will run out of money in retirement. That is a staggering figure. Women live longer, are more likely to need extended care, and typically retire with smaller portfolios due to the gender wealth gap.

For this demographic, a properly structured HECM line can serve as a critical backup plan. It can be used to bring in in-home care, avoid premature moves to assisted living, or fund non-covered services that improve quality of life. All without requiring ongoing loan payments or introducing new monthly obligations.

A Planning Gap Worth Closing

Some advisors still shy away from reverse mortgage strategies, often due to outdated perceptions. However, the modern HECM solution is entirely compatible with comprehensive planning practices. When modeled correctly, it reduces reliance on sequence-sensitive withdrawals and serves as a buffer against later-life volatility. For some of your mass affluent clients, it can be the solution that keeps the plan stable when you model the retirement health care spending shock.

More importantly, it closes a real risk gap. Most clients are not buying long-term care insurance. Most are underestimating the cost. And most have never discussed how their largest asset, their home, can be integrated into their retirement income or contingency planning.

That’s a missed opportunity.

The Role of the Advisor

Clients need and deserve complete planning. As longevity increases and caregiving demands rise, it is no longer sufficient to rely solely on market-based portfolios. By helping clients evaluate how housing wealth fits into their strategy, advisors can expand the toolbox to include all the client’s resources. They have more options to address one of the most urgent planning gaps that still goes largely unresolved.

The next time a client asks what happens if they need care in their 80s or 90s, don’t just revisit the withdrawal strategy. Look at the home.

It might be the difference between a crisis and a plan.

Contact us to discover how to incorporate this resource into your client’s retirement plans.