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Private financing of long-term care: income, savings and reverse mortgages


  • Carole Bonnet
  • Sandrine Juin
  • Anne Laferrère


To what extent would older Europeans be able to pay for their long-term care needs, out of their income and assets, if they had no access to informal care or public insurance? To answer this question, we build a microsimulation model and estimate the disability trajectories of those currently aged 65 or older in nine European countries using the Survey of Health, Ageing and Retirement in Europe. We focus on the potential role of reverse mortgages in home equity liquidation. According to the simulations, 57% of people 65 and over will experience disability. Conditional on need, care will be required for 4.4 years on average. Of those with no partner, 6% of dependent individuals could pay for their long-term care out of their income alone, 22% if they used all their savings except their home. The proportion would double to 49% if they took out reverse mortgages on their main residence. However, one-quarter would be able to finance less than 10% of their long-term care expenses.
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  • Carole Bonnet & Sandrine Juin & Anne Laferrère, 2019. "Private financing of long-term care: income, savings and reverse mortgages," Erudite Working Paper 2019-14, Erudite.
  • Handle: RePEc:eru:erudwp:wp19-14

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    JEL classification:

    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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