Caregivers often worry about how to pay for assisted living and they are right to do so even when assisted living is not currently needed.
None of us look forward to the time when we or our parents need to have help with cooking or dressing. Maybe we see Mom take a fall and realize that it could happen when we are not there and it could have been much worse. Or maybe we see Dad sitting all day making his best friend the tv channel changer and you realize that his life should be more social. So, we start to think about what options there might be to help them age safely and with a better quality of life. Because of the advancements in technology and medicine, the life expectancy of both men and women have steadily increased which means that the golden years may include a move out of a senior’s current home into assisted living.
If a senior does not required medical supervision, an assisted living facility is a more financially appealing option. The average estimated cost of assisted living is between $2,000 and $5,000 per month as compared with nursing homes or memory care facilities that can easily cost $10,000 per month. However, because it’s impossible to know the how long assisted living is going to be necessary, the annual cost of $24,000 to $60,000 needs to be planned for appropriately and well in advance.
At first, these costs may have you gasping but don’t forget that they are usually all inclusive. If someone needs assistance at home, the costs can be very close so it is important to fully explore options prior to deciding that it’s just not possible financially.
Do you know the different options available to cover assisted living expenses?
Prior to reviewing the most common ways of paying for assisted living, consider how far off the change of residence might be. This is important, as some options aren’t really possible unless they are planned 5 – 10 years out from the time that the assisted living is needed. So if your parents or someone else in your family is healthy start to think about what options might be used if and when the time comes. For example, purchasing long-term care insurance needs to be done in advance and qualifying for Medicaid can be complicated but it generally means that anything transferred with 5 years will count in the assets of the senior. Seeking advice from a financial planner (who specializes in elder financial planning) well in advance of the need is key.
(1) Cover assisted living expenses with home equity
When your loved one owns a home there are several options available to leverage this asset to cover senior care expenses. Sometimes, if there’s sentimental value in the home, or your loved one refuses to sell the home, the easiest option might be to rent out the house and use that income to pay for a part of the cost of assisted living. For couples, one person may need assisted living, while the other spouse is still able to live at home. This can make a reverse mortgage a useful to pay for the assisted living costs of one spouse, while the other spouse still resides in the home. If those options aren’t adequate, the home can be sold and the money applied to assisted living charges.
(2) Use veteran benefits to contribute to senior care costs
Veterans, and widowed spouses of veterans, are eligible for financial assistance in retirement. The Aid & Attendance and Household monthly pension from the Veteran’s Administration. may be added to your regular monthly pension amount if you qualify. This additional pension can supplement the other sources of income you leverage to pay for elderly care. The best place to get advice on this benefit is at your local VA Benefits office.
(3) Fund assisted living with life insurance
Traditionally, life insurance is allocated after a person passes away. However, it’s possible to cash out a policy early by speaking with your life insurance company about the possibilities. It’s common for insurance companies to buy back the policy for up to 75% of its face value. If your life insurance company refuses to do this, a policy can be sold to a third-party for a life settlement.
(4) Pay for assisted living with long-term care insurance
Long-term insurance works best when purchased when your loved one is younger. The policies are designed to benefit those needing assisted living, at-home care or a nursing home.
As with any type of insurance, it is important to review the fine print to see what stipulations are incorporated into the policy. Premiums are calculated by factoring in age, the duration of coverage, physical health, the elimination period, and the maximum dollar amount you will be reimbursed for care. Often, premiums are altered as the person ages and the higher premiums aren’t as affordable.
(5) Savings and investments can contribute to assisted living expenses
Many people pay for assisted living by tapping into their savings and investments. If a person made regular contributions to a 401K or IRA while working, the available money can go toward investing in senior care.
(6) Check with your state’s Medicaid office
Depending on the state you live in, Medicaid can offer limited coverage for people that meet certain requirements. Normally, the person’s combined assets and income must be below the poverty level determined by the government. Not every assisted living facility accepts Medicaid, so it’s helpful to identify facilities that allow Medicaid if you think your loved one will be eligible for assistance.
How to Spend Down Income and / or Assets to Become Medicaid Eligible:
Aid and Attendance:
Reverse Mortgages – Some Pluses and Minuses for Seniors
Planning for the future, even if it’s still 20 years away, is the wise thing to do. It’s important to discuss every option with your loved ones to understand their expectations for quality care. Enlisting the help of a financial planner to navigate complicated costs, identify opportunities for financial assistance and create a strategy for the future is a smart choice. The key to getting the senior care you want tomorrow starts by planning today.