Are daily tasks around the house becoming more challenging?
As we age, we often have to come to terms with the fact that living independently at home is no longer best for us.
That’s when it’s time to consider moving into an assisted living community — where you can get a little extra help with activities of daily living (ADL’s) like dressing, bathing, or taking medication.
But how will you pay for that extra help?
How does assisted living work financially?
Does insurance help pay for assisted living?
You may have a lot of questions.
Don’t worry. You’ve got options. This guide will:
- Clarify what is typically included in the monthly “all-inclusive” fee for assisted living, as well as what “extra” services might incur additional costs.
- Introduce five primary ways to pay for assisted living, including using private funds, selling a home, long-term care insurance, and veterans’ aid.
- Emphasize the importance of early financial planning and provide information on government assistance programs, such as Medicaid.
Read on to learn what’s included in assisted living care and how to develop a plan for your future.
Paying for Assisted Living: Consider the Costs
Have you considered how much assisted living will cost? What about who pays for assisted living?
There are many variables to consider to answer those questions. How much money you’ll need to save for your entire assisted living stay depends on:
- Where you live
- How long you stay
- Type of accommodations (e.g., private or shared room)
- What services you want or need while in assisted living
- The level of care required
According to the 2020 Genworth Cost of Care Survey, assisted living in the U.S. costs an average of $4,300 a month. It’s important to note, though, that these rates do vary widely. Memory care costs (on average) an additional $800-$1,200 per month.
AARP reports the average length of stay in an assisted living community is 2.5-3 years.
So let’s say you spend 2.5 years at an assisted living community where you pay the national average of $4,300 a month. You’re looking at a cost of $129,000. That’s a big number to wrap your head around.
Are Assisted Living Costs All-Inclusive?
By nature, assisted living facilities are “all-inclusive.” This typically means one monthly fee for your:
- Accommodations
- Utilities
- Meals
- Transportation
- Activities
- And more
However, you may find some “extras” come at an additional cost.
What Is and Is Not Included in Assisted Living Costs?
Some of those “extras” you may have to pay for out of pocket may include:
- Special activities/events: Some activities or special events at an assisted living facility may not be included and require an additional charge.
- Groceries/canteen items: Meals are generally included in your monthly fees, but if you’re interested in doing any cooking or baking on your own, you may have to purchase your groceries. Many assisted living facilities have a small shop where you can purchase candy and other snack items.
- Skilled nursing: While the cost of assisted living usually includes medication management and coordination with health care providers, more in-depth medical care like skilled nursing is not typically included.
Does this sound like what you’re looking for?
How to Pay for Assisted Living: 5 Ways to Pay
To pay for your assisted living care, you may consider a combination of these methods:
- Private funds
- Proceeds from selling a home
- Long-term care insurance
- Veterans’ aid
- Life insurance
Option #1: Private Funds
Many families or individuals pay for assisted living with private funds. This is typically a combination of:
- Savings
- Social Security benefits
- Pension payments
- Stocks
- Retirement accounts
- 401k
- IRA
Option #2: Proceeds from Selling a Home
If you’re planning to move into an assisted living community, you may no longer need your home. If you own that home, you may consider selling and using the proceeds to pay for assisted living.
Additionally, this eliminates the financial and physical burden of maintaining that home if it is no longer occupied.
If this is an option you’re considering, you’ll want to speak to a financial advisor and real estate professional to learn more about your options.
Option #3: Long-Term Care Insurance
At least 70% of people over the age of 65 will need some type of long-term care. This means long-term care insurance can be a good investment.
A long-term care insurance policy removes the burden of having to pay for 100% of care from personal funds by helping to supplement monthly payments to an assisted living provider.
Long term care insurance can cover:
- Home care
- Assisted living
- Adult daycare
- Nursing home care
- Memory care
- Respite care
- Hospice care
Many experts suggest investing in this type of coverage before the age of 55 as part of an overall retirement plan. It’s important to note that premiums paid on long-term care insurance policies may be eligible for an income tax deduction.
Option #4: Veteran’s Aid
The U.S. Department of Veterans Affairs offers an Aid & Attendance benefit for qualified veterans and surviving spouses to help with the cost of assisted living.
This benefit can be used for care in any state-licensed care setting and can provide up to $2,200 a month to a veteran and their spouse or up to $1,900 a month for a veteran without a dependent.
- Medical Eligibility: The individual must need assistance with at least two Activities of Daily Living (ADLs) within VA guidelines. Details on these needs can be best explained by an expert at your local VA office or by contacting a Veterans Benefits Advisor.
- Financial Eligibility: Many assets, including some annuities and pre-paid funeral expenses, may be exempt from consideration in the financial qualification guidelines. For more information regarding financial qualifications, seek the professional advice of a VA-accredited attorney.
Less than 5% of eligible veterans are currently taking advantage of this benefit.
For more information about the Veteran’s Pension Benefit with Aid & Attendance program, visit your local or regional VA center, or visit the VA website.
Option #5: Life Insurance
Life insurance is designed to provide financial protection for your loved ones after you’ve passed away. However, depending on your insurance company and life insurance policy, you may be able to use the policy’s cash value to pay for long-term care.
Oftentimes an insurance company will buy back your policy at 50-75% of its value. You also may be able to sell your policy to a third-party company in what’s called a “life settlement.”
Consult a financial advisor before considering these options.
Assisted Living Payment Options: Is There Assistance Available?
If the options above aren’t available to you, you’re not out of luck when it comes to paying for a spot in an assisted living community.
Financial assistance is available for seniors who need to live in an assisted living facility, but you may have to meet certain requirements.
Read on to learn more.
How to Pay for Assisted Living Costs With Medicare
You may be wondering how to pay for assisted living with Medicare?
Medicare doesn’t typically cover long-term care (also called custodial care).
However, Medicare may cover qualified healthcare costs while you or a loved one is receiving care at a certain long-term facility.
Medicare is more often used to pay for a skilled nursing facility or home health care.
Use this resource to find out whether a test, item, service, etc., is covered by Medicare.
How To Pay for Assisted Living Costs With Medicaid
Medicaid benefits vary by state because the Medicaid program is partly funded by the federal government and partly by each state.
Forty-four states and Washington D.C. currently provide some level of assistance for those residing in assisted living facilities.
It’s important to learn about eligibility requirements where you live.
State Assistance Programs
Many individual states offer assistance programs for assisted living costs.
Some examples of assistance programs include the Indiana Residential Care Assistance Program and the Maryland Assisted Living Program.
Find out if assistance programs are available in your state.
Private Funding Through the Senior Living Facility
Some assisted living facilities will offer their own private funding options for residents. You’ll need to inquire with the individual facility to see if this is something they provide.
Preparing to Pay for Assisted Living: Developing a Plan
Assisted living is an investment in the:
- Health
- Safety;
- And well-being
Of yourself or your loved one.
It’s essential to plan for this important period of life.
Think about college. It’s typically a four-year period of life. Many people begin planning for how to pay for those four years long before they or their children graduate from high school.
Senior care should be no different.
Start planning for assisted living ahead of time by:
- Figuring out what kind of care may be necessary.
- Assessing how you plan to pay for care and get started by either socking away savings or investing in a long-term care insurance policy.
- Researching care facilities and inquiring about what services are included in the basic monthly rate.
