Senior Guidance

Assisted Living Costs

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Assisted Living Costs & 12 Ways to Pay Them

Any older adult who plans to move to an assisted living facility needs to understand that it does not come for free. In all cases, there is a monthly fee that residents have to pay to continue staying in the assisted elderly care homes. Assisted living costs by state will vary quite a lot. Seniors typically get what they pay for. Expenses that older adults have to cover in the senior living communities include expenses for:

  • Quality of Care - aging individuals pay the price for the kind of service they receive. These fees include expenses for the caregivers, cleaning and maintenance staff as well as medical staff if any offer services in the facilities. Memory care facilities will also charge additional assisted living costs for providing dementia-certified caregivers and special memory care programs.
  • Amenities - the “perks” that retirees access usually come at a cost. Some residences provide pools, gyms, and spas that help to maintain and promote the senior citizen’s health. Others will even have lovely dining atmospheres in restaurants, cafes, or cafeterias. As a general rule, retirees will end up paying more in the assisted living facilities that have many more amenities with opportunities for an extensive range of fun and exciting activities.
  • Living Quarters – assisted living centers offer the older generation various living quarters depending on what they deem fits their needs best, which is reflected in the costs. Many occupants pay rent every month to live in their new homes. Some retirement communities also give the elderly the chance to purchase a home on their grounds where they will spend their golden years.

12 Ways to Pay for Assisted Living

It is always good to plan ahead for assisted living. After getting an idea of what senior citizens pay for when they move into the homes that offer assisted living, we have outlined 12 options and ways that seniors can use to cover the costs associated with assisted living. They include:

Income and Savings

Older adults who have planned properly for their retirement can use personal income as well as the savings they have to get the money they need to cover assisted living fees. Some older adults still receive income from various investments that they have, such as investment properties and other things. Many retirees also have significant retirement savings either in their 401k accounts or personal bank accounts that they can use to cover assisted living costs.

Long-Term Care Insurance

Older adults who have long-term care insurance can take advantage of it to pay to reside in assisted senior housing facilities – all they need to do is claim the benefits for long-term insurance as per the requirements of their specific long-term insurance policy that they person has.

Another thing to note is that using long-term care insurance to pay for assisted living best works for a person who got the insurance coverage during their younger of middle-age years. Some long-term policies work in such a way that they have a particular designated benefit that goes to assisted living / nursing home care basing this on physical or mental diagnosis. It is what senior citizens use to pay for assisted living.

An individual can also purchase the policy so that it pays for home care. This option pays the costs directly to assisted living homes and in some cases to the beneficiary who uses the cash to pay for senior living communities.

Please note that financial experts do not recommend purchasing long-term care insurance if you are already in or near retirement years, as the older adults who do not have the long-term care insurance may find it to be too costly at that point in time. However, you can always do your research and see if purchasing long-term care insurance to pay for assisted living makes sense for you in your current situation.

Selling Life-Insurance Policy

It is highly probable that older adults who have life insurance policy purchased it a long time ago as a way of offering their family financial support after they die. What many do not know is that the life insurance plan can provide immediate relief to covering senior living costs when the policyholders are in need of assisted living.

Senior citizens can also opt to go through a process that is known as a life settlement. It involves selling life insurance policies to a company or another individual. In most cases, they purchase it for up to 75% of its face value. The percentage can increase or decrease depending on the policy as well as the institution or individual who is buying it.

The person who purchases the policy takes on the responsibility of paying the premiums from that point on, and collect the benefits when the original policyholder passes away.

While it is understandable that most people would consider this option with a grain of salt since it affects the future of their heirs negatively, it helps to know that this is just one of ways to pay for assisted living costs. Do not forget to contact the insurance company to find out about “living” or “accelerated” benefits.

Veterans Benefits

Individuals who once served in the military in any capacity can receive financial aid from the VA (Department of Veterans Affairs) to cover assisted living costs. There are specific criteria a person has to meet before they can get the money to cover assisted living benefits. The elderly can use the cash aid to pay for residential care in different scenarios.

One of the benefits is only available to the people who have service-related disabilities or injuries. Aid and Attendance is another example of the benefits. Veterans or their spouses can use this if they have a low income that is below-set limits or the ones with disabilities.

Some seniors may find that going through the Veterans Administration to get the benefits to be complicated and time-consuming. In such an instance, working with a professional advisor or planner can help because they understand the system well thus can guide the veterans in the best possible way so that they can get the benefits that will help them get the cash they need to afford assisted living facilities.  It helps to know that some assisted living communities specifically cater to the elderly veterans and their families.

Use Your Home Equity

Although not many retirees love taking this route, some still use this option. There are several ways that home equity can be used to finance assisted living costs.

One of the ways is to sell the home to finance assisted living care during old age. If you’ve built enough equity in your home that you will get an influx of cash to help offset assisted living facility fees, and you don’t have other options to help with the costs, then it may make sense to go this route.

Another way to use home equity to pay for assisted living is by taking a loan against your home equity, also known as a home equity loan. Such loans generally have very favourable interest rates – almost as good as when you buy / refinance, so going this route may be the right thing for you. Please note, however, that when you take a home equity loan, you are essentially taking a second mortgage on your house, if you still have some mortgage payments left. If your house is fully paid off, taking a home equity loan to cover senior living fees will mean that you will have to pay mortgage again, while at the same time paying assisted living fees. The fees may add up to a very high monthly payment, so be careful with this option to pay for assisted living.

Renting Out Your Home

Aging individuals who do not want to sell their homes because they cherish them or for any other reasons can also look into renting out their property to get the cash they need to pay for assisted senior housing. It is usually a convenient arrangement in that the elderly still get an opportunity to retain the ownership of their previous home. At the same time, they also create an income stream that they use to pay for living in the assisted living facilities. If the idea of becoming a landlord or landlady does not sit well with the older adults, they can look for a reputable and trustworthy property manager to take up the role at a percentage fee or a flat monthly management fee. Depending on where you own your home and how much the rent is in your area, the rent itself may be sufficient to cover assisted living costs. If not, it will at least help offset some part of the assisted living fees.

Using Reverse Mortgage

Aging individuals who own homes can find that reverse mortgage is the solution they are searching for.  It permits them to borrow money based on the equity of their property. Homeowners can cash out the value of their stake in a series of monthly payments or all at once.

The bank decides the value by taking into consideration things like interest rates, worth of the home, the age of the applicants, and other necessary factors. The balance of the loan goes up gradually over time, and seniors pay back the cash after moving out or when they finally sell the house. Many people often mistake that the reverse mortgage is not helpful when an individual wants to move into assisted living, but they are wrong. It can also come in handy when a wife or husband wants to go to the senior living facility, and the other wants to stay at home. If one partner is healthy, they can utilize reverse mortgage to get the means to pay for their partner's care in senior housing apartments without the other accompanying them to the senior care home.

A person can end up staying in their house as long as they want, even when at times the balance of the loan can exceed the value of their house. When they die, the remaining cash has to be paid, and most of the time it means selling the home to recover the difference. Before opting to get a reverse mortgage, take time to know the pros and cons and always go through the fine print and all the clauses keenly to be sure it is the right option to help you pay for assisted living.

Making use of Annuities

Retirees who have a nest egg but are not confident that they will outlive their savings can use annuities to get the funds they need for assisted living facilities. Purchasing an annuity means that after you pay an upfront fee for the annuity, you will receive your annuity payments every month, which if large enough, can cover assisted living costs entirely. In most cases, annuities come in the form of lifetime annuity, which gives the retirees payments over their entire lifetime. Annuities may be an excellent option because senior citizens will have money coming in even when seniors live longer than they expect. It means that an individual continues to get the money after their purchase premiums come to an end.

In simple terms, a person may end up getting a lot more than what they invested if they end up living a long time. In such scenarios, underwriters take on the risk if a person ends up outliving their premium. They also make a profit if a person passes before their expected time. The annuities are also beneficial in that Medicaid does not consider them to be part of the senior’s assets when they are applying for assistance from the government. The term income from the annuity is a resource but the lump sum that a person used to buy it is not counted.

As much as they bring in several benefits, older adults need to know that they are complicated financial solutions and that they should not rely only on annuities to pay for assisted living, and should approach annuities with extreme caution. Many con men prey on unsuspecting retirees with shady deals; thus, a person should only work with a reputable company when it comes to annuities.

Asking Family Members for Financial Support

If a senior is lucky, they can ask their family members to contribute some money that they will use to cover their assisted living costs. Pooling financial support from children, grandchildren and other relatives can help seniors cover high costs associated with assisted living because in most cases blood relatives only want the best for their aging family members in their post-retirement years. This is probably one of the most common ways to pay for assisted living costs, as children try to make sure that their parents are properly cared for in senior years, and if the grandchildren are old enough and are financially capable, they will want to do the same as well.

Using Medicaid, Medicare or SSI

There are two questions that people commonly ask when it comes to Medicaid / Medicare and assisted living:

  1. Does Medicaid pay for assisted living? The short answer is: it depends on where you live. In general, do not rely on Medicaid to pay for assisted living as assisted living is largely not covered by Medicaid with some few exceptions. In some states, Medicaid offers assistance with assisted living fees to older adults who have no or little assets. Medicaid is a partnership that runs between federal and state governments, where the Medicaid money is distributed by the states themselves. Although eligibility differs in different states, a person typically has to have assets that add up to be less than $2,000 in addition to their cars and home. It is extremely important that you contact your state’s Medicaid office to see if it will cover any assisted living costs, and if so, what your state’s requirements are.
  2. Does Medicare pay for assisted living? The simple answer is no. Do not confuse the federal Medicare with state Medicaid because in most cases, Medicare does not help cover costs for senior citizens who are in assisted living facilities.

When it comes to SSI (Social Security Income), things are much simpler. SSI is a benefit which you get during retirement and can do with it as you please. As such, anyone who receives SSI can use it to cover assisted living costs, although in most cases, SSI itself will not be sufficient for full coverage.

Consider Bridge Loans

Although it is a relatively new concept, it is something that senior citizens can consider if they want to enjoy life in assisted living facilities. This option works best for the people who do not have too much in regards to financial assets or free cash that they can liquidate easily. The bridge loans are short-term loans where a person can access at least $50,000 that can help them with moving to the senior living communities. They are available in two types:

  1. Unsecured line of credit - here a person does not require any collateral and they can get cash to cover assisted living expensed for the first few months in their new living quarters that offer assisted living. Interest rates for this typically range from 8-12% and a person has about five years to pay back the loan. Because the interest rates are so high, this option shouldn’t be the first one you use to cover assisted living fees. Look at bridge loans as a fall-back option.
  2. Capital Access Program - it is a lump-sum loan that attracts lower interests because a person can use real estate or other assets to secure their borrowings. It is set up to help older adults get their hands on the hefty up-front fees that some continuing care assisted living communities demand upon entrance.

To qualify for the any of the above loans, criteria that lenders use include things like debt to income ratio, credit history, and credit score. Either a retiree or their adult children can apply for the loan. It is also possible for up to six family members to co-sign during the loan application process.

Finding Non-Profit Resources for Elderly Care and Assisted Living

A little research can aid retirees and their family members to identify a non-profit organization that helps the elderly to find resources they need to afford to stay in assisted living apartments. If the institutions cannot offer a hand, they may point you to the places that can assist. Examples of organizations an individual can consider include:

  • Visiting Eldercare.gov - it can refer to local resources like transportation resources, home health services, respite care, senior housing options and finding financial aid if a person is eligible and a lot more.
  • Seeking assistance from the local Area Agency for Aging - they can make it possible to locate resources like elder abuse programs or elder refuge, meals on wheels, counselling, adult day care services, and volunteers who visit among many others.

Cost is most likely a top factor for anyone who is considering assisted senior care options. Depending on the care that an individual senior requires, it may help to understand that assisted living tends to be more affordable than long-term in-home care or nursing homes, at least when it comes to your out of pocket costs.

Going through the 12 ways to pay assisted living costs that we’ve outlined above gives you an idea of where retirees can get the money they need to pay for their retirement. Planning ahead of time will ensure that older adults live happily and comfortably in the assisted living residences and enjoy the best of times in their retirement years.