Paying for Assisted Living
As seniors age, it becomes increasingly difficult to keep up with household responsibilities like cleaning and yard maintenance. Many also struggle with completing activities of daily living (ADLs) on their own, such as bathing and getting dressed. Seniors’ homes often have stairs and other hazards that make the space ill-equipped for aging in place. Assisted living communities are a great solution for seniors searching for a safe, comfortable place to live out their retirement years. In fact, there are currently over 800,000 Americans residing in these communities today. However, assisted living often comes with a hefty price tag – the average monthly cost is $4,500.
Thankfully, there are several ways for seniors to pay for assisted living. This guide goes beyond the basics by offering a variety of options that you might not have previously considered to cover the costs. It includes tips to keep in mind as you consider each option and helpful next steps to take when you’re ready to pursue assisted living.
What Is Assisted Living?
Assisted living is a type of residential care for seniors who need help with daily personal care. The goal is to help older adults live as independently as possible. Staff members are available 24/7 to provide assistance with activities of daily living (ADLs) such as:
- Medication management
Many communities offer onsite security and emergency call systems to keep residents safe and protected in case of emergency. Although they differ, most assisted living communities offer a wide range of services, amenities, and life-enrichment activities in a home-like atmosphere. Residents enjoy the privacy of living in their own apartment, but with the added benefit of onsite communal dining and meeting spaces for meaningful social interaction.
Standard assisted living services include:
- Prepared meals
- Scheduled transportation
- Cleaning services
- Organized social activities and events
Some assisted living communities go beyond the basics by offering high-end amenities and services similar to a resort-style living. These can include:
- Concierge service
- Individualized wellness programs
- Gyms and fitness classes
- Outdoor common areas
- Computer room
- Movie theater/entertainment center
Who Should Consider Assisted Living?
If you are considering assisted living, consider the following signs that this care type is the right solution for you or a loved one:
- Increasing difficulty managing the activities of daily living
- Challenges with keeping the inside and outside of the home clean, uncluttered, and well maintained
- Recent accidents in the home (such as a fall)
- Slower recovery times after an accident or illness
- Concerning weight loss or increased frailty
- Changes in one’s appearance, such as stained clothing or unkempt hair
- Loneliness due to lack of companionship
- Unopened mail and unpaid bills
- Signs of dangerous driving or new damage to the car
- Stale or expired foods in the pantry and refrigerator
How Much Does Assisted Living Cost?
Although cost differs based on the state, city, available services and amenities, and other factors, the average monthly cost of assisted living in the United States is $4,500. This price can even vary between different communities in the same area, so be sure to research individual communities.
It’s important to note that pricing structure can also differ with assisted living communities. Some charge an all-inclusive monthly fee, while others itemize bills and charge for specific services or amenities utilized. The latter can add up as seniors age and their needs become more prominent.
Use the state table below as a starting point while you research costs of assisted living communities in your area:
|State||Average Monthly Cost of Assisted Living|
What Are The Ways to Pay for Assisted Living?
If assisted living costs in your area are more than you can afford, you are not alone. Fortunately, you have options when it comes to covering this large expense. From Medicare and Medicaid, to tapping into various types of personal funds, home equity, and insurance, there are several ways to pay for assisted living. Read below to learn more about each option and determine which solutions work best for you.
Using Personal Funds To Pay for Assisted Living
When considering how to cover the cost of assisted living, it’s a good idea to start by taking inventory of all personal funds and savings. The majority of assisted living communities rely primarily on private payment, so you’ll want to make sure you’re taking advantage of the funds that are currently available to you.
We’ve outlined some common ways to pay out-of-pocket below:
|Private Fund Type||How It Works|
|Retirement Accounts||Funds from a 401(k), IRA, or other retirement account can be withdrawn to go towards assisted living costs. Keep in mind that in some cases, withdrawals might be taxable, and those younger than 59.5 could receive a penalty for early withdrawal.|
|Savings Accounts and CDs||Savings accounts and CDs, especially those with six months to a year’s worth of expenses in liquid accounts, are a viable option to pay for assisted living.|
|Withdraw from a Pension||Seniors that receive periodic payments through a pension retirement savings plan can use those funds to pay for assisted living.|
|Annuities or Insurance Plans||After initially giving a large amount of money to an insurance company, you can receive an annuity that guarantees a steady monthly income to be used for assisted living payments.|
|Trusts||Trusts allow one person to transfer assets to another. There are specific types of trusts that pay for long-term care services like assisted living.|
|Stock Market Investments||Funds from investing in stocks or stock mutual funds can be used to cover the cost of assisted living.|
|Social Security||Funded by the federal government, Social Security provides a source of income for retirees or those with disabilities. These payments can be used to go towards assisted living.|
Using Life Insurance To Pay for Assisted Living
If you currently have a life insurance policy, you have the option of “cashing it out” through a life settlement to provide funds to use for long-term care, like assisted living. Some life insurance policies include an Accelerated Death Benefit (ADB), which gives the policy owner a portion of their death benefit from the insurance company in advance of their death.
Also called “living benefits,” ADBs have different purposes based on the specifics of the insurance policy. Typically, individuals use their ADB to help cover the costs associated with a terminal illness or long-term care. Although the amount varies, the ADB payment is typically capped at 50% of the death benefit. Keep in mind that your remaining survivors will receive little to no death benefit if you use the ADB for long-term care.
Another way to use life insurance to pay for assisted living is through Combination Life & Long-Term Care Insurance. Some insurance companies include a long-term care benefit with their life insurance policies. The amount designated to long-term care is typically a percentage of the life insurance benefit.
Using Home Equity to Pay for Assisted Living
Home equity is a useful resource when determining how to pay for assisted living. Bridge loans, reverse mortgages, and selling or renting your home are the three most popular ways to use your home’s value to generate revenue for long-term care.
Bridge loans are short-term loans that offer expedited funding for individuals who need immediate financial help while they work to secure an alternative, long-term option. This type of loan is especially helpful in time-sensitive scenarios. While seniors wait for their home to sell or long-term care insurance payments to come through, they can rest assured that a bridge loan will cover the cost of their assisted living care. Once the long-term financing option comes through, bridge loans can be easily repaid. Most importantly, seniors don’t have to put their necessary care on the backburner due to limited finances.
A reverse mortgage is a viable option to alleviate some of the burden associated with assisted living costs – especially for couples with one spouse that needs long-term care while the other stays at home. Reverse mortgages are a unique type of financing that allows eligible borrowers age 62 and older to receive payments drawn from their home’s equity. This cash can go directly toward assisted living costs, and the loan does not need to be repaid until the last borrower passes away or moves. The Home Equity Conversion Mortgage (HECM) is the only reverse mortgage insured by the U.S. federal government, and it is available through an FHA-approved lender.
Selling or Renting Your Home
Many seniors turn to selling or renting their home to cover long-term care costs, as there are several advantages to each. Selling is a good option for individuals who are ready to trade in the burden of taking care of a home and paying a mortgage for a lump sum to go toward assisted living. Additionally, the proceeds from a home sale are often tax free, which makes this an attractive option to many seniors. Renting is also popular because it is a great way to create monthly cash flow to use for assisted living without having to sell your home. This works best for homeowners who have paid off their mortgage and have arranged for a third party to manage tenants.
Using Medicare and Medicaid to Pay for Assisted Living
Medicare Coverage of Assisted Living
Medicare does not cover the cost of assisted living because it is considered to offer custodial, non-skilled assistance with daily activities, rather than medically necessary services.
Medicaid Coverage of Assisted Living
Although the exact coverage differs by state, Medicaid offers some sort of financial assistance for qualifying seniors seeking assisted living in most states. Eligibility also varies by state, but typically requires specific income limits to be met. Often, seniors must also receive a doctor’s confirmation that assisted living is a medically necessary choice for their current condition. It’s important to note that some assisted living communities do not accept Medicaid, so you’ll want to ask in advance if this is the way you plan to pay.
Medicaid waiver programs are a good alternative if your state does not offer financial assistance for assisted living. These programs are designed to expand coverage for seniors by offering alternative assistance in community and home-based settings like assisted living and in-home care.
One of the most common Medicaid waivers is the Home & Community Based Services (HCBS) waiver. Although specific coverage for these waivers differs between states, their overall purpose is to provide seniors with opportunities to receive long-term care within their home or community, instead of an institutional setting such as a nursing home. Be sure to research your state’s Medicaid program details and available waivers to get a clearer picture of assisted living coverage in your area.
Get Help Finding an Assisted Living Community
Start your search for an assisted living community by entering your city or zip code at the top of this page. You’ll see a directory of the best assisted living communities in your area.
For further assistance, contact one of our skilled Family Advisors at 1(800) 748-4024. A Family Advisor will provide you with personal, one-on-one guidance to help you find the right assisted living community.
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