Are you worried about paying for assisted living care for yourself, your spouse, or another family member?
The cost of assisted living and long-term care can be a contributing source of stress for some families. And cost certainly plays a significant role in determining where to obtain assisted living for yourself or your loved one.
How much does assisted living cost?
Long-term care costs increased substantially in 2020, according to a Genworth annual Cost of Care survey. According to Genworth, assisted living facility rates increased by 6.15% to an annual national median cost of $51,600 per year, while the cost of a private room in a nursing home increased 3.57% to $105,850. Prices can be even higher based on a facility’s geographic location, quality of care, and luxury amenities.
Read on for some of the ways you can pay for assisted living when you or a loved one needs help with day-to-day activities.
The Best Ways to Pay for Assisted Living
According to financial professionals, the following are the best ways to pay for assisted living for you or your loved one.
Long Term Care Insurance
Long Term Care Insurance, or LTC, is one of the best ways to pay for assisted living costs. LTC insurance can cover many of the costs of in-home care, assisted living facilities, and nursing homes. LTC insurance benefits kick in after the insured can no longer perform two out of six activities of daily living (such as dressing, bathing, eating, or transferring to a wheelchair) or has suffered from severe cognitive impairment.
Life Insurance and Hybrid Life-LTC Policies
Permanent life insurance, also known as whole or universal life, is designed to offer a death benefit and a living benefit that allows the policyholder to access cash while still living. This cash and any potential dividends can grow, tax-deferred, and become a source of income you can access later in life.
Hybrid policies that combine Life Insurance with Long Term Care insurance are also available. However, these hybrid policies tend to come with a higher price tag. Financial guru Dave Ramsey suggests looking into a hybrid policy as a last resort if you can’t qualify for LTC on its own due to medical underwriting.
Saving for Assisted Living
Saving outright is another of the best ways to pay for assisted living. Roth IRAs, Traditional IRAs, and 401(k)s are all vehicles to help you save and invest for your retirement needs, including assisted living and memory care.
Talk to your trusted insurance and financial professionals to help you put a plan in place to pay for assisted living.
More Ways to Pay for Assisted Living
Many of the recommendations above require you to start planning, saving, and investing for retirement early in life. But for many people, the need for assisted living comes suddenly and without warning. These suggestions may be helpful when you don’t have an insurance policy or savings to access.
A reverse mortgage is a cash loan that a senior can take against their home’s equity. The loan is typically paid in full when a house is sold after the last borrower passes or has moved out of the home for 12 months.
A reverse mortgage may be helpful for a senior who needs the resources to pay for their spouse’s assisted living or memory care expenses. It may also be a helpful tool for a senior who will need to live in a facility for a year or less. A borrower can live outside the home in a nursing home or assisted living community for up to 12 months before the reverse mortgage becomes due and payable.
Alternative options for seniors are a HELOC (home equity line of credit), renting your primary residence to pay for your assisted living expenses, or finding a senior living bridge loan.
Veterans or their widowed spouses can get financial support through the Veterans Pension and Survivors Pension benefit programs.
Veterans and surviving spouses eligible for a VA pension may qualify for additional monthly benefits beyond the normal pension amount if they need daily assistance. These additional payments are known as the Aid and Attendance benefit.
The Aid and Attendance benefit along with the basic pensions may provide $2,170 or more per month toward the cost of several types of care, including assisted living and memory care.
This option is best for veteran seniors who are close to affording assisted living but need a bit of financial assistance to bridge the gap between their monthly income and the cost of living in an assisted living facility. Learn more and apply for Aid and Attendance benefits here.
Do Assisted Living Facilities Accept Medicare or Medicaid?
Medicaid is partially funded by the government and partially funded by the states. Qualifications for Medicaid vary, but typically Medicaid is designed for individuals with low income and few assets.
Almost all state Medicaid programs cover some aspects of assisted living, such as medical exams, medication management, and nursing care. However, Medicaid does not typically cover an assisted living facility.
Medicare is a type of health insurance for people aged 65 and older. Medicare typically only covers a short-term stay in a skilled nursing or rehabilitation community while an older adult is recovering from an illness or injury. It may also cover in-home rehab care performed by a home health nurse or therapist.
Medicare does not typically cover the expenses associated with assisted, independent, or retirement living at an assisted living facility.