7 Practical Ways to Pay for Senior Living
The cost of senior living can vary based on living options and levels of care, and once the need for senior living becomes a reality, how to pay for it becomes one of the biggest concerns for seniors and their families. However, with strong financial planning and thorough research, you can cover the cost of senior living.
Let's look at 7 practical ways to pay for senior living costs.
1. Personal Savings and Investments
Many seniors have planned for the potential cost of long-term care and can pay for it with personal savings and investments. If you are one of those lucky ones, congratulations.
It's important to save up enough to pay for at least 20-30 years of senior living since you can't predict the future.
Regular contributions to 401(k), IRA, and other investment accounts can be used to pay for independent living, assisted living, and memory care communities. It's recommended to start saving up for retirement as soon as possible since it takes decades to save up enough.
For those who have worked in jobs with defined benefit pension plans, these pensions provide a guaranteed monthly income for life. This steady income will be helpful in paying for retirement living costs.
2. Life Insurance Policy
Most think of life insurance policies for death benefits. And that's what you could potentially use it for.
However, life insurance policies can be cashed in using the proceeds to fund senior living while retaining some death benefits. That's ideally how you would like to use it, especially if you are considering a senior living community.
Another option is to surrender your life insurance policy for the cash value without receiving any death benefits.
Reviewing the terms and conditions of cashing in your policy with your insurance provider is essential. Also, you could set up your life insurance policy right when you purchase it, so you don't have to worry about restrictions when you try to get your money.
3. Long-term Care Insurance
Many people don't think long-term enough. But, if you currently have long-term care insurance, you're in luck.
Purchasing long-term care insurance early, ideally before health issues arise, can result in lower premiums and more comprehensive coverage. It's a proactive step that can significantly ease the financial burden of senior housing costs later on.
Long-term care insurance policies are through private insurance companies and can help cover the cost of assisted living, nursing homes, and in-home care. They are a very good investment in your future, even if that future might seem far away for most.
Most long-term care insurance policies begin when you need assistance with activities of daily living (ADLs) such as bathing, dressing, or toileting.
These policies vary greatly depending on your health, age, and coverage amount, so make sure you speak with your insurance professional. They can give you a better idea of what to purchase, and when to cash it out.
Policies typically cover senior living expenses, nursing homes, and in-home care. It's essential to review the policy details to understand what is covered and any limitations or waiting periods.
4. Home Equity
If you no longer need a large home, consider selling or renting it and using the proceeds to cover senior living expenses. With the real estate market booming as it is in the United States, it's always a great idea to sell your home before the bubble bursts.
Another great option is a reverse mortgage, which allows homeowners aged 62 or older to borrow from their home's equity. This is because, for many seniors, their home is their most significant asset.
This can be a more risky endeavor, but if you don't wish to sell your precious home, where you have built up so many memories, then this is a good idea.
Reverse mortgages have specific rules and requirements, so consult a financial advisor before taking one out.
Short-term bridge loans can cover senior living costs until longer-term funding sources, such as the sale of a home or approval for benefits, become available. These loans are typically arranged through financial institutions that specialize in senior living financing.
5. VA Aid and Attendance Benefits
If you're a veteran or spouse of a veteran, the VA Aid and Attendance benefit can help cover some of the costs associated with long-term care, including assisted living.
This benefit provides monthly payments added to the monthly VA pension for qualified veterans and spouses.
Veterans enrolled in the VA health care system may have access to a range of services, including long-term care community and community living centers, which ensures you can afford senior care.
To see if you qualify, review the requirements here.
6. Medicare
Although Medicare does not cover the cost of a senior living community, it will cover health-related expenses related to your stay.
Medicare will cover skilled nursing by a certified nursing professional or doctor.
It may also cover costs associated with assisted living, such as transportation to doctors' appointments, preventative health services, or medication management.
7. Medicaid
Federally funded and state-regulated Medicaid provides health coverage for seniors with limited financial resources.
Medicaid eligibility varies by state and is based on income, assets, and medical needs. Seniors may need to "spend down" their assets to qualify, but exemptions and protections are in place to prevent impoverishment.
While Medicaid won't cover the cost of room and board in a senior living community, it can cover services such as medication management and on-site therapy.
Many states offer Medicaid waivers that provide financial assistance for home and community-based services, allowing seniors to receive care in assisted living communities or at home rather than in nursing homes.
You must meet certain income and asset requirements, which vary by state. So, review your state requirements and make sure that your chosen community accepts Medicaid.
Pay for Senior Living in a Sustainable Manner
With strong financial planning and thorough research, there are several ways to help pay for senior living care.
Insurance options, home equity, personal savings, and investments are all financially savvy ways to fund senior living costs.
For more information, contact your local senior living community for guidance.