Paying for Assisted Living

When your elderly loved one is still physically, mentally, and socially active, interested in pursuing some of their interests, and fairly independent but, at the same time, also requires assistance with some activities of daily living (ADLs), then they may be ready to join an assisted living community.

Assisted living is an ideal retirement option for seniors who do not have any health problems that require specialized or professional care, but who may struggle with bathing, going to the toilet, getting dressed, getting up, preparing meals, eating, and/or managing medications and keeping track of their vitals. The transition to an “assisted lifestyle” typically does not bring about major changes in their daily routine and, in fact, allows them to continue living their life to the fullest.

Assisted living costs vary based on location, personal needs and preferences, available amenities and services, and many other factors. Let’s take a look at your options for funding your loved one’s assisted living needs and how you can save money on assisted living.

Assisted Living Costs

Because assisted living is more about maintaining a certain lifestyle and not about managing a serious health issue, assisted living costs are not covered by Medicare. According to Genworth’s 2020 cost of care survey, the median cost of assisted living in the country is $4,300 a month. The cost in your area may be lower or higher, as determined by the local cost of living, personal preferences, and level of assistance needed, among others.

Private funds are the most common financial resource for many families. One or a combination of the following fund sources are often used to cover assisted living costs:

Retirement account
Pension payments
Personal savings
Family contributions

Some types of insurance may also help cover assisted living costs.

Medicare may only cover the cost for some basic health care provided to an assisted living community resident, such as insulin injection fees.
Private health insurance may cover the cost for skilled nursing or health care needs, but not the cost for personal care, such as bathing and dressing.
Long-term care insurance (LTCI) offers more coverage for assisted living costs, but the policy usually has to be taken up before the life assured (the elderly) turns 80 and often only becomes applicable when the senior requires assistance with at least two ADLs. also known as senior care insurance or nursing home care insurance, LTCI premiums are often considerable; the insurance may be worth the investment if your loved one had made the decision early enough to move into an assisted living community.
Life insurance — whether it’s your senior loved one’s policy or that of another family member — can be converted into cash to help cover assisted living costs. The policy can be sold at market value to a third party, with the original policy holder’s death benefits retained; alternatively, the policy can be surrendered back to the life insurance company for its entire cash value, in which case the death benefits will no longer be retained.

Other Funding Options

Home equity

If your loved one is a home/property owner, they can leverage their home ownership in several ways to cover their assisted living costs. Selling or renting the home is often the choice made by the senior homeowner if their house will be left vacant once they leave.

If cash is needed asap, such as to make a downpayment to the assisted living facility, a bridge loan using the house as collateral can provide cash quickly. Bridge loans are also a good short-term funding option if your loved one is just waiting to sell their property.

A reverse mortgage is also typically offered to senior homeowners who need to supplement their income. They can convert their home equity into cash without paying for monthly mortgages. The loan can be used to cover their move to an assisted living community while ownership of their home is retained.

Government Benefits

Military veterans or their spouses may qualify for the Department of Veteran Affairs’ pension program, which can cover some of the costs of senior care in an assisted living community.

The Federal Long-Term Care Insurance (FLTCI) is available to federal and postal employees and annuitants, as well as qualified family members. Signing up for FLTCI must be done before retirement, and approval is conditional on medical underwriting results.

How can you save money on assisted living costs?

Even after you have figured out how to cover the cost of your loved one’s assisted living needs, you can explore other ways to save more money.

Ask about special offers and discounts

Some communities offer moving-in discounts during certain months of the year when move-in rates are slow or when moving in at the end of the month. Discounts may be in the form of a waived entrance fee or lower monthly rates for the first few months or so. You may also inquire if you can get a discounted rate or even a month free if you sign up for an extended lease or make a lump sum payment.

Compare package vs a la carte costs

Your assisted living community may offer the option to pay for services a la carte, depending on what your loved one needs, or to get the package rate, which includes the rent fee and all available services. If your family member only needs assistance with a few ADLs and can manage well on their own with other activities, or if another family member is also available to help with some of their care needs, you can save money by only paying for specific services.

All-inclusive pricing is, of course, always a better deal, particularly for long-term care needs. Do the math to figure out which option will be more cost effective.

Choose a shared room

Choosing a shared room is not only cheaper but may also be beneficial in terms of providing your loved one with constant companionship.

Hire a senior move manager

This might seem counterintuitive as you would be paying for additional services, but a senior manager may be worth their fee as they can help to significantly reduce moving expenses and organize the sale of some of your loved one’s possessions.

Explore financial assistance programs for low-income seniors

Check out the National Council on Aging’s (NCOA) website for a list of senior benefit programs for which your loved one may qualify. Most of these programs help cover the costs of medications, eye care, hearing care, dental care, food, and/or energy bills.

Take advantage of tax credits and deductions

Your loved one may qualify for senior living tax deductions of up to $7,500 if they are chronically ill or require assistance for at least two ADLs. You may be eligible for caregiver tax credits if you are paying for at least 50% of your loved one’s assisted living costs.

Final Thoughts

Assisted living can be costly, especially when the need for such a service happens with very little time to prepare. If planned early enough, your family can make sure that your elderly loved one will get the best care they deserve without worrying about the costs.

Your loved one can take up a long-term care insurance early enough so they’ll be well covered when the time comes for them to move into a community. Or your family can plan how to free up assets ahead of time for when the move becomes necessary. Signing up for a life insurance policy may also be a good savings option intended for future assisted living costs, as the policy can be converted into cash. A retirement insurance plan can also be used later to cover assisted living costs.

Saving money on assisted living should not mean compromising the quality of care your loved one receives. Explore all money-saving options available; weigh the pros and cons; but always prioritize your loved one’s well-being and quality of life.