7 Options to Pay for Senior Housing Now and Later

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Your parent’s future might be a topic that they don’t want to face, or perhaps you have been in denial.  It can be a complicated issue, filled with challenges and difficult decisions. However, many families find that in the end, their parent is happier and healthier having made decisions ahead of time.

One of these decisions may be about if and when they should move into senior housing, or the supportive services of an assisted living or memory care community. When this happens your family will have to discuss how to pay for this expense.  The cost of senior housing can be challenging for some families with fixed incomes or who have not planned for future care.  Don’t panic; there are ways to overcome financial hurdles and get to a happy ending.  This article will walk you through the best options and resources for your family to pay for senior housing. 

How to Pay for Assisted Care

Here are a few options to consider when determining how to pay for assisted living for your parent now.

Private Pay:

If you have savings or investments that can be used to pay for care this is the best option. Of course, this may not be possible for all families.   As you assess your assisted living or care options, it’s a good idea to have a budget in mind. First, have a clear understanding of your parent’s financial picture and what finances and assets may have available. If they own their home, you may want to consider selling the house or renting it for additional income.  Second, determine if you or any other family members are able to contribute money towards expenses.

Once you have this determined, you will be able to create a budget.   Like any search for housing, the cost of an assisted living community can vary. The location, the types of amenities that are offered, and the quality of care are all things that may affect cost.  We strongly suggest that you tour and meet with multiple assisted living communities to compare costs and savings.

Veteran’s Benefits:

Under the VA Aid and Attendance Special Pension, or A&A Pension, qualified veterans or their surviving spouses can receive tax-free monthly sums to help defray the costs of assisted living. These benefits may not cover the entire rental expense, but it can supplement the long-term care costs and medical expenses in an assisted living community. We suggest that you contact your local VA office to see if your parent qualifies. 

Life Insurance:

If your parent has a life insurance policy, your family may be able to cash out the policy for a lump sum to pay for senior housing expenses.   The first step is to contact their life insurance company directly to ask about accelerated benefits.  The insurance company that issued the policy will typically purchase the policy back for 50% to 75% of its total value.  This amount can be determined by the monthly premiums, policy amount, the policyholder’s age, or their health.  Each insurance company is unique and must be contacted directly to understand their specific rules and procedures to comprehend this option thoroughly. 

Be aware that there are advantages and disadvantages of cashing out the policy. It can negatively affect the financial future of heirs. We suggest that you research your options to understand if this is a fit for your circumstance and a good strategy for your family.

Medicaid:

Medicaid is a federal program for elderly adults with low income and limited assets.  The Medicaid program is administered by each state, with each state setting its guidelines regarding support services and eligibility.   Over forty states allow some type of funding for senior housing and assisted living, but coverage can differ significantly. To best understand what may be covered under Medicaid within your parent’s specific state, visit the Centers for Medicare and Medicaid Services online. Many assisted living communities do not accept Medicaid. You’ll want to check first with any communities you are considering as well.

Planning for Future Care Expenses

It’s best for everyone to plan for the future and the care needs that you may face later in life. Here are a few suggestions to save and plan for those expenses.

Long-Term Care Insurance:

If long term care insurance has been purchased, you will want to review the specifics of their policy.  Typically, this type of insurance covers assisted living.  Long term care insurance is not traditional health insurance.  It’s specifically designed to cover the costs of supportive services when the policyholder is no longer able to care for themselves. These care services may be provided in home, at an assisted living community, for respite care, in a skilled nursing facility, or hospice care.  Long term care insurance usually covers what is not covered by health insurance, Medicare, or Medicaid. 

The bad news is only 3% of Americans have long-term care insurance. It’s recommended to purchase this insurance during middle age or younger. Otherwise, it can be prohibitively expensive later in life.  This purchase should be considered as part of retirement planning.  When you select your policy, you will have a range of benefits to choose from and decide upon. We suggest that you shop multiple options so you can compare what each policy offers and what you are most comfortable paying

Retirement and Savings

Planning for retirement and saving for your future housing or care needs is essential.  If you are just starting to put away money for retirement, start saving and investing as much as you can now. Investing when you are young will give your compound interest an opportunity to generate more earnings.  Also, contribute to your company 401K if offered by your employer.  A 401K will enable you to contribute pre-tax money to a significant advantage with less of an impact on your monthly budget.

Catch-Up Contributions

The benefit of saving early is that yearly contribution to your 401K and IRA plans are limited, but it allows you to save money over an extended period of time. If you have not been able to save enough, the good news is you can catch up once you reach 50 years old.  At 50, you are eligible to invest beyond the usual limits with catch-up contributions to IRAs and 401Ks. Catch-up contributions can give a significant boost to your retirement savings.

There are many options available to families to help find the best assisted living care for their loved one.  It is always advised to speak with a professional. Choose a professional in each of the areas of financial and estate planning to ensure you fully understand the advantages and disadvantages of using the options available. Also discuss the best way to plan for the future.

If your parent can no longer live on their own, an Aegis Living community may be the right fit for your family.   Our staff would love to give you a tour and discuss your needs in person.   Schedule a tour today at a community near you.

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