The biggest fear many have when making senior living decisions is what it will cost. The fees for assisted living facilities at first glance may seem quite high. Keep in mind though all that assisted living covers: housing, at least some meals, and help with your daily needs. Beyond assisted living and your medical expenses, you will likely need to spend very little, if anything. Assisted living is usually paid for using long-term care insurance, personal funding, or veterans benefits. These funds may be supplemented by social security.
Long-Term Care Insurance
Long-term care insurance covers services that help people who need medical or non-medical care over a long period of time. It will cover assisted living if you cannot perform two or more “activities of daily living” (ADL), such as walking, using the bathroom, or getting dressed. You may have to have an examination by a doctor chosen by the insurance company to be sure that you qualify.
The benefit is often structured so that the policy has a daily limit, usually $100-$150, and a lifetime maximum, for example $250,000. Some policies have an elimination period, an amount of time during which you must pay for your own care (similar to a deductible).
As you grow older, your premium is likely to rise since the older you get the more likely you are to require long-term care. If the premium rises beyond your ability to pay, the insurance company will likely offer a lower premium in exchange for reduced benefits. In some but not all plans, you no longer have to pay your premium once you begin using the benefit.
Money to pay for assisted living may come from retirement funds like Individual Retirement Accounts (IRAs), pensions, or 401k plans.
People also use the funds from the sale of their home. A home purchased 40 or 50 years ago will yield quite a bit of equity that can go towards senior care. If you are unable to find a buyer by the time you need to move, you may be able to get a bridge loan to help pay for your care. This loan provides immediate funding, which you then pay back when your house does sell. You can usually gain at least a few extra months to sell your home before you need to start making payments on the loan.
If you don’t want to sell your home, there are other options available. You may be able to rent it out, thus giving you a monthly income. You may also be able to take out a reverse mortgage, where you receive money drawn against the equity you have in your home. You can receive this money as a lump sum, monthly payment, or revolving line of credit. Keep in mind that your spouse (or someone who owns the home with you) must still be living in your home for you to qualify. Also, the starting costs associated with these loans can make them quite expensive.
With any of these financing options, if you have relatives who are in a position to lend you money in exchange for equity in your home, you may be able to come up with a similar arrangement privately, rather than borrow from a bank or other company. Consult with a lawyer to learn more about this option.
Veterans benefits may be able to help you finance care in an assisted living facility, if you or your spouse served in the military. This is the Aid and Attendance tier of the Improved Pension offered by the Veteran’s Administration. You do not need to have any sort of injury related to your service, though you must have been on active duty at least 90 days and one day during wartime. You also must have less than $80,000 in assets. You’ll need to file the Veteran’s Application for Compensation and/or Pension (VA Form 21-526, Parts A, B, C, and D).
A Note on Medicare and Medicaid
First, you should know that some assisted living facilities, including Raya’s Paradise, only accept long-term care insurance or private funding. Also be aware that Medicare does not pay for assisted living as assisted living is not medical care but rather assistance with your daily needs (Medicare will pay for medical expenses incurred during the time you are in the assisted living facility, such as your prescriptions or visits to the doctor). Medicaid might pay for a limited stay (often 90 days or fewer), but even then, coverage is limited. In some states Medicaid pays for the personal care services you receive, and in others it pays for room and board as well. Medicaid does not currently pay for assisted living in the following states: Pennsylvania, South Carolina, Alabama, Kentucky, and Louisiana, though it is likely that there will be national coverage in the coming years.
Finally, you may be eligible for tax deductions that can also help pay for senior living expenses by reducing your tax liability. You can learn more by doing research at www.irs.gov on the Elderly and Disabled Tax Credit and Medical Expense Tax Deductions, and on your state’s elderly care tax credits. You may also find it helpful to talk to an accountant.