Each year, the cost of assisted living has steadily risen. Depending on what level of care your loved one needs, assisted living can be much more affordable than nursing home care or long-term in-home care. Often nursing homes don’t allow flexibility in services and you pay a flat fee for services, where assisted living communities range from an apartment with services for extra fess to all-inclusive packages.
Although, financially speaking, assisted living might be your best bet, for most families, savings and Social Security income aren’t enough to pay for assisted living. And if you think Medicare will cover the cost of assisted living, think again. Medicare won't pay for assisted living beyond short-term rehabilitation.
However, there are plenty of strategies that can help your loved ones afford senior living without compromising the quality of care. Here’s a look at five ways to cover assisted living costs.
- Apply for Veterans Benefits
Veterans and veterans’ survivors who are eligible for a Veterans Affairs pension and who require the aid and attendance of another person or are housebound may be eligible for additional $2,000 per month in veteran’s aid. These benefits are paid in addition to the monthly pension, and they are not paid without eligibility to pension. When applying for Aid & Attendance, your parents can deduct the cost of monthly recurring medical expenses from their countable income including some senior care costs if they require the daily assistance of another person to perform normal living activities. This includes the fees they pay for home care, assisted living or a nursing home. Apply online using eBenefits, work with an accredited representative or agent, or go to a VA regional office and have a VA employee assist you.
- Use a Life Insurance Policy
If your parent has been paying premiums on a life insurance policy for a decade or longer, they can leverage their life insurance policy to provide financial support now. Consumer Reports recommends withdrawing the cost basis — what was paid in premiums — to avoid owing tax. If they cash out the entire policy with the insurance company that issued it, these accelerated benefits, sometimes called living benefits, are usually between 60 and 80 percent of the policy's face value, and they’ll pay income tax on everything but the cost basis. If the company that issued the policy won't cash it in, your loved one can also sell the policy to a third-party company in return for a life settlement, or senior settlement, which is usually a lump sum of 50 to 75 percent of the policy's face value plus tax.
- Set Up a Reverse Mortgage
If your parents are 62 or older and trying to finance assisted living care for one of them while the other remains at home, a reverse mortgage will allow them to convert some of the equity in their home into cash. Depending on the loan type, they can get a lump sum or draw down the money as needed. However, reverse mortgages aren’t without their own significant closing costs and fees, and borrowers are still responsible for home insurance, property taxes and home maintenance expenses
- Ask About Price Flexibility
Most assisted living facilities offer at least one of three models for billing their residents.
- All-inclusive model groups the costs for monthly rent, meals, housekeeping, laundry, transportation, security, personal care, recreational activities and nearly everything else residents require in assisted living into a single monthly bill.
- Tiered pricing, or levels-of-care model, places seniors in a price tier that entitles them to a given number of hours of care (e.g., individuals who require very little or no extra care would be placed in the lowest level of care, which would also be the least expensive).
- Fee-for-services model, residents are charged a flat monthly fee for rent or for rent and meals, and each service provided comes with an additional cost.
Choose an assisted living situation with a flexible pricing structure, and before your parents sign a contract, ask about move-in incentives and whether they might be willing to negotiate the monthly price. The official cost might not be set in stone.
5.Consider a Different Location
As with other types of housing, the cost of assisted living varies by location. If the nearest assisted living community is out of your budget, the suburbs or outlying communities may be more affordable. Rent within communities vary based on location and size, too. If your parent is able and willing to be farther from the dining room or even willing to share a one-bedroom apartment, they could save up to 50 percent of the rent, depending on the facility.
Although the cost of assisted living is rising, you can make a plan to finance the move and defray the cost of long-term care.