Paying for Senior Care - Exploring Financial & Assistance Options for Senior Living

Article Summary

This article provides an overview of the various options available to pay for senior living, including insurance strategies, tapping into home equity, and taking advantage of government assistance programs.

Key takeaways:

1. Long-term care insurance, hybrid insurance policies, life insurance with an LTC rider, and annuities are all options to pay for senior care.
2. Reverse mortgages and liquidating assets are other ways to pay for senior living.
3. Veterans have access to a range of benefits and programs, and Medicaid covers long-term care for those with very little income and assets.

What Are My Options to Pay for Senior Care

Aside from using personal savings, other ways to pay for long-term care include various insurance strategies, tapping into home equity, or taking advantage of government assistance programs.

Insurance

Life insurance, long-term care insurance, and annuities are often used to pay for senior care.

• Long-Term Care (LTC) Insurance can offset the costs of long-term care but it generally must be purchased quite a bit before it’s needed – it gets very expensive as people age or develop serious health conditions. Policies don’t always cover care in every type of senior living setting, so look closely at the terms of each specific policy.
• Hybrid Insurance Policies combine life insurance and long-term care insurance so you can pass a death benefit on to a beneficiary if you don’t end up needing long-term care. Most hybrid policies are more limited than traditional LTC insurance, covering only five years of long-term care payments.
• Life Insurance with an LTC Rider or Accelerated Benefits allows you to access life insurance benefits early if needed to cover long-term care expenses.
• Annuities are special contracts with insurance companies. They provide a reliable stream of income and assistance over time in exchange for an upfront lump-sum payment. Different types of annuities exist for different circumstances, such as paying for long-term care or planning for Medicaid eligibility.

Tap Home Equity

Many seniors sell or rent out their homes in order to pay for senior care. In some cases, they get creative – for example, by selling to a family member who, in turn, rents it back to them.

Reverse Mortgages are loans for older homeowners who owe little or nothing on their primary residence. A reverse mortgage provides a lump sum or monthly income that can be used to pay for needs like long-term care. Instead of making payments on the loan, it gets larger over time. You pay back the entire amount borrowed, plus any upfront and ongoing fees when you die, sell the home or move out.

Liquidate Assets

Selling artwork, jewelry, collectibles, extra vehicles, or other assets can sometimes provide enough cash to cover long-term care needs.

Government Programs

Veterans have access to a range of benefits and programs. Some offset the costs of long-term care and others provide board and care in nursing homes, assisted living facilities, group homes, or other senior living settings.

Medicaid covers long-term care for individuals who have very little income and very few assets – provided they haven’t compromised their eligibility by giving away assets, for example. Many seniors plan ahead for Medicaid eligibility or engage in complicated Medicaid planning strategies in order to keep their spouse out of poverty or protect certain assets to pass on to their loved ones. Can be a good route for assistance.

How Much Does Senior Assisted Living Cost?

The national average cost of care per month (Genworth Cost of Care Survey, 2021):

In-home care (40 hours per week)

Homemaker services: $4,506

Home health aide: $4,680

Community and Assisted Living

Adult Day Program: $1,690

Assisted Living: $4,500

Nursing Home

Shared room: $7,908

Private room: $9,034

Use the Genworth Cost of Care Calculator to break down costs based on:

• Location
• Period (hourly, daily, monthly, or annually)
• A different number of weekly home care hours
• Estimates for the future

Who Can Help me Take the Next Step for Senior Care?

Depending on your situation, different professionals may be most helpful in helping you pay for senior assisted living.

Certified Financial Planner

A CFP will look over your entire financial picture, analyze your options and help you develop a plan to pay for senior living and meet any other financial goals. Read more about finding and selecting the right CFP here.

Insurance Agent

Look for an agent specializing in the type of insurance you’re interested in exploring – long-term assisted living or home care insurance, life insurance with an LTC rider, annuities, etc. Learn about finding and selecting the right insurance agent here.

Reverse Mortgage

Find a reverse mortgage counselor at the U.S. Department of Housing and Urban Development (HUD) Directory of Counseling Agencies. A HUD-approved counselor can help you determine whether a reverse mortgage would be a sound move in your situation and guide you to finding a reputable lender.

Veterans Benefits

The veterans' benefits available to you vary based on a number of factors such as your need, service history, and location. Learn more at the U.S. Department of Veterans Affairs website.

Medicaid

If you have less than $2000 in monthly income and less than $2000 in assets, you can apply directly for Medicaid.

If you’re interested in planning ahead for Medicaid eligibility, there are a number of different types of professionals who can assist. The American Council on Aging’s Medicaid Planner Finding Tool can help you find the best planner for your situation.

Author Bio

Laura Herman is an elder and dementia care professional who advocates for better senior care in America. This article has been reviewed by TJ Falohun, co-founder and CEO of Olera. He is a trained biomedical engineer and writes about the cost of healthcare in America for seniors.

Sources

The Long-Term Care Annuity

Annual Report on Long-Term Care Insurance: 2021

Is Hybrid Long-Term Care Insurance Right for You?

Should I Get Hybrid Long-Term Care Insurance? | Policygenius

Health Savings Account (HSA) - HealthCare.gov Glossary

HSA savings can be used for long-term care in retirement | Employee Benefit News

How HSAs (Health Savings Accounts) work with HDHPs | HealthCare.gov