Have you decided that it’s time to start thinking seriously about moving to a senior living facility?
Many seniors admit that one of the main reasons they put off exploring senior living options is the price tag. However, if you know deep down that you’re ready for senior living, you should seriously consider moving and start exploring the options available to you.
Unfortunately, financial concerns lead to lengthy delays in seniors receiving the care, accommodations, and engagement that they so badly need. But there are many options and resources available to help pay for senior living—some that you might not be aware of.
The first step in the process is to use a senior living cost calculator to total your current living expenses and to get an idea of how they would compare to senior living. Senior care counselors (SCCs) at senior living communities can be a great source of information and a link to valuable community resources, too.
There are many ways to pay for senior living. Most financial plans draw from various sources, and exploring what options are available to you or your loved one is the first step.
1. Using Home Equity to Pay for Senior Living
Home equity is one of the most common ways that people pay for senior living. Even if you want to retain ownership of a home, or unexpected circumstances require an immediate move to senior living before a home can be sold, there are creative ways to convert the value of your home into cash.
Talking to a realtor about current market conditions and any minor improvements or staging that can be done in the short term to increase the value of a home is a great place to start. From there, here’s a rundown of different ways to use home equity to pay for senior living:
- Outright Sale: Listing a home and selling it outright is often the foundation of financial planning for senior living.
- Reverse Mortgage: When one spouse or family member wants to remain in a home while the other moves into senior living, a reverse mortgage can pay out home equity gradually in the form of monthly “reverse mortgage” payments that can be used to pay for senior living.
- Bridge Loan: If a medical event or sudden changes in circumstances require a move to senior living before a home can be sold, bridge loans can provide cash to pay for short-term expenses until a home can be prepared for sale, listed, and sold.
- Rent Back: Sometimes a family member buys his or her parents’ home and then “rents it back” to one of the parents while the other parent moves into senior living.
Given that 80 percent of people over the age of 65 are homeowners, home equity will likely continue to play a key role in paying for senior living and financing long-term care costs.
2. Using Life Insurance to Pay for Senior Living
Life insurance policies were originally designed to protect families from financial losses resulting from an untimely death. More and more, however, life insurance policies are playing key roles in paying for senior living costs.
Converting life insurance policies into a long-term care benefit plan, seeking out policies that combine life insurance and long-term care insurance, and using an accelerated death benefit are all ways to convert life insurance policies into cash that can be used to pay for senior living:
- Long-Term Care Benefit Plans: Most term, universal, whole, and group life insurance policies with a death benefit of $50,000 to $1 million can be converted into long-term care benefit plans that make tax-free payments directly to senior living providers.
- Combination Products: Policies that combine long-term care insurance (LTCI) and life insurance (sometimes called “hybrid products”) will pay out in the form of a long-term care benefit or in the form of a standard death benefit.
- Accelerated Death Benefits: Adding an accelerated death benefit (ADB) rider to a life insurance policy will trigger a cash benefit that can be used for many types of senior living and long-term care by providing a monthly stipend equal to a percentage of the policy’s total value.
- Life Insurance Settlement: Selling a life insurance policy for current cash value (usually only women older than 74 and men older than 70 qualify) can be used to pay for senior living.
Life insurance policies and long-term care costs have become increasingly linked in recent years. Options might exist today that didn’t exist when a policy was purchased. A senior care counselor can be a great resource to check with about available options.
3. Using Government Benefits to Pay for Senior Living
Medicare does not cover senior living costs, but other government benefits might be available depending on individual state guidelines and individual circumstances. Again, talking to a senior care counselor, or visiting an Aging and Disability Resource Center, can be a great place to start.
Government benefits available for senior living are typically based on an individual’s location, personal finances, and military service:
- Federal Benefits: The U.S. Department of Housing and Urban Development (HUD) operates senior housing programs that provide rent subsidies and additional support to low-income elderly seniors.
- State Benefits: State-run Medicaid programs each have different rules and guidelines, but low-income seniors (typically those who earn less than $12,000 per year) with limited assets might qualify for housing assistance that can be used for some types of senior living.
- Veteran Benefits: Veterans and their dependents might qualify for housing assistance through the Department of Veterans Affairs (VA) that can be used toward the cost of senior living and long-term care.
Although Medicare Part A and Part B do not provide coverage for senior living or long-term care, other government assistance options might be available for those who meet certain qualifications.
Adding It Up: Top Ways to Pay for Senior Living
The prospect of paying for senior living can feel so daunting that many seniors don’t even explore what options might be available to them. The first step is to use a senior living cost calculator to compare your current living costs to senior living. Converting home equity into cash, leveraging life insurance policies, and falling back on government benefits can provide a path forward. Many seniors use a “piecemeal” financing approach that draws from one, two, or even all three sources of funds to pay for senior living. A senior care counselor can help you put the puzzle pieces together and find a path forward.