The cost of assisted living is a big barrier for many family carers considering placing a loved one in such a community. It’s possible you’ve hired an in-home carer and/or have friends that have been helping out when you need assistance for caring for your loved one.
For a while, at least, this method has been effective. However, there may come a time when the cost of maintaining your loved one at home exceeds that of assisted living. When you consider the ongoing expenses of property ownership, this becomes even more apparent.
As per the Genworth’s 2021 Cost of Care Survey, the yearly median cost of assisted living in the United States is less than the annual cost of 44 hours per week of in-home care.
Consequently, knowing the cost of assisted living and ways to pay could begin preparing your family for the future, depending on how much care your loved one requires.
Average Monthly Fee For an Assisted Living Facility
About half of the over 800,000 people staying in assisted living facilities in America are aged 85 or older. The importance of assisted living facilities may be easily understood by looking at the figures that are collected from across the country.
As you look for assisted living facilities for yourself or a loved one, the cost will be a major factor.
You are not alone if you find calculating the cost of assisted living difficult. Many factors, such as the capacity of the assisted living facility, the services provided, and the level of care needed, affect the upfront, monthly, and a la carte costs.
As of 2021, the median cost of assisted living in the United States was $54,000 per year, or $4,500 per month, as reported by Genworth Financial.
Costs of Assisted Living vs. Aging at Home
Making a plan for where you will spend your retirement years is a major life choice. The choice to age in place in one’s current or a smaller dwelling is a viable one.
Medical alert systems allow the elderly to continue living independently while providing the peace of mind that comes from knowing that assistance is only a click away should the need arise.
However, aging in place may not be the most ideal option financially for seniors who require additional assistance with ADLs, including basic hygiene, clothing, and medication management. Further, as you may need the assistance of a home healthcare assistant or homemaker to help you maintain your health and improve your quality of life, these supplemental services can be quite costly.
The average cost of assisted living in the United States is lower than the expense of receiving in-home care, which may be a surprise. Costs for home health aides and homemakers in 2021 averaged $61,776 and $59,488 per year, respectively, as reported by the Genworth Cost of Care Survey.
Relocating to an assisted living community can save you over $7,000. The median cost of assisted living care was $54,000 per year.
Factors That Affect Aging in Place Costs
Aging in place requires a significant financial commitment beyond the typical monthly rent/mortgage and utility bills. For seniors who prefer to age in place, the cost of making necessary safety and comfort upgrades to their homes must be considered.
Walk-in bathtubs, grab rails and bars, and expanding doorways are all relatively pricey additions to a home that may be required as you age in place and should be factored into your budget accordingly. An example cost is the $2,000-$5,000 needed to install a stair lift.
Factors That Affect Assisted Living Costs
Understanding the elements that affect assisted living expenses is the key to getting the most out of your money while searching for a suitable assisted care home. Each state’s average cost of care will help you make an informed decision when you research assisted living facilities.
The average cost of assisted living is $4,500 monthly. However, this number can vary greatly from one facility to the next.
For example, the cost of assisted living in Missouri is $3,000 a month, but in the District of Columbia and Rhode Island, it’s close to $7,000.
The size of your apartment, the amenities available in the assisted living facility, and the degree of care you need were also important considerations when pricing assisted living. It may be possible to receive additional hospitality and care services for a supplementary cost each month.
The cost of memory care, which requires a higher level of medical expertise, will rise.
Options to Pay For Assisted Living
There are a few strategies to avoid most of the financial burden associated with assisted living, despite the fact that the cost of assisted living varies widely and can often feel daunting.
1. Benefits For Veterans
Several types of situations qualify for residential care coverage under the Veterans Administration’s benefits program:
Benefits can cover assisted living costs if your loved one or their spouse sustains injuries or impairments due to their military service.
If a disabled veteran’s (or their spouse’s) income is below a specific limit, they may be eligible for Aid and Attendance benefits.
The Veterans Administration can be a hard and time-consuming process, but it is necessary to ensure that your loved one receives the benefits to which they are entitled.
Consider teaming up with a geriatric planner familiar with the system’s specifics which can make applying for benefits easier. In addition, it is common for retirement communities to have financial advisory services to help you navigate the benefits application process.
2. Life Insurance
Although most people get life insurance to provide for their loved ones after they pass, the policy’s “living benefits” can be used for the insured person’s own expenses. Based on the policyholder’s age, health, and the number of their monthly premiums, the insurance company will buy back the policy for 50-75% of its face value.
Some policies are more flexible than others, but most do not provide “accelerated” or “living” benefits until the insured is diagnosed with a terminal illness.
Other possibilities exist to examine if your loved one’s insurance coverage doesn’t provide living benefits. As an illustration, they can receive a “life settlement” or “senior settlement” from a third-party corporation, often between 50% and 75% of the policy’s value.
Once the insurance is purchased, the monthly premiums are the obligation of the third-party company, which also benefits from the full amount of the policy upon the death of the original policyholder.
Life assurance, often known as a “life insurance conversion program,” is another alternative that enables seniors to turn their policy benefits into long-term care payments.
While the payout for a life insurance conversion is usually lower than that of a life settlement (between 15% and 50% of the policy value), it is an option for lower-value policies that would not be acceptable for a life settlement.
3. Pooling Family Resources
If you’re concerned about your elderly parent’s decision to live alone, your siblings and cousins may feel the same way. A group discussion can help people work together to find a solution, such as sharing resources or bartering money for more time.
If one or two family members take up most of the day-to-day caregiving responsibilities, such as transport to and from medical visits, those with less flexible working hours may opt to make a monetary contribution instead.
Siblings who have the financial means may pay for assisted living with the understanding that they will be reimbursed upon selling the family property.
Finding and choosing an assisted living facility and completing the necessary paperwork to apply for financial aid can be time-consuming and stressful. In addition, when no family member feels up to the challenge, it might generate a stalemate.
Working with a geriatric care manager familiar with your area’s services can be a tremendous comfort. If you hire a care manager, they will collaborate with you and your loved one’s entire family to provide options, overcome obstacles, and establish the best possible living situation.
Family disagreement is a common result of arguments about money. Find out more about dealing with family conflicts if you and your loved ones are having problems discussing this difficult topic. A mediator could also be of use.
4. Long-Term Care Insurance
Consider yourself fortunate if you or a loved one has health insurance that covers care services. The only thing you need to know to get your assisted living benefits from your long-term care insurance policy is how to get them.
Depending on the policy, the allocated benefit for nursing home care may be used to cover the cost of assisted living regardless of the insured person’s mental or physical condition.
The policy may also designate a certain amount to be paid straight to the assisted living facility or to the beneficiary for use in paying for assisted living.
It is too late for your loved one to buy long-term care insurance. But if you don’t want to put your family through this ordeal in the future, now is the time to get a long-term care policy.
5. Annuity
If you are concerned about outliving your retirement savings despite having amassed a sizable sum, an annuity may be a good option for you.
An annuity is a financial contract in which the buyer agrees to pay the insurer a quantity of money in exchange for a series of fixed payments over a set period, typically for the remainder of their lives.
The money you save can go further with the help of an annuity, and you can be assured that you will always have a steady income stream. Their main advantage is that payments will continue after the purchase premium has been depleted. There is a positive return on investment if you live a very long time.
The underwriter assumes the risk that you will outlive the funds allotted to you and benefits financially if you do. Although no underwriter ever enters the annuity business with the goal of losing money, you may be better off investing in an annuity than draining your savings account annually.
When applying for government assistance, such as Medicaid, an annuity will not be counted as a major source of wealth. Although the money spent to buy the annuity is not considered a resource, its income is.
An annuity can be a sophisticated financial instrument with many options. For example, some have an upfront cost in exchange for periodic payouts in the future, while others payout immediately; some have a fixed interest rate, while others fluctuate based on market conditions.
When considering which annuity option is best for you, conducting your research and consulting with a reputable financial advisor is important.
6. Reverse Mortgage
A reverse mortgage may be the answer if your family member has full or nearly full house ownership.
The equity in your house can be converted into cash through a reverse mortgage, either all at once or through a series of monthly installments. The bank sets the initial loan amount depending on a number of variables, including the applicant’s age, current interest rate, and the home’s estimated value.
There must be outstanding mortgages on the property for you to receive payments once those are settled. Even if the home’s value decreases after the loan is paid off, the borrower can continue to live there until their death. For most mortgages, the residence must be sold after the owner dies to cover the outstanding sum.
In the beginning, reverse mortgages were created to help widows keep their houses after the breadwinner’s death. The best scenario for today is when one parent requires assisted living, but the other may continue living at home independently.
Any reverse mortgage requires that at least one of the current homeowners be 62 or older.
Reverse mortgages aren’t for everyone, so weighing the benefits against the risks is important. For instance, there are better options for a treasured family home than that you intend to maintain in the family.
And finally, because a reverse mortgage is such a long-term financial commitment, it’s crucial that you partner with a trustworthy lender.
7. House Rentals
If only one of your parents is still living or if they both need assistance with day-to-day activities, the family home may prove to be an invaluable resource for you. But unfortunately, even while selling is an option, many families aren’t emotionally prepared to part with their parent’s home.
In that situation, you may utilize the rental money from the house to cover the cost of assisted living.
Even if the thought of being a landlord fills you with dread, there are services you can hire to handle all the details so you can focus on enjoying life while still making enough money to help cover the expense of assisted living.
8. Payment For Assisted Living With Medicaid
If your elderly family member has a poor income and few financial resources, they may be eligible for Medicaid, which can offset some of the cost of assisted living. Quickly and easily determine your Medicaid eligibility with our free, no-obligation assessment.
If you are unfamiliar with the name of your state’s Medicaid program, you can easily find it online. Eligibility for Medicaid varies by state, but in general, the beneficiary must have no more than $2,000 in assets (excluding their primary residence and vehicle) to qualify.
Few assisted living facilities accept Medicaid, and those that do often have a shortage of available beds. Consult your local Area Agency on Aging to learn more about your area’s many long-term residential care facilities.
Get free advice from a governmental health insurance advisor to help you navigate the complexity of applying for public benefits.
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