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How to Pay for Senior Living – 8 Financial Resources to Consider

The month of April is recognized as National Financial Literacy Month and a great opportunity to learn more about smart money management, especially when saving for retirement and potentially senior living.

While Financial Literacy Month is a great opportunity for people of all ages to take a closer look at their finances, we are going to focus this blog on the importance of Financial Literacy when it comes to paying for senior living.

If you’ve toured a senior living community lately, you probably have a list of what is important to you and your family, when it comes to finding the perfect fit. This list might include – location, care services, programming, dining, and of course, price.

Senior living costs have risen over the years, so how can you afford to make sure your loved one is moving into a community that is perfect for them and for the right price? We hope these financial resources will help you in your senior living journey.

We’ll go over a variety of financial resources you should consider when planning for senior living, most of them can be used in combination to make your money go as far as possible.

8 Ways to Pay for Senior Living

1. Veterans Benefit

Is your loved one a Veteran, or the spouse of a Veteran? You may be eligible for the VA Aid and Attendance Benefit.

What is the Aid and Attendance Benefit?

This benefit provides monthly payments in addition to the monthly VA pension. It is for Veterans over the age of 65 that need assistance with Activities of Daily Living (bathing, dressing, ambulating, walking, toileting and eating).

Qualifications for the Aid and Attendance Benefit include:

1. Over 65
2. Considered a wartime veteran – served at least 90 days and served at least one day during wartime dates, but not necessarily in combat. Wartime dates are listed below.
3. Cannot be dishonorably discharged.
4. For a spouse – single, surviving spouses do not need to meet the wartime requirement but do need to have been married to the Veteran at the time of their death, must be single while applying and must not have remarried after November 1, 1990.

Wartime dates include:

• World War II: December 7, 1941- December 31, 1946
• Korean Conflict: June 27, 1950- January 31-1955
• Vietnam Era: August 5, 1964- May 7, 1975, for Veterans serving ‘in country’ before that starting date the period is extended to February 28, 1961 – May 7, 1975
• Gulf War: August 2, 1990 – a set date to be determined by Presidential Proclamation or federal law

The VA Aid and Attendance application process can be intimidating, we encourage you to go in person to a VA Regional Office location for further assistance or to submit an application. Click here to find a VA location near you.

2. Life Insurance

There are a few different options to look at when using life insurance to pay for senior living.

1. Life Settlement– the policy holder sells their rights to collect the death benefit from their policy and stop making monthly premium payments in exchange for an immediate lump sum of cash.
2. Viatical Settlement – similar to the life settlement, but designed for terminally ill individuals.
3. Accelerated Death Benefit– enables someone who is diagnosed with a terminal illness or qualifying medical condition to receive a portion of their death benefits in advance.
4. Death Benefit Loans – loans taken against the cash value of the policy, not the death benefit. These must be re-paid or the death benefit will be reduced.

3. Assisted Living Loans

These loans are designed to cover short term financial gaps, typically for periods of less than 2 years. They are ideal for families dealing with unexpected senior living costs and waiting for other resources to be available.

4. Long Term Care Insurance

Important to note about long term care insurance- you must have a policy in place and have been paying towards it for it to be a truly beneficial tool for paying towards senior living. The older you are when you take out the policy, the higher your monthly payments may be because you will be paying towards the policy for less time before needing access to it.

What to consider when deciding on a Long Term Care Insurance policy:

1. Care Allowance – the amount of money a policy will pay out on a daily or monthly basis.
2. Deductible- what is the appropriate deductible with consideration to the policy holders other resources (how much will the policy holder need to pay out of pocket before the benefits kick in).
3. Monthly Premium – what can you afford to pay towards the policy on a monthly basis.
4. Elimination Period – the number of days the policy holder must require care before benefits are available.
5. Payout Duration – what duration of time should the policy cover.
6. Daily Allowance vs. Expenses incurred
7. Policy Cancelation – can you receive money back if the policy is cancelled, what are the fee’s for this.
8. Non-care expenses– coverage for medication or medical equipment.
9. Definition of care – how is care defined by the policy.
10.  Cancellation of the policy by insurance company – is renewal guaranteed or can the policy be cancelled by the insurance company.

If you are someone in good health, it is best to start thinking about setting up a Long Term Care policy around the age of 60.

5. Reverse Mortgage

What is a Reverse Mortgage – a reverse mortgage is a type of loan available to homeowners who are typically 62 or older. It allows the borrower to convert a portion of their home equity into cash while retaining ownership of the property. The name reverse mortgage comes from the fact that unlike with a mortgage, where the homeowner makes monthly payments to a lender, in a reverse mortgage, the lender makes payments to the homeowner.

Qualifications for a Reverse Mortgage:

1. Must be at least 62 years old.
2. Own the home outright or have a low mortgage balance that can be paid off with the proceeds from the reverse mortgage.
3. Reside in the home as their primary residence.
4. Have enough equity built up in the home.

How it works – once you qualify for a reverse mortgage, homeowners can receive payments from the lender in multiple ways: a lump sum, monthly payments, a line of credit or a combination of these options. The amount available depends on homeowners age, appraised value of the home, and current interest rates.

Repayment – repayment is typically due when the homeowner no longer occupies the home as their primary residence. This could mean they move out, sell the house, or pass away. At that point the loan balance, including accrued interest and fees must be repaid. Typically repayment is made by selling the home and using proceeds to pay off the loan.

Pro – Reverse mortgages are non-recourse loans, which means that the homeowner or their heirs are not personally liable for repaying more than the value of the home at the time of repayment. If the home is sold for less than the loan balance, the lender absorbs the loss, neither the homeowner nor their estate is responsible for the shortfall.

Con – as we noted above once the person or people who took out the reverse mortgage move out of the house, the loan needs to be repaid. This option might work best for a couple where one person needs to move into a senior living community but the other is able to stay, safely at home. Be sure to list both partners on the reverse mortgage so that it only has to be repaid once the last borrower moves out.

6. Personal Savings and Investments (retirement accounts, investments)

If you have investments or retirement accounts, these can be used towards paying for senior living.

7. Social Security

Although social security payments will most likely not cover the full amount of your monthly assisted living cost, it can be used towards your monthly bills to help offset the monthly cost.

8. Family Support

It is becoming increasingly common for family members to supplement some of the assisted living monthly cost for their parents.

We understand that looking through all of this information may seem overwhelming, there are plenty of resources including estate and financial planners who will work with you and your family to come up with the best plan to pay for senior living.

If you are interested in learning more about your senior living options or want recommendations for a financial planner to work with, be sure to reach out to our community Sales Director and they will be happy to help!

We’re here to answer any of your questions, please contact us if we can provide further information or if you would like to schedule a personalized tour. 

Sources:
NVF.org
Bankrate.com
Payingforseniorcare.com
Reviewcounsel.org