3 Ways to Pay for Assisted Living and Senior Care

paying-for-assisted-living

Medicare sometimes covers nursing home stays for elderly residents if they meet certain requirements, including a need for skilled nursing care. But if you or a loved one opts for an Assisted Living Community or if you don’t qualify for Medicare to pay for your nursing home stay, you may have to pay out-of-pocket for all expenses.

There are a few ways to do this. Not all of these options will work for everyone, as some people may not have the resources available. No matter your age, the time to start planning for long-term care is now. Let’s look at a few options to pay for senior living care.

Private Insurance
Whether it’s cashing in a whole life insurance policy to using a long-term care insurance policy you’ve paid into, private insurance has become a popular option to pay for long-term care.

If you have a whole life insurance policy, you can cash it in at any time. There may be some tax penalties or early withdrawal penalties associated. The benefit is that, if your life insurance policy is large enough, you won’t have financial worries about how to pay for your long-term care, and you won’t have to dip into other accounts, like savings or retirement. But this means there won’t be any life insurance funds available for your heirs. Make sure you have enough in savings to cover the costs of funeral, burial or memorial services you desire when you pass, so that your loved ones won’t be burdened with these costs.

On the other hand, long-term care insurance, which is a separate from life insurance, can be cashed in to pay for assisted living costs at any time. Tax Qualified (TQ) long-term care policies count as a medical tax deduction when you file income tax, and the money you receive when you cash in the policy typically is not taxable, either, making this a desirable choice for many people.

Home Equity
If you still own your own home and your mortgage is paid off, a reverse mortgage could be an option to cover long-term care costs. First, make sure your home equity will cover assisted living costs for a reasonable length of time. It’s not worth it to take out a reverse mortgage if the money will only cover your stay for a few months.

Reverse mortgages have several drawbacks and are typically a last resort when few other options are available. If you outlive the reverse mortgage, you will have to pay it back, which could mean selling the home. You still own your home, so you’re responsibility for maintenance and income taxes. When you die, your estate pays back the reverse mortgage, leaving less money for your heirs.

If you’re looking into a reverse mortgage, consider, instead, selling your home and using that money to pay for long-term care, unless there’s a compelling reason to keep your home in the family, and you or your family has the means to pay back the mortgage at the end of the term.

Government Assistance
Some seniors choose to “spend down” their assets in order to qualify for Medicaid to pay for long-term care. If you do the research, you may find other forms of government assistance, as well. For instance, veterans can get long-term care in VA facilities. The drawback is that their may not be one near your home, or there could be a waiting list.

The Programs of All-inclusive Care for the Elderly (PACE) is a new program that combines Medicare and Medicaid benefits to pay for long-term care. However, the program only applies to in-home care, not care in assisted living communities.

Preparing to Pay for Long-Term Care
The best scenario is to have money set aside in investments to pay for long-term care. Personal savings, retirement accounts, and other investment funds can be used to cover long-term care, and you may be able to deduct the cost of long-term care if you itemize medical expenses. With a little bit of early planning, you might be surprised to discover you can afford assisted living, especially if you choose an assisted living community that offers all the services and amenities you need included, so that all your living expenses are covered in one payment.