6 Financial Tips for Paying for Assisted Living Costs

You know the benefits of assisted living. You think your mom would actually love making new friends and eating food she didn’t have to cook. But you just can’t even bring yourself to mention it because you’re sure you can’t afford it.

Sound familiar? Most Americans either don’t believe or don’t know if they can afford to move into an assisted living community. And instead of investigating ways to pay for assisted living costs, they put off looking for fear of how they will pay for it.

But if you wait until there’s a crisis, then you’ll be scrambling to find somewhere that can take your loved one. Instead of a deliberate search for the best place that fits their needs, desires, and budget, it’s a desperate search for anywhere that can take them in time.

So, yes, although assisted living costs can appear to be expensive, the cost covers way more than rent. And if you spent a little time looking, you’ll find that there are many financial resources for funding assisted living.

First, let’s take a look at assisted living costs.

Assisted Living Costs

You might get sticker shock when you see the monthly costs of assisted living; however, families discover the cost of an assisted living community can be the same or even less than living alone, especially considering all the bills associated with living in a house.

 

Until you accurately assess the expenses you are already paying to provide care at home for your loved one, you won’t know when the cost of living at home actually meets, or even sometimes exceeds, the cost of assisted living.

To compare your assisted living options and get at the value of assisted living, it’s best to find an online expense calculator or use the list above to work out the cost of staying at home.

Ways to Pay for Assisted Living

When it comes to paying for assisted living, often families aren’t sure where to start.

 

The truth is that most families pay for assisted living costs on their own by using a combination of pensions, home equity, and savings — most families do not use Medicare or Medicaid.

The Truth About Medicare and Medicaid

Medicare is a type of health insurance, but it won’t pay for assisted living beyond short-term rehabilitation in skilled nursing or rehab facilities.

Medicaid is a state- and federally-funded health insurance program for low-income families and the elderly. Some states have a Medicaid waiver program that provides some assistance for assisted living if you qualify. Depending on where you live, that may cover room and board or just care.

Most Common Ways to Fund Assisted Living Stays

How you pay for assisted living depends on your financial situation and the level of care you need.

 

Although, financially speaking, assisted living might be your best bet, for some families, savings and Social Security income aren’t enough to pay for assisted living.

However, there are plenty of strategies that can help your loved ones afford assisted living without compromising their quality of care.

Little-known Ways to Pay for Assisted Living

Here’s a look at six additional ways to cover the costs of assisted living.

1. Apply for a Bridge Loan

Many financial firms offer bridge loans to help cover the assisted living costs while families wait for the sale of a home or other benefits to kick in.

2. Set Up a Reverse Mortgage

If your parents are 62 or older and trying to finance assisted living care for one of them while the other remains at home, a reverse mortgage will allow them to convert some of the equity in their home into cash. Depending on the loan type, they can get a lump sum or draw down the money as needed.

However, reverse mortgages aren’t without their own significant closing costs and fees, and borrowers are still responsible for home insurance, property taxes, and home maintenance expenses.

3. Convert a Policy

If your parent has been paying premiums on a life insurance policy for a decade or longer, they can leverage their life insurance policy to provide financial support now. Consumer Reports recommends withdrawing the cost basis — what was paid in premiums — to avoid owing tax. If they cash out the entire policy with the insurance company that issued it, these accelerated benefits, sometimes called living benefits, are usually between 60 and 80 percent of the policy’s face value, and they’ll pay income tax on everything but the cost basis.

If the company that issued the policy won’t cash it in, your loved one can also sell the policy to a third-party company in return for a life settlement, or senior settlement, which is usually a lump sum of 50 to 75 percent of the policy’s face value plus tax.

4. Deduct Costs from Income

The IRS offers tax deductions for long-term care services if the expenses are more than 10 percent of your adjusted gross income and your loved one is considered chronically ill. You can consult a tax advisor with questions concerning your own personal circumstances.

5. Consider the Location

As with other types of housing, the cost of assisted living varies by location. If the nearest assisted living community is out of your budget, the suburbs or outlying communities may be more affordable.

Rent within communities varies based on location and size, too. If your parent is able and willing to be farther from the dining room or doesn’t mind not having a view of the nearby golf course, they could trim costs each month.

6. Ask If the Community Offers Companion Apartments

For a cost-effective stay in assisted living, or for those who want companionship, many assisted living communities can help match your loved one with a roommate to share living costs and apartment space in the community. Each resident in a companion apartment has their own private bedroom but shares common areas.

If your parent is willing to share an apartment, they could save up to 50 percent of the rent, depending on the facility.

When you do the math and consider the value, you may be surprised at how affordable assisted living costs really are.

For more information about assisted living costs and how you can support you loved one download our guide, Assisted Living Costs & Affordability.