Plan Ahead For the Cost of Assisted Living
We all have the tendency to push off addressing difficult subjects, and moving into assisted living or long-term care is one of them. Just like we don’t want to make a will because we don’t want to think of dying, many of us don’t want to tackle assisted living because we don’t want to think about losing our independence.
But you wouldn’t want to pass away without leaving your family a will, which is simply a blueprint for carrying out your last wishes and helping them to organize your estate; so, too, you don’t want to wait until assisted living is a necessity before giving some thought as to what you’ll need to do to get there.
And it’s likely that at some point you will have to consider some type of alternative living arrangement: According to the National Institutes of Health, “About 70 percent of people over age 65 need some type of long-term care during their lifetime. More than 40 percent need care in a nursing home for some period of time.”
One of the big issues when it comes to moving from your home into assisted living or long term care is cost. According to Genworth, a provider of long-term care insurance, the median yearly cost in 2016 for assisted living in the US is $43,539, while a semi-private room in a nursing home is $82,125, and a private nursing home room at $92,378.
Depending on your age and the services you need, the cost of assisted living can add up. Kiplinger says the average stay for nursing home residents is 28 months, and the average stay for assisted-living residents is 27 months; many of those in assisted living will move to long-term care, and others will need in-home care before they move to assisted living, so you need to factor that in to the costs. That’s why it’s important to plan ahead so you – or your family – will know how to meet those costs.
Ways to Pay
There are a number of types of private funds that can be used to pay for care. Here are the most common examples:
- Retirement accounts (401K, IRA, etc.)
- Social Security
- Home Equity
- Veterans benefits
- Disability benefits
The Pros: You won’t need a medical exam to qualify; you’ve saved or will get enough income on a regular basis to cover costs.
The Cons: If you rely heavily on investments, those investments could go in either direction; if they underperform you may not generate the income you need. If you don’t save enough, you’ll run out of money and need to find another source of funding.
Long-Term Care Insurance
LTC insurance can help pay for costs associated with long-term care that aren’t not covered by health insurance, Medicare, or Medicaid, such as home care and home health care services, assisted living, adult day care, respite care, hospice care, nursing home and Alzheimer's facilities. Not all LTC insurance covers all of these items, nor do they cover them at the same rate. It also may exclude pre-existing conditions, Alzheimer’s disease, mental health disorders, and treatment outside of the US. Additionally, you may not be eligible if you already need assistance for Activities of Daily Living (ADL), so it’s important to do your research.
The Pros: The plan may be tax-deductible; a good investment if you use it.
The Cons: LTC insurance can be pricey and if you don’t use it, it may be a waste of money.
Hybrid Life Insurance
Hybrid insurance combines universal life insurance with a savings-investment component and LTC coverage, so you withdraw funds when you need to pay for long-term care; the insurance company pays for care when those funds run out.
According to insurance.com, a hybrid policy may cost 5 percent to 15 percent more than a standalone life insurance policy.
The Pros: If you die without using up the long-term care benefits, your heirs will receive a death benefit, so the money isn’t wasted.
The Cons: May not be tax-deductible. It can be too expensive for some because premiums are paid over shorter periods of time.
Medicare and Medicaid
While used mostly by those over 65, Medicare is a medical insurance program, not long-term care insurance. It provides coverage for rehabilitation—but not long-term care. If you have been in a hospital for medically necessary care for at least 3 days, Medicare will pay for up to 100 days of convalescent care immediately following discharge. The rehab must be at a Medicare-certified skilled nursing facility.
Courville at Manchester and Courville at Nashua accept Medicare. Learn more.
Medicaid covers long-term care services, but your income must be below a certain level and you must meet minimum state eligibility requirements, based on the amount of assistance you need with ADL. Both Courville at Manchester and Courville at Nashua accept Medicaid.
So, as you can see, planning in advance is the best strategy for paying for senior living costs. You can start as early as 40, which is a good idea if you plan to buy LTC insurance or are planning to use private funding to cover the costs. If you are currently in need of assisted living or long-term care, contact us and we can go over the options available to you!