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How to pay for assisted living in 2024: 6 options to know

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You may be here because you know that you or a loved one will need assisted living either now or in the near future. Maybe you have been putting it off because you're nervous about the cost. That's understandable.

However, educating yourself is the first step to understanding your options. This allows you to get creative about how you can cover the costs, depending on your access to various income sources.

Let's take a look at the costs of assisted living and a handful of ways you can finance them, including alternatives you may not have considered.

Cost of assisted living

The 2020 Genworth Cost of Care Survey puts the average monthly price at $4,300 for assisted living. The overall cost could be higher or lower, depending on a few factors, which we list below:

  • Services: The more services the facility offers, the more it will cost. For example, if the facility offers all the bells and whistles — memory care, specialized diet, exercise programs, skilled nursing, in-house hair salons, theatres, and pools will all add to the cost of assisted living. However, you do want to learn more about services with regard to medical aides, attendants, and other medical staff. Check on the availability of nursing assistants, licensed practical nurses, and medical directors. You want to make sure these services are available!
  • Location: You'll pay more for an assisted living facility in California compared to Nebraska. If you have the option to go to assisted living (or have the option to move a parent to the right assisted living community) near a son who lives in Nebraska or a daughter who lives in California, chances are that you'll pay less in Nebraska. However, compare costs from various providers to be sure. Putting yourself or a loved one in close proximity to family and friends may be vital, particularly if you can no longer drive or get around as easily.
  • Accommodations: The style, size, and quality of living spaces may also affect your costs. If you choose a semi-private room, a private room, or a full apartment, it may cost more. Put together a list of needs and wants when you choose your accommodations.
  • Community: You'll also pay more for a robust activity schedule, clubs, and facilities. However, an active community may be the right thing for you or your loved one's specific needs.

You'll find that most assisted living communities offer all-inclusive pricing. You can choose certain services in some cases, however. However, all-inclusive pricing may save you money if you or your loved one will need a high level of care.

6 ways to pay for assisted living

There's no way around it — for most Americans, the cost of assisted living is just too expensive at face value. But with proper planning and a little creativity, it is possible.

1. Budget accordingly

First, find out how facilities require you to pay. Some require upfront payment, monthly rent, or payments for individual services.

When you get an idea of how much assisted living facilities cost in your area, then you'll have a better idea of how much you'll spend. You might have to get creative and piece together the money to pay for assisted living, but more on that in a second.

[ Related: 26 of the best personal budgeting tips ]

2. Long-term care insurance

Long-term care insurance (LTCI), sometimes referred to as nursing home or senior care insurance, can provide benefits to help cover the cost of assisted living. However, look into your long-term care insurance policy so you know exactly what your LTCI insurance covers. You don't want to move toward using your LTCI policy and find out it doesn't cover what you want.

If you're considering LTCI insurance for another family member, read the fine print before you purchase.

Learn More: How Much Does Long-Term Care Insurance Cost?

3. Tap into home equity

You or your loved one may choose to tap into home equity as a way to pay for assisted living. You may consider the following loan types:

  • Bridge loans: A bridge loan can offer cash flow during a transitional period, such as before you move into a new home. You can use bridge loans to pay for assisted living while you liquidate assets or wait for your home to sell before you move to assisted living. Remember that you or a loved one will have to pay the loan back, with interest.
  • Sell or rent your home: You or your loved one probably won't need a home anymore if moving to assisted living. However, you could also consider renting out the home if you or your loved one would like to keep the home in the family or use rental income to pay for assisted living.
  • HELOCs: Home equity lines of credit (HELOCs) that give you a revolving credit line secured by your home to use for large expenses, such as assisted living costs. A HELOC often has a lower interest rate than other common types of loans. Like a bridge loan, remember that you will have to pay the HELOC back with interest.

4. Consider Medicaid

Unfortunately, Medicare doesn't cover assisted living. Instead, it covers short-term, non-custodial care.

For example, it might pay for temporary care related to in-house rehabilitation for a broken hip. It may also pay for the care you or your loved one receives in an assisted living community. If you or your relative needs help with shots due to care for diabetes, Medicare will pay for the injection fees, but not the cost of the assisted living facility.

However, some assisted living facilities may accept Medicaid but may limit the number of Medicaid residents they accept or the length of coverage.

Medicaid assistance for assisted living depends on state requirements. Each state’s Medicaid program has specific eligibility requirements to be able to qualify for long-term care coverage, but the individual must not have a lot in assets. States can set their own policies on how they assist persons residing in assisted living residences.

5. Dip into life insurance

You may want to use a life insurance policy to pay for assisted living. For example, you can surrender a life insurance policy to your insurance company for cash value. However, your beneficiaries won’t receive any benefits when you die, so carefully think about the implications of this before you do it.

You can also purchase hybrid long-term care insurance, which basically combines life insurance with long-term care coverage. This, of course, requires you to be very proactive though.

Learn More: Hybrid Long-Term Care Insurance

6. Work with family support

There's no one way to pay for assisted living. You or your loved one may have ample resources at their disposal and may easily pay for assisted living. They may have long-term care insurance to cover the costs. On the other hand, families may opt to piece together various financial resources. For example, three siblings may chip in to pay the costs for their parent's assisted living expenses.

You may want to work with a financial advisor to help you come up with the best way to pay for assisted living.

Key takeaways

Paying for assisted living can look more like putting together the pieces of a puzzle than a straightforward solution. It may take the whole family putting their heads together to plan how to pay for it. However, it's always best to go into it with a plan (and make sure everyone agrees) so family members know what to expect.

The information and content provided herein is for educational purposes only, and should not be considered legal, tax, investment, or financial advice, recommendation, or endorsement. Breeze does not guarantee the accuracy, completeness, reliability or usefulness of any testimonials, opinions, advice, product or service offers, or other information provided here by third parties. Individuals are encouraged to seek advice from their own tax or legal counsel.

— Published July 13, 2021
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