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Figuring out how to pay for assisted living can be a challenge, since, in many situations, the money doesn’t come solely from one place. According to Princella Seymour, CEO and founder of Complete Elder Solutions in Coral Springs, Florida, most often assisted living is “covered through a mix of personal funds and long-term care insurance.”
Here, Seymour and other experts break down how families can go about paying for assisted living (i.e. which types of insurance and what programs will contribute), as well as offer tips for saving and budgeting early before you make the move.
Key takeaways
- Funding for assisted living is complex, often requiring personal savings and sometimes Medicaid or VA benefits.
- Medicare and Social Security don’t fully cover assisted living.
- Early planning is key due to high costs, averaging $70,800 annually.
Who pays for assisted living?
Most folks rely on personal savings, retirement funds or income to pay for assisted living, notes Seymour. “While long-term care insurance policies may cover some expenses depending on the plan’s terms,” Seymour says, typically, it’s the individual or contributing family members.
“Government assistance through Medicaid can help qualified individuals, but this varies by state and really only supports those with limited income and resources,” she adds. “Eligible veterans and their spouses may receive assistance through VA benefits.”
Fran Majidi, an insurance expert at SmartFinancial in Los Angeles, adds that a long-term care policy, either standalone or as a rider to a life insurance policy, can contribute towards assisted living expenses. (Regular health insurance, it should be noted, does not cover assisted living.)
“However,” she says, “do note that a rider on a life insurance policy will use up to 50% of the death benefit, so only take this route if you’re comfortable leaving less behind for loved ones.”
Is assisted living covered by Medicare?
Generally, no, Medicare doesn’t cover assisted living costs.
“Medicare and Medicare Advantage will only cover certain expenses, if medically necessary, but up to very short limits,” Majidi says. “The coverage doesn’t include caregiving services. Help with daily chores, walking, bathing and cooking will be covered with a long-term plan, unless the individual qualifies for Medicaid.”
“Government assistance through Medicaid can help qualified individuals, but this varies by state.”
— Princella Seymour, CEO and founder, Complete Elder Solutions
Can social security pay for assisted living?
In short, no, but older adults can use social security funds to pay for assisted living — however, it’s not a good idea, according to Majidi.
“It’s not the best long-term plan,” she says, adding that “once an older adult depletes their income, they can apply for Medicaid; and in some cases social security income will increase coverage rate to cover assisted living expenses. “
Does Medicaid pay for assisted living?
Yes, Medicaid will pay for “all or part of your care needs, however it is income/asset based, which will vary by state,” explains Scott Maibor, managing director at Senior Benefits Boston. “And keep in mind, this can involve the dilution of any assets that a person has managed to save over their working lives.”
Maibor also notes that most states have a ’lookback’ period when trying to qualify for Medicaid. “Assets moved out of a person’s name are still counted if the period — usually five years — has not been met.”
“Asset protection planning [a.k.a using legal strategies to shield your assets] may be an option for those individuals who are slightly over the income and asset limitations in order to qualify for Medicaid,” adds Seymour.
What happens if you run out of money while in assisted living?
There’s no hard and fast rule here, as every situation is completely unique, but generally, the resident would “transition to Medicaid,” says Maibor. “However, many private homes will make sure there is a solid financial cushion prior to admitting someone who needs care for this exact reason.”
The national annual average cost of assisted living is $70,800.
— Genworth and CareScout
It’s also important to remember, per Seymour, that not all assisted living communities accept Medicaid, so seeking a facility that accepts a Medicaid Waiver can be smart, depending on your financial situation.
Financial planning for assisted living
Assisted living isn’t exactly cheap, so planning is important. According to data from Genworth and CareScout, the national annual average cost of assisted living is $70,800.
“It is extremely hard to save for a retirement lasting an unknown number of years and then have one spouse need care that could cost over $10,000 per month,” Maibor says. “Even for solidly middle class families that is a big expense!”
Here are a few ways to get ahead of things, per Maibor and Seymour:
- Assess your current financial situation and create a plan that’s realistic and attainable.
- Explore retirement accounts (401K, IRA) and other investments.
- Complete a financial assessment with a certified financial planner.
- Consult with a professional senior care advisor who will provide a comprehensive analysis of current resources and project future cost of care.
- Establish a realistic plan of care based on your budget
- Consider short- or long-term care policies. “This is a huge help for people with assets,” notes Mainor.
- Medicaid plan with a qualified estate attorney with an eye to the five-year lookback.
A final note on paying for assisted living
Each person will likely pay for assisted living their own way, with the majority using their own funds. Medicaid and life insurance can help, but it’s important to consider all of your options sooner, rather than later. “ No matter which route you choose,” Maibor says, “you can’t wait until you need the care.”
