The Arbor Company Senior Living Blog

Affording Senior Living: Who Pays When Your Money Runs Out?

Jan 15, 2020 2:58:00 PM / Francine O'Neill Francine O'Neill

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This blog was published on March 16, 2017 and updated on January 15, 2020.

Forty-nine percent of seniors are concerned that they will outlive their savings, according to the United States of Aging Survey. An additional 64 percent worry that healthcare costs will increase over the next five to 10 years. Fully 40 percent of seniors have low or moderate incomes, and many live on meager savings or fixed Social Security payments. A recent Health Affairs report found that many middle income seniors will be unable to afford long-term care. With seniors living longer than ever — and desiring more meaningful and adventurous retirements than previous generations — these figures present a serious problem. What happens to seniors in senior living communities when their money runs out?

The answer is that it depends — on the type of senior living you choose, the supplemental resources that are available to you, your health and prognosis, and myriad other factors. 

Affording Senior Living: Identifying Available Government Assistance

Medicare does not cover senior living costs. However, many state-run Medicaid programs provide financial assistance for assisted living when residents exhaust their resources. Understanding the terms of Medicaid benefits in your state is a key part of financial planning and affording senior living.

Also, veterans may have access to additional government benefits for assisted living through the Department of Veterans Affairs (VA). The VA does not pay for rent, but it does provide funding for extra care services that veterans may need at assisted living communities.  

Not understanding governmental assistance for senior living is one of the most common mistakes people make. Understanding when benefits kick in and what they cover is critical, but the best strategy is to make long-term plans to ensure that your money doesn’t run out in the first place.

Affording Senior Living: Additional Funding Sources

Government programs are not the only option for affording senior care. Long-term care insurance is a great investment that can fund all or a portion of your senior living expenses. The earlier you invest in long-term care, the more affordable it will be, and the fewer conditions it will exclude. 

Some other strategies that may help include: 

  • Selling your home. If you own your home, selling it and investing the profits may offer a significant sum of cash you can use to fund your care needs. You’ll also save money on the many costs of homeownership. 
  • Life insurance policies. Some life insurance policies offer buyback programs that allow you access to a large sum, especially if you’ve paid into the policy over time. 
  • A second job: A part-time job in retirement means having extra money to set aside. Talk to a financial planner about how employment might affect Social Security eligibility or your ability to draw on your retirement savings. 

Affording Senior Living: Plan for Rising Costs

A couple retiring at 65 will need an estimated $240,000 to cover medical costs for the remainder of their lives, Fidelity Investments reports. For some seniors, the figure may be significantly higher. The total cost of care for someone with dementia averages more than $340,000. 

The key to affording senior living is to plan for the costs of both today and tomorrow. Financial planners use a number of common strategies to accomplish this:

  • Investments: Choosing investments that keep pace with inflation ensures that savings won’t get less mileage over time; Treasury Inflation-Protected Securities, inflation-indexed immediate annuities, inflation-protected bond funds, and floating rate funds are just a few examples of safe and moderate-risk investments to consider.
  • Reduce Costs: Finding ways to limit living expenses — skipping vacations, dropping expensive private golf-club memberships — after retirement will help slow the drawdown of savings.
  • Social Security: Getting the most out of Social Security benefits will generate more income to put toward senior living each month; working for 35 years before retirement, getting delayed retirement credits by waiting until age 70, and collecting a spousal benefit now and delaying a primary benefit for later are just a few examples.

The first step toward figuring out how much money you’ll need in the future to afford senior living is to use an online senior living cost calculator. This will use your income and current living expenses to bring projected senior living expenses into focus.

Affording Senior Living: Seeking Additional Support

Financial planning for senior living shouldn’t end when someone moves into a senior living community. As circumstances, care needs, and monthly expenses change, it’s important to revisit financial plans to ensure that they remain workable before any financial challenges arise.

Leveraging insurance policies, community support programs, and other forms of assistance can help address rising senior living costs over time:

    • Senior Care Coordinators: Senior living communities offer residents access to senior care coordinators, trained professionals who help find answers and fit financial puzzles together. You may also be able to hire an independent care coordinator to help you explore your options. 
  • Legal Assistance: Financial planning with the help of a lawyer is key to the financial wellness of every senior — not just those who are wealthy. A lawyer can help you preserve your assets, plan for the future, and determine when and whether you might be eligible for Medicaid. 
  • Area Agencies on Aging: Area Agencies on Aging provide information about community caregiving programs, nutritional support and meals programs, and insurance benefits counseling when it comes to long-term care planning.
  • Other Benefits: Additional benefits and resources that might be available to cover caregiver and senior living costs can be found using an online elder care financial assistance locator tool.

Revisiting financial plans often and continuously exploring outside resources available to help offset the costs of care and senior living can help head off financial problems before they arise.

Affording Senior Living: Next Steps

The right senior living community preserves and protects your long-term health while scaffolding you to greater independence — especially if you have a chronic medical condition. Safe and comfortable senior living can transform your retirement from a time of stress to a period of generativity and joy. The Arbor Company has worked with seniors for three decades. We understand what it takes to plan for retirement, and we’d love to connect you to resources in your community. Give us a call today to learn more!

finding a safe and comfortable senior living community

Topics: Senior living, Assisted living

Francine O'Neill

Francine O'Neill

Francine O’Neill serves as a clinical resource for resident care directors, overseeing ongoing quality improvement programs and regulatory compliance. She assists with identifying and implementing programs that enhance care delivery and service to our residents and their families. Francine has more than 20 years of experience in health care, serving in both clinical leadership and operations management positions across the continuum of care including assisted living, long term care and acute care. Francine's favorite traits in others are COMMITMENT and ACCOUNTABILITY.

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