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Figuring out how to pay for assisted living can be a challenge, since, bluntly-put, it isn’t cheap. “Assisted living can be pretty pricey, and for a lot of families, it’s not very affordable,” says Donzella Burton, a Maryland-based assisted living executive who goes by The Assisted Living Coach. The good news: There are ways to make paying for assisted living easier, she says.
For instance, long-term care insurance, veterans benefits or short-term loans can help. That said, “not every assisted living facility offers payment plans or flexible options, so it’s always good to ask and shop around,” she notes.
Trying to figure out how to pay for assisted living? Here, industry experts break down the confusing, overwhelming process of paying for assisted living.
Key takeaways
- Given how costly assisted living can be, paying for it often requires combining personal funds, insurance and benefits.
- Options like long-term care insurance, Veterans Aid and Attendance (A&A) Pension and Medicaid help, but early planning is essential.
- In order to pay for assisted living, experts recommend budgeting ahead and seeking guidance.
Who pays for assisted living?
In most cases, the money for assisted living doesn’t come from one sole source, but a mix of multiple outlets, and throughout a person’s stay in an assisted living community, the income stream may shift. For instance, residents may pay for some of their stay with private funds or from long-term care insurance and then use a reverse mortgage to pay for the rest. Here’s a breakdown of some of the most common ways to pay for assisted living.
Private pay
You might opt to pay for assisted living out of pocket. According to Dr. Barbara Sparacino, a triple board-certified geriatric psychiatrist and aging parent coach, this is the most straightforward route, and for many families, it’s the first phase of the plan. In fact, approximately 66% of people pay for assisted living with their own retirement and savings funds.
“However, with assisted living costs averaging $4,500–$7,000 a month, it’s often not sustainable long-term without a strategy,” says Sparacino.
Scott Maibor, managing director at Senior Benefits Boston, echoes Sparacino, noting that, while this is often where families without long-term care insurance start, it’s in no way endurable for most middle class folks and “will certainly impact the spouse not receiving care and any legacy [inheritance] plans.”
In these cases, he notes, folks sometimes “spend down” — use any excess money on medical expenses in order to qualify for Medicaid.
Put another way: With Genworth and CareScout citing the national annual average cost of assisted living as $70,800, very few families are able to sustain paying for it out of their own income.
Private health insurance and Medicare
It’s a common and frustrating surprise for families, according to Sparacino, but private health insurance plans don’t cover the caregiving services associated with assisted living, such as help with activities of daily living (ADLs), like daily chores, walking, bathing and cooking, as they’re considered “custodial care” — meaning, they’re non-medical.
This goes for Medicare, as well, notes Fran Majidi, an insurance expert at SmartFinancial in Los Angeles. “Medicare and Medicare Advantage will only cover certain expenses, if medically necessary, but up to very short limits,” Majidi says.
Medicare, for example, may cover short-term skilled nursing care, while Medicare Advantage (Part C) may cover meal delivery and medical transportation.
Medicare may also cover some of the care an older adult receives while staying in an assisted living facility, such as physical therapy, prescription drugs and certain medical devices.
Long-term care plans, Majidid adds, may include non-medical caregiving help and may cover assisted living. However, it’s usually only for a two- to five-year stay. “Some cover a lifetime, but they are rare and expensive,” she notes.
“Selling a home, cashing out investments or using savings can bridge the gap — but it’s not just a financial decision; it’s an emotional one.”
— Dr. Barbara Sparacino, a geriatric psychiatrist and aging parent coach
Assets
While assets can certainly help pay for assisted living, it’s important to note, per Sparacino, this route can be touchy, to say the least.
“Selling a home, cashing out investments or using savings can bridge the gap — but it’s not just a financial decision; it’s an emotional one,” she notes. “I always encourage clients to talk through the impact with family and a trusted financial advisor.”
Veterans benefits
This is one of the most underutilized resources, according to Sparacino. While the VA does not directly pay for assisted living, “the VA’s Aid & Attendance benefit can offer over $2,000 per month for eligible veterans and their surviving spouses,” she says. “It’s paperwork-heavy, but absolutely worth pursuing.”
Majidi adds: “VA pensions and disability coverage can help too.”
Public assistance
Can government-funded programs pay for assisted living? Yes and no. According to Sparacino, Medicaid may help, but it’s all dependent on your state and whether the facility accepts it. “And keep in mind, there are waitlists, and not every facility participates — so this route requires persistence, patience and a solid plan B,” she notes.
Maibor adds that public assistance can be an immediate option for those who have no assets in their names. “However, there is a look back period so any assets moved to, say, a trust would need to have been done a minimum of five years earlier or the trust is invalidated,” he notes.
Also, in most instances, the primary residence and a vehicle will not count as assets however, Maibor notes, adding: “Most states will place a lien on the house so that when the spouse moves or dies the state is the first creditor paid.”
It’s worth noting, Maibor says, that as the federal government reduces what they give the states, there will be less money available to pay for assisted living.
Financing options for assisted living
Since most families don’t have the means to outright pay for assisted living, and since most alternatives don’t offer complete and full-lifetime coverage for it, many people opt to finance the cost.
Here are a few financing options to consider.
Private long-term care or life insurance
Standard health insurance won’t help at all, but long-term care policies may. In fact, according to Maibor, this kind of coverage may be “the most cost-effective way to leverage a dollar for needed care.” “A single dollar of premium will pay a multiple of dollars in benefit for either assisted living or home care,” he continues. “Many policies also include a care navigator to assist the family with decision-[making] and finding suitable help.”
And if you or your loved one have an old permanent life insurance policy that is no longer needed, the cash value can be moved into a long-term care insurance policy, points out Maibor.
Life insurance policies
Newer life insurance policies frequently include “living or accelerated death benefits,” Sparacino notes, which “allows for an early payout or can be sold for cash as a life settlement.”
“Additionally, new policies may include a long-term care rider to provide some long-term care benefits tied to activities of daily living,” he says. “For those with old policies with just a death benefit, it may make sense to convert them into something more useful.”
Home equity
In many cases, when someone moves to an assisted living community, they’ll sell their home and use the proceeds to help pay. But for people with substantial equity in their home but no desire to sell, a reverse mortgage can provide a ready pool of cash, without needing to make payments, to be drawn upon as needed, explains Maibor.
Social Security
Social Security can help, but it’s rarely enough on its own.
“Retirement benefits are a critical income stream that can reduce the overall burden of paying for assisted living, but they don’t cover the full cost,” says Michael Liner, a disability attorney and advocate at Liner Legal in Cleveland. “Similarly, Social Security Disability Insurance (SSDI) can be used to help pay for assisted living if the recipient is under 65 and qualifies as disabled. SSDI recipients may also qualify for Medicare after 24 months, which could help with certain health-related services, although not custodial care itself.”
As Sparacino puts it: Think of Social Security as one leg of the stool, alongside savings, benefits or proceeds from a home sale.
Budgeting tips as you work toward paying for assisted living
Figuring out how to pay for assisted living can be tricky, but it is possible with a bit of planning and information-gathering. Here’s advice from the experts we spoke to.
1. Plan ahead
Most of the options to pay for assisted living require planning in advance, so you’ll do best to avoid putting it off until you actually need it, if possible.
Ideally, it’s best to buy long-term care insurance well ahead of time as opposed to when you’re actively looking to pay for assisted living. “If there is home equity, the time to start the process with the banks is sooner rather than later,” explains Maibor. “If Medicaid planning is the choice, then assets need to be moved at least five years prior to applying for assistance.”
2. Enlist a specialist
To say navigating the assisted living financial world is confusing is an understatement — so consider getting help. “Whether it’s a financial advisor, elder law attorney or care manager, ask for help,” Sparacino says. “This is too big to navigate alone.” .
3. Consider your location
Do you live in a pricey area? You may want to consider relocating. “Assisted living facility costs vary greatly,” Majidi says. “One way to save money is to choose a less expensive location, even if it means moving out of the state you currently live in.”
For instance, according to Genworth and CareScout, the annual cost of assisted living in Washington is $83,700, while in Florida it’s $63,885.
4. Do your research
When looking at assisted living communities, make sure to do extensive information-gathering, says Sparacino. “Get a clear, itemized list of what’s included in the facility and what’s not, as ‘all-inclusive’ doesn’t always mean what you think. And don’t be afraid to speak up. See if you can negotiate rates and ask about move-in specials, tiered pricing or shared room options.”
A final note on paying for assisted living
Although the majority of people rely on private pay to some extent, every family has their own unique game plan when it comes to paying for assisted living.
“Most people use personal savings, retirement funds, family support, and in some cases, long-term care insurance,” notes Baron. “It’s always good to explore all options — peace of mind is worth it.”
