Preparing for retirement and all that it entails should include an understanding of how to pay for long-term care. According to the acl.gov article, “How Much Care Will You Need?,” “Someone turning age 65 today has almost a 70% chance of needing some type of long-term care services and supports in their remaining years,” so even if you are healthy and active now, the odds are long-term care at some level is in your future. The good news is that there are more options for funding senior care than you may realize, so before you start worrying take a look at the possibilities.
Personal assets
Initially, funding senior care is most often accomplished by using personal assets including savings, pensions, retirement income from 401k and individual retirement accounts, annuities, and Social Security. Other potential sources for funding senior care may include money from trusts, sales of valuables like classic cars, coin collections, real estate, and art or jewelry. When trying to figure out how to create a plan for funding senior care, the best place to begin is with a certified financial advisor who can help you assess all your personal assets so that when the need arises, you will already have a plan in place.
Home equity
If you, like many seniors, consider your home an investment in your retirement, it can be sold to provide considerable cash for funding senior care, especially if the home mortgage is already paid off. But your home can also be used in other ways for funding senior care. For example, you can rent it to generate monthly cash, or a home equity loan (aka home equity line of credit or HELOC) can provide money that you can pay back usually over a period of five to ten years or at the time the home is sold.
Another option is a reverse mortgage, a choice that often has more consumer protections built in than home equity loans. To better understand how to use home equity for funding senior care, check out the payingforseniorcare.com article, “Using Home Equity to Pay for Elder Care.”
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Insurance
Perhaps the most obvious source for funding senior care is long-term care insurance, which is a policy purchased specifically to pay for long-term care in the future. The upside of long-term care insurance is that it often covers what isn’t covered by health insurance or Medicare, but the downside is that long-term care insurance policies vary greatly and it is difficult to guess how much money you will need to cover costs decades down the road. It is also important to note that long-term-care insurance policies usually cap the amount paid per day and per lifetime, and benefits may not be available immediately pending medical records review and possibly an evaluation. An in-depth look at long-term care insurance is provided in the nerdwallet.com article, “Long-Term Care Insurance Explained.”
Life insurance is another less-often-recognized source for funding senior care. If you have a whole life insurance policy that is no longer needed to care for a young family, options include cash value surrender, borrowing against the value without need to repay the loan, tax-free cash withdrawals up to the accrued value, or in the case of hybrid life/long-term care policies they can be used for long-term care and will pay a death benefit as well. Find out more in the thebalancemoney.com article, “Can You Use Life Insurance to Pay for Long-Term Care?”
Public benefits
If you have few or no personal assets or insurance you may also be able to use public funds available through Supplemental Social Security, a state-run program, which can be used for funding senior care and other senior living expenses. There are, however, many requirements which are detailed on the Social Security Administration’s Understanding SSI webpage.
As the largest payer for long-term care services in the U.S., Medicaid is another option for funding senior care. Medicaid too must be applied for and covers a variety of needs but is based on a variety of factors including income, age, and disability. One important thing to note about Medicaid is that many senior living communities do not accept this form of payment, so make sure to check in advance when you begin searching for a community.
If you served in the armed forces you may also be eligible for veterans benefits through two programs from the Department of Veterans Affairs:
- Aid and Attendance benefits
- Housebound benefits
These are only available to veterans who qualify for a VA pension, which may be applied for at any time. Get the facts about VA benefits in the va.gov article, “VA nursing homes, assisted living, and home health care.”
Funding senior care is not as difficult as it may seem when you consider all the possibilities. Download our “A Family Guide to Paying for Senior Living” for more help and contact us find out all that Thrive Senior Living has to offer!
