What You Need to Know About Financing Senior Living Expenses

It’s a subject nobody wants to think about, much less talk about. Needing care—and paying for it—in our later years is frightening for most of us. 

There are a lot of unknowns—where you’ll live, who will provide help, how you’ll pay for it all. This last question is especially troubling because the cost of senior living is staggering. Turning away from a problem doesn’t make it go away, though. It’s far better to prepare ahead if possible. 

We’ve rounded up some of the important information you should know about paying for senior living. 

Note that in this article, we’ll be talking about the heavy hitters of senior living: assisted living, memory care, and skilled nursing. You can find information on other senior living options on our blog.

What Does Senior Living Cost?

Let’s get down to brass tacks here. The more care and services you require as you age, the more it will cost. Costs vary by region, but the biggest factor is the level of care needed. 

Here are ballpark figures, based on type of care provided:

Assisted Living 

The average nationwide cost of assisted living is $4300 per month. That ranges from roughly $3000 to over $6000 per month, depending on location. Assisted living facilities provide:

  • Housing
  • Meals
  • Medication management
  • Varying level of personal care
  • Scheduled activities—social gatherings, exercise, hobbies, etc.
  • Some nursing care onsite
  • Non-medical staffing 24 hours per day

Memory-care Facilities 

Memory-care facilities service people who have varying levels of dementia. They provide more intensive services than assisted living. The cost reflects the increase in care. Memory care runs about $1000-$4000 more per month than assisted living. Memory-care facilities offer:

  • A higher staff-to-resident ratio
  • A more structured schedule for residents
  • More frequent monitoring
  • Increased personal care
  • Alarms and door codes so residents can’t wander off
  • More cognitive-based activities

Nursing Homes or Long-term Care Facilities 

Nursing homes and long-term care facilities provide the most in-depth form of care. Sometimes called skilled nursing facilities, the average cost of this type of care is about $8000 nationwide. Nursing homes usually offer:

  • 24-hour nursing care
  • A range of medical care services
  • Onsite rehabilitation services, including occupational therapy and physical therapy
  • Admittance privileges to area hospitals if a medical need arises

Continuing Care Retirement Communities

Continuing care retirement communities (CCRCs) are a senior living option worth considering. They offer a range of services that change as a resident’s needs change. 

For example, when a senior needs help with household chores and some daily living tasks, they may decide the time is right to move to assisted living. If that person needs more care in the future, the facility adjusts their level of care. Sometimes the resident can stay in the same room; sometimes they move to a different part of the CCRC’s campus. 

The CCRC model removes a lot of uncertainty for seniors and their families. People feel a sense of security knowing where they will live no matter their level of need. 

Some CCRCs require a hefty entrance fee that locks in rates for the long term. Speak to a financial advisor before you agree to an entrance fee. This type of fee structure is complicated. 

How Do I Pay for Senior Living and Senior Care?

There’s no way to sugarcoat it. The cost of senior living is exorbitant. If you feel overwhelmed just thinking about the cost of care, you’re not alone. It’s one reason why many people turn away from the subject altogether. They pretend it’s never going to happen to them and hope for the best. 

The problem is someone is going to have to face the tough decisions. The more we put off planning for our future needs, the more our loved ones will have to scramble later on—to find suitable housing and to cover expenses.

Let’s look at some options for financing senior care. Some you can use right now. Some are applicable further down the line.

If You’re Still Working

Contribute to Retirement Savings 

The best way to afford the senior living costs later on is to start saving now. We’re with you—the percentage of your life’s wages that go toward senior living expenses is the pits. But the sooner you start to set aside a little money, the more that money will grow over time. 

Sign up for your employer-sponsored 401K plan. Many employers will match your 401K contributions up to a certain percentage. Often, employers will match up to 3-5% of your annual salary. This is one of the few ways you will ever be able to double your money. Any 401K contributions are pre-tax which lowers your taxable income.

Open an Individual Retirement Account (IRA)

If you don’t have access to a 401K saving plan, you can still have a retirement saving account. An IRA is one option. Contributions aren’t pre-tax, but the earnings aren’t taxed until you withdraw the money. If you don’t withdraw until you’re older, your tax rate will likely be lower, which saves you money.

Long-term Care Insurance 

Now is the time to look into long-term care insurance. The younger you are when you get a plan, the lower your monthly rates will be. Also, when you’re younger, you’re more likely to be approved for a policy—something that gets more difficult as you age. Long-term care insurance plans vary greatly, so read the policies carefully and ask questions. 

Retirement Planning 

One of the biggest favors you can do for your financial future is to hire a certified financial planner. A certified financial planner (CFP) is what’s called a fiduciary. A fiduciary is obligated to operate with their client’s best interests in mind. You can hire a CFP to create a financial plan for a one-time fee or you can have the CFP on retainer. 

Many CFPs don’t charge a retainer fee if you have them act as a manager to your accounts. In this arrangement, your CFP earns a percentage of the value of your accounts, usually around 1%. The beauty of the fiduciary duty is that your CFP doesn’t make money unless you make money.

A CFP can help you decide when to take Social Security and when to withdraw funds from pension and savings. 

If You’re Retired

If you are retired, things start getting more complicated. You still have options, though.

Long-term Care Insurance

You can still look into long-term care insurance. The monthly fees will be higher, but it will give you great peace of mind.

Know Your Benefits

There are a surprising number of programs that assist seniors financially. The trouble is, it takes a lot of time and effort to track down the right programs for you. 

Luckily, the National Council on Aging’s Benefits CheckUp site has a free search tool that can help. Benefits CheckUp have vetted over 2500 programs that offer assistance to seniors. It’s a simple process to enter your information and identify any programs that are suitable for you. 

Senior Discount Programs 

There are many discounts available to seniors. The trick is knowing where to find them. Look for retail and health-related discounts to offset your regular cost-of-living expenses. 

If You Need Care Soon

Many seniors find themselves in need of senior housing and care before they are prepared. A sudden illness or fall can result in the immediate need for monitored care. Hopefully, you’ll have some pieces in place.

Many seniors pay for senior care with a mix of financial resources. Your plan may look something like this:

  • Social Security Pension
  • 401K pensions
  • IRAs
  • Savings
  • Long-term care insurance
  • Veteran’s Benefits and other benefit programs
  • Proceeds from the sale of a house

As expensive as nursing home care is, there are living expenses that are absorbed in their fees. For example, there are no home repair bills, homeowner’s insurance, or grocery bills to pay when you live in a nursing home. It’s only a small percentage, but it’s worth figuring that into your overall costs.

Want one less thing to worry about? Contact us to see how we can help with decluttering and aging in place.