Ways to Save for and Fund Senior Living

Sometimes, the hardest part about planning a move to senior living isn’t convincing your loved one of its benefits, but rather, how your family will pay for it once they agree. However, a limited budget doesn’t automatically mean senior living is beyond your reach! You may not realize that there are a number of options to help fund senior living. Here are some of the most common, as well as some quick ways to save. 

Options to Help Fund Senior Living 

Depending on your specific circumstances, these options may be able to help your budget go further: 

• Veterans Aid & Attendance Benefit – A wartime veteran or their surviving spouse may be eligible to receive this non-service-connected benefit to help fund senior living. The benefit starts with the basic pension and, depending on medical need, gives your loved one a rating that could add more money to their monthly pension. But your loved one must meet the military service criteria as well as the medical requirement AND the financial requirement to qualify. 
• Long-Term Care (LTC) Insurance – LTC insurance can help your loved one fund senior living by covering care services typically not covered by health insurance, Medicare, or Medicaid. Many LTC policies begin to pay benefits after an assessment has determined that your loved one needs help with two or more Activities of Daily Living (ADLs) or has cognitive impairments (known as a benefit trigger). However, there will be an elimination period, typically 30, 60, or 90 days after the benefit trigger occurs before payments will be received. During this time your loved one may need to cover the cost of services they receive out of pocket. Also, keep in mind that policies may only pay up to a pre-set daily limit until the lifetime max is reached.  
• Life Insurance Conversion – If your loved one has an in-force life insurance policy, you may be able to transform it into a pre-funded financial account that disburses a monthly benefit to help fund senior living. Unlike life insurance, this account is a Medicaid-qualified asset. The conversion process simply transfers ownership of a life insurance policy from the original holder to an entity that acts as a benefits administrator. Because the original owner no longer holds the policy, it won't count against your loved one in the Medicaid spend-down process. There are no application fees to apply for a life insurance conversion and the typical enrollment time is 30-45 days. Once converted, the benefits payments should start immediately. 
• Reverse Mortgage – A reverse mortgage is a type of home equity loan that’s specifically for homeowners 62 or older. It may make sense if your loved one wants to access the equity in their home to supplement income to help fund senior living. If your loved one meets the age requirement, owns their home or has a small mortgage, and the home meets FHA property standards as well as flood requirements, they may be eligible. Then, the lender makes payments to the borrower based on a percentage of your loved one’s accumulated home equity. Keep in mind that the loan will need to be repaid when the borrower dies, sells the home, or permanently moves out. 

Saving for Senior Living 

Another way to help fund senior living is to make some breathing room in your budget. These tips can help: 

• Decrease Spending – Often, your loved one can make considerable cuts here. Start by looking at automatically renewing subscriptions, entertainment and/or dining expenses as well as phone and cable expenses first. 
• Catch-Up Contributions – At age 50 you can begin making extra contributions to your IRA (up to $1,000) and 401(k) accounts (up to $6,500) according to the IRS. It’s never too late for your loved one to start! 
• Hold off on Social Security – While you can collect benefits starting at age 62, most financial advisors recommend waiting until age 70 instead to increase your loved one’s monthly benefit exponentially. 
• Check with the Senior Living Community – It never hurts to check as the community your loved one is considering may offer move-in specials or have pricing options that can help you fund senior living as well.  

And don’t forget about your loved one’s current assets as well. Consider selling or renting their home, for example. Also check into what savings, stocks, bonds, or annuities they may have to help fund senior living.  

For more information about the different senior living choices available for older adults, download our Senior Living Options Guide today!