A major component of financial planning is factoring in costs toward quality assisted living care. People are living longer than they have at almost any other time in history, which means the need for care will continue to rise. The economy is down and health care costs are up. It’s never too early to incorporate assisted living financial planning into an overall financial strategy. Just as many people start a college fund for their child well in advance, so should people start saving and researching how to pay for assisted living care.
What’s the First Step of Financial Planning for Assisted Living?
The first step is to have an understanding about the different kinds of care available in order to choose the right type of care the loved one will need. Assisted living care is typically non-medical and more associated with assisting seniors with day to day activities such as house work, yard maintenance, transportation, and social activities. There are medical services available but not on a routine basis. Assisted living residents are generally in good health and can take care of most things, but want the security and peace of mind that there are people there to assist them. Many seniors also do not want to have the burden of doing daily chores so they can focus on enjoying their golden years. For people who need more intrusive medical care there are skilled nursing facilities, often referred to as nursing homes.
Assisted living fees vary by state and region. Pricing structures also vary and can be based upon an all-inclusive model or a fee-for-service model where people pay only for the services rendered. In 2009 the average cost of assisted living was $3,100. For people who need Alzheimer’s or dementia care the costs were approximately $1,300-$1,500 more per month. The costs vary greatly from state to state with the lowest costs being in the South where the average was $2,300. The Northeast had the highest average costs coming in at $5,000 per month. To help mitigate costs some people elect to live in an assisted living community outside of the state where they reside.
Is There Financial Assistance for Assisted Living Costs?
It depends on the state where you live and your financial situation. It’s best to look at financial assistance from a three-pronged approach. The first includes researching state and federal programs that offer help. The second approach is to look at your own financial picture and to see what tactics can be done to reduce costs and increase cash flow. The third approach is to liquefy assets to free up large sums of cash to help pay for costs.
Several states have programs such as the Florida OSS for Seniors program or the SSI State Supplement Programs. Federal aid includes Medicaid and Medicare. There are also cost of living reductions such as medical expense tax deductions and credits and elderly care and disabled tax reductions and credits. Despite all these deductions it is important to know that the majority of costs will be out-of-pocket.
How Can I Pay For Assisted Living Care?
Again, the majority of assisted living expenses will be paid for by the private party. For most people this involves tapping into several resource pools such as retirement and pension funds, social security, home equity, insurance coverage, and savings. One of the main ways people pay is tapping into their home equity by selling their home or completing a home equity loan or reverse mortgage.
Many people wrongly assume Medicare will pay for their assisted living costs. It will pay for medically related expenses such as procedures, but will not cover monthly dues or other living costs. Medicaid, as it currently stands, will help people pay for assisted living costs through state waivers. Not all states have waiver programs so it is best to contact the Medicaid office in the state where you live to get the most current information. More and more states are adding a waiver program as it is more cost effective for them to pay for assisted living programs than skilled nursing facilities (nursing homes).
How Can I Develop An Assisted Living Financial Plan?
Financial planning for assisted living is complicated because you do not know what type of health your loved one may be in at the time when care will be needed. In those instances it is best to plan out several scenarios based upon different health care needs. Developing a long term plan will help ensure that your loved one will receive great care and your financial situation will remain stable when the costs begin to be incurred.
There are several individuals and agencies that can help you develop a plan. Since assisted living financial planning involves all areas of your finances it is best to see a certified licensed financial planner or accountant who has the expertise to give sound advice and strategies. It can be dangerous to solicit and follow advice from family and friends who do not have the knowledge of financial planning or assisted living. That doesn’t mean their advice is not sound, but getting a second opinion is critical. The best type of free advice from family and friends is from those who are currently in the situation of paying for assisted living care. They can provide very concrete advice based upon their experience.
Financial planners can look at your overall financial health and see what is best to for your particular situation and then formulate a plan. The sooner you can plan ahead the less impact the costs will have on your finances.
There are also financial planners who specialize in eldercare. Eldercare planners have worked with clients in similar situations and are often times more knowledgeable about resources and strategies concerning assisted living financial planning.
Public benefits counselors can be a good resource as they provide advice free of charge and are usually quite knowledgeable of resources that can assist you at the federal, state, and municipal levels. One downside is they have limited knowledge of overall financial planning strategies, laws, and instruments.