Aging isn’t just hard on your health — it can be hard on your wallet too.
Genworth Financial’s 2023 Cost of Care Survey reports that the median cost of assisted living facilities is $5,350 per month. Meanwhile, the American Health Care Association and the National Center for Assisted Living report that the median stay lasts about 22 months. Put together, that means you’d need more than $117,700 to afford the median stay. If your loved one gets to enjoy life a little longer or you live in a more expensive part of the country, you could be looking at an exponentially higher bill.
Here, we’ll unpack how much assisted living can cost and ways families can manage this big expense later in life.
How Much Does Assisted Living Cost?
It’s true that assisted living is expensive, with that median cost of $5,350 per month. However, compare that to the average monthly fee for nursing homes:
— Semi-private nursing home room: $8,669
— Private nursing home room: $9,733
Clearly, assisted living, when medically appropriate, can be a more economical option than a nursing home.
Aging in place at home may also save you some money over assisted living. In-home care costs typically start at about $33 per hour, depending on the requested services and your geographic location. That amount may be more affordable if you need only a few hours of care at a time, but full-time care can add up quickly and may be difficult to staff appropriately.
Assisted living costs for a couple
Costs for assisted living for couples are often based on individual living situations. For instance, if one spouse resides in assisted living and pays $5,350 per month while the other maintains the family home, costs add up fast. In that scenario, it may be more cost-effective for both spouses to live in assisted living or for both to remain at home and pay for in-home care for the spouse who needs it.
If a couple is living together in assisted living, they may be able to share the rent cost. However, depending on the services each requires, additional fees may vary widely.
Factors that determine the cost of assisted living
The three main factors that determine the price of assisted living:
— How much assistance the individual requires
— The types of amenities or luxury experiences they request
— The location of the facility
When you’re deciding on a community, some questions to ask about pricing include:
— How much does pricing vary by room type or floor plan?
— Are there pricing tiers structured around the level of care?
— Are there annual pricing increases, and how much are the increases?
— Which services and activities are included, and which are additional?
— Are there upfront fees, such as deposits or community or move-in fees?
— What notice do I need to provide if I choose to move out?
— Can my loved ones stay indefinitely, or would they ever be asked to move to a community that offers a higher level of care?
What Assisted Living Costs Include and Exclude
Assisted living costs include:
— Room and board
— Housekeeping services
— Social, educational and physical activities at the facility
Depending on the community, costs may also include assistance with activities of daily living, such as:
— Dressing
— Toileting
— Hygiene and bathing
— Medication management
— Transportation (to doctor appointments, grocery stores and other destinations)
— Laundry services
— Meal preparation
Assisted living costs often do not include:
— Phone and internet services
— Personal supplies, such as incontinence care and toiletries
— Some personal grooming, such as hairstyling or salon-like services, including nail care
[READ: How to Find the Best Assisted Living Community Near You: A Checklist]
Does Medicare Pay for Assisted Living?
Unfortunately, Medicare — the federal health care insurance plan primarily designed for people age 65 and older — does not cover the costs of long-term care. That includes most assisted living, nursing home or long-term care facility costs.
Specifically, Medicare doesn’t cover custodial (or nonmedical) care, such as bathing and other activities of daily living, which are the very tasks most people need help with in assisted living.
What Medicare does cover, to some degree, is home health and aide services, such as physical or occupational therapy or skilled nursing services ordered by a physician after a hospital stay.
Medicare Advantage, offered through private insurers, may help cover some custodial care costs, but such benefits vary widely depending on the specific plan.
[Read: Best Medicare Advantage Plans in Each State for 2024]
How to Pay for Assisted Living
There are several ways you may be able to pay for the care you need later. Working with a financial advisor, an attorney who specializes in elder law and/or a geriatric care manager can help you figure out how to afford the hefty costs of assisted living. The following tips may also help:
— Planning ahead and saving early
— Financing
— Medicaid
— Long-term care insurance
— Private health or life insurance
— Social programs
— Personal assets
— Practical considerations
Planning ahead and saving early
The high cost of assisted living emphasizes the need to start saving as early and as much as possible. This requires an honest assessment of how much you can afford to put away on a monthly basis. Then consider what you will need for assisted living care.
Start with some simple steps:
— List your net income and current expenses.
— Identify all of your saving sources.
— Write down goals, including the quality of life you want.
— Assess what’s realistic based on your financial capabilities.
“It’s never too early to start planning, but for some it can be too late to plan ahead,” says Tyler End, CEO and cofounder of Retirable, a retirement advisory company based in New York City. “Health can change fast, so, work with a financial advisor who understands senior needs as early as you can to understand costs and how you will cover long-term health expenses.”
Financing
Financing for assisted living can be complicated, particularly if you don’t have much money saved to cover this expense. Because assisted living facilities are nearly always set up as rental units, a mortgage is unlikely to be an option to finance your fees; instead, you’ll need cash on hand to cover your expenses month to month. If you don’t have a big nest egg, you can explore some other financing options, including:
— Selling your home and using the proceeds to pay your rent and other fees at an assisted living facility
— Setting up a bridge loan, a potentially risky, short-term loan option that uses the family home as collateral. This option can offer seniors in an urgent situation the means to pay for care quickly, as this loan product “bridges” the time between when you need the money and when the home can sell, freeing up the cash equity you have in the property.
— Getting a reverse mortgage, in which you sell your home back to the bank and they pay you in monthly installments, creating working capital for paying for care
— Grants and other funding programs in your local community that you may qualify for depending on your financial situation
Medicaid
, a joint federal and state program, offers health care coverage to some beneficiaries, such as low-income adults as well as children, pregnant women, the elderly and people with disabilities. Medicaid may pay for some assisted living in some states. However, even in those cases, you have to spend down all of your assets before it kicks in.
For those who are wondering how to pay for assisted living with no money, Medicaid may be your best option. But there are a lot of administrative hoops to jump through, and again, you must prove that you’ve spent down all your assets before you can become eligible for benefits. It’s also true that the number of assisted living communities that take Medicaid as a source of payment is limited.
Still, for those who have no funds, Medicaid may be your best option in states where it offers waivers for assisted living. For example, in Louisiana, Medicaid reimburses personal care providers, such as assisted living communities, for help with activities of daily living.
If you live in a state that has Medicaid waivers and find a community that accepts Medicaid, be prepared to provide a significant amount of information documenting your eligibility:
— Verification of income and other financial resources
— Birth certificate
— Social Security card
— Marriage certificate or divorce decree
— Medicare and/or other health insurance cards
[READ: Does Medicaid Pay for Assisted Living: What Is Covered and What’s Not]
Long-term care insurance
Long-term care insurance policies are specifically designed to cover long-term care needs. These can help pay for services such as occupational therapy and rehab and help with activities of daily living. However, this coverage comes with a hefty price tag.
Premiums for a 55-year-old man are about $2,100 a year, according to the Association for Long-Term Care Insurance. That will cover $165,000 worth of benefits at the time of the policy’s purchase. If benefits increase by 3% annually, that would mean getting about $464,300 at age 90. While such coverage can be helpful, it should be just part of your strategy to pay for assisted living or other long-term care.
Private health or life insurance
While Medicare doesn’t cover the cost of assisted living, some private health insurers do, and some may offer some funds to cover at least part of the services you need in assisted living. You’ll have to check with your benefits provider for details about what’s included in your policy.
Life insurance and Social Security disability insurance may come into play to help pay for senior care in some situations. For example, if you have whole life insurance, you can surrender it for its cash value tax-free. Talk to your insurance agent to calculate the value of your policy.
While this option can be a valuable source of cash if you need it, it may not be an optimal move for individuals who are counting on this life insurance to provide a nest egg for loved ones.
David Meschel, founder of Meschel Wealth Management, also recommends exploring hybrid policies, such as a life insurance policy with a long-term care rider. A benefit of these plans is that you can access the money you put in or leave it to your heirs if you never end up needing long-term care.
Social programs
Social programs that provide free support and resources that may be able to help you finance assisted living include:
— PACE. The Program of All-Inclusive Care for the Elderly provides comprehensive medical and social services to some older adults.
— SHIP. The State Health Insurance Program offers personalized health insurance counseling to Medicare-eligible adults to help them find services and resources for care in their communities.
— Veterans Affairs. The VA offers guidance and support for military veterans and their families.
— Social Security Disability Insurance. If you have a disability that requires assistance with activities of daily living, you may be eligible to receive Social Security disability benefits from the federal government. These benefits can be used to offset some of the costs of assisted living.
Veterans and their families may benefit from Veterans Aid & Attendance benefits and Housebound allowance. Such benefits can range from about $1,000 to over $2,000 per month for assistance with long-term care, including assisted living.
Covered services include:
— 24/7 nursing and medical care
— Physical therapy
— Assistance with daily activities, such as bathing or medication management
— Comfort care and pain management
— Support for caregivers
Personal assets
Assisted living residents typically pay at least some assisted living costs out of pocket using their own savings and retirement income or with financial assistance from their adult children.
If you’ve planned ahead and saved wisely, you likely have some assets waiting to be tapped to pay for health care during retirement. These funds may include:
— A pension. For some, a pension from an employer is the first source of funds used to pay for assisted living.
— A fixed annuity. This is a financial product that can be set up to pay out a regular sum now or in the future. You can purchase an annuity with a single payment, or you can contribute to it over time. The main advantage of an annuity is that it provides a source of retirement income. On the downside, annuities at best have a low rate of earned interest, and you must wait until you’re 59.5 to make penalty-free withdrawals.
— Investments. Investments, such as stock market accounts, can grow considerably over time. However, the economy and the market can be very volatile; if you need these funds when the market is down, you could end up with less money than if you had waited until the market was stronger.
If you own a home, that may provide a large chunk of the funds you need to pay for care later on.
“Most people we talk to plan on using the equity in their home to support them as long as they can,” End says.
The downsides are you’ll have to sell the home to unlock those funds, and if there’s still a mortgage in place, that will eat into the amount of money you’ll have to work with afterward.
Some seniors find a reverse mortgage can help them stay in their own home longer while making ends meet. Reverse mortgages can be complicated, though, and you’ll need to read the fine print carefully before signing the deed over.
Practical considerations
No matter where you are in the planning process, know that there are resources available to help. For instance, your local Area Agency on Aging is a nonprofit organization dedicated to addressing the needs and concerns of older adults. They can help you determine:
— Which facility type is right
— How you’ll pay for care
— Whether insurance will chip in
— How best to plan for long-term care
In addition, talk to your doctor or another trusted practitioner. “They will be able to help determine what level of care is right for you or your loved one,” says Dr. Steven Buslovich, a New York-based geriatrician and medical director.
“For instance, instead of going into an assisted living community, you may be able to utilize a senior/adult day center as a viable alternative, particularly if you are able to assist in the care and support of your loved one in the evenings and on the weekends,” he explains.
You’ll also need to consider physical abilities.
“It will be helpful to identify your loved one’s frailty level through an assessment that will target the risk of adverse health outcomes, such as falls,” Buslovich adds.
A geriatrician or geriatric care manager can conduct such an assessment to help you figure out which services are needed now and which may become more critical down the line.
You’ll also probably want to connect with a financial planner who has expertise in helping seniors find the financing they need for senior care.
Finally, make sure you attend to the paperwork that becomes critical later on. Designate a trusted family member as financial power of attorney, and appoint a health care proxy or power of attorney to oversee medical care. These actions can help ensure your loved one doesn’t receive costly, unwanted care later when they’re less able to advocate for themselves.
How to Pay for Assisted Living With No Money
It can be difficult to cover the high cost of assisted living, but you may be able to find resources via personal, local, state or federal sources. Some options, as mentioned, include:
— Selling your home or getting a reverse mortgage.
— Family support
— Medicaid
— PACE
— Veterans benefits
— Long-term care insurance
— Life insurance
— Social Security disability insurance
— Private grants
There are pros and cons to each of these options, and not all of them will be available to every senior. But some of these options may provide funds when you’ve used up any savings you might have had.
How Care Costs Are Billed
There are three primary ways in which assisted living facilities structure fees:
— All-inclusive: If you have a lot of needs, selecting an all-inclusive option might be your best bet. With these plans, everything is covered under one monthly bill, so you’re not adding services as you go and not having to think about every dime you spend.
— A la carte: With a la carte pricing, residents select only the services they want or need, such as meals, one-on-one caregiving and medication management, and pay for those as individual items. In some cases, you can add or remove services on a monthly basis, depending on the contract with the community. This approach can save you money initially, but as your care needs increase, your costs might rise too.
— Levels of care: This pricing structure is the most common among assisted living communities. Essentially, this option specifies upfront how the community charges for care services based on the resident’s abilities and the amount of time needed to assist the resident with tasks. Because a resident’s care needs can change as they age, this structure is often tiered; you might start at a lower tier but progress to a higher tier, with its associated costs, as you require more assistance.
Exactly how much a service costs and how it’s billed to the resident depend on how the operator runs the business. Many assisted living communities are run as for-profit companies. That means the business needs to make a profit, which could mean a higher price tag.
Personal care services, such as those offered in an assisted living facility, are usually a labor-based cost, rather than materials- or equipment-driven, so the hourly wage of the caregiver, plus any profit margin, are typically used to calculate care costs.
How to Lower the Cost of Assisted Living
If you’re looking to lower the cost of assisted living, consider a facility that offers assistance with activities for daily living but doesn’t provide nursing care or specialized medical services, suggests Casey Allen, head of product and cofounder of SeniorLytics, a Vancouver, Washington–based SaaS analytics platform for senior living.
You can also ask to negotiate if your research suggests that a company may be overcharging, he adds.
Larger families should consider caring for seniors in their own home before hiring outside caregivers or moving them to assisted living, says Joanna Fuller-Crawford, CEO of Perfect Care Nursing, an in-home care provider offering skilled and unskilled support in and around metro Atlanta.
If you’re thinking of going this route, however, it’s important to be realistic about the cost versus the benefit of senior care services. For instance, you might need to cut your work hours to take care of your aging parent.
It’s also important to remember that seniors can benefit from the care and socialization that assisted living communities provide. Having the peace of mind that comes with balancing care needs with financial and family priorities may be worth the expense.
Explore Top-Rated Assisted Living Facilities with U.S. News
Start your search for the right assisted living facility for your loved on with U.S. News’ Best Assisted Living Communities 2024. This ranking is based on data collected in 2024 from nearly 400,000 residents and family survey responses and encompasses more than 3,500 senior living communities across the United States.
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How Much Assisted Living Costs and How to Pay originally appeared on usnews.com
Update 08/15/24: This story was previously published at an earlier date and has been updated with new information.
