It’s no secret that saving for retirement is a good idea. And for many older adults, retirement expenses often include senior living, which can be pricey.
In this article, we’ll go thought the many different types of senior living, what their average costs are and how you can financially prepare for this stage of your life.
[READ: Affordable Housing Options for Seniors]
What Is the Average Monthly Cost for Senior Living?
You have many options when it comes to senior living, and each type of facility may cater to various budgets. Below is the average cost for five senior living facilities based on figures from senior care-focused organizations and experts:
— Independent living and retirement communities: $3,065 per month
— Assisted living: $5,350 per month
— Continuing care retirement communities: $3,450 per month
— Memory care: $6,500 per month
— Nursing homes: $9,733 per month for a private room
— Average among all senior living options: $5,620 per month
[READ: Nursing Home Care: Where Does My Money Go?]
There are many factors that can add up to these big price tags, says Lauren Dunning, director of the Center for the Future of Aging at the Milken Institute, a nonpartisan think tank based in Santa Monica, California. Senior living cost drivers include:
— Owner/operator costs
— Location, size and property type
— Type of on-site medical care and equipment provided
— The specific staffing, services and amenities available
“Staffing costs are typically the largest expense item and can account for up to two-thirds of overall owner/operator expenses,” Dunning notes.
[READ Long-Term Care Facilities: Types and Costs]
Independent living
Independent living communities, also sometimes called retirement communities, are designed for older adults who are still able to look after themselves but want access to certain amenities, such as dining options or social activities, among peers of a similar age.
The average cost of independent living is $3,065 per month, according to SeniorLiving.org. This rental fee estimate is for the property itself and often doesn’t include extras or special amenities.
Factors affecting cost include:
— Where the independent living community is based
— Whether the community charges an entrance fee
— Whether the community is considered a luxury independent living community
Assisted living
Assisted living is the next care level up from independent living. Residents in these facilities need ongoing support and assistance with one or more activities of daily living, such as bathing, toileting, managing medications or preparing meals.
According to Genworth Financial’s 2023 Cost of Care Survey (the most recent data available), the average cost of an assisted living facility is $5,350 per month. This estimate includes the rent on the living space, meals and some of the support services you’ll receive, depending on how the contract is written. This monthly estimate typically does not include any health care services. Some amenities may also be billed separately.
Fees can vary based on location and the mix of services you need. For example, seniors who need lower levels of care (assistance with managing medications, for instance) may spend less than those requiring a higher level of care (more hands-on help with personal hygiene and moving around).
[Read: How to Finance Assisted Living]
Continuing care retirement communities (CCRCs)
Continuing care retirement communities can address all of your future health care needs in a single location, eliminating the need to move to a new facility each time those needs change. For instance, most CCRCs offer independent living, assisted living, memory care and skilled nursing care all on the same campus.
CCRC costs, which can be expensive, vary based on the fee model.
— An entrance-fee model CCRC usually includes an upfront fee of between $100,000 and $1 million, plus a monthly service fee. Depending on how the CCRC’s contract is written, you may have a fixed monthly cost for the entirety of your stay on campus, while others may require you to pay for additional services a la carte.
— For a monthly rental model, the nonprofit National Investment Center for Seniors Housing & Care reports that the average cost is $3,450. This monthly rental estimate does not include any entrance fees or additional health care services rendered, and it’s the average rate across all the levels of care offered.
Memory care
Memory care is a type of senior living designed for people with Alzheimer’s disease and other types of dementia. Caregivers who work in memory care facilities have specialized training to assist those experiencing cognitive decline, and the facilities themselves typically have important safety features to prevent wandering and elopement.
Average costs can vary but hover between $6,000 and $7,000 per month. SeniorLiving.org, for example, estimates the average cost of memory care is $6,935 per month, while Dementia Care Central reports that average is $6,160. For the purposes of our averages above, we’ve used $6,500 per month for memory care costs.
Costs usually include the living space — an apartment or room — meals, medication management, personal care and assistance with activities of daily living, plus specialized dementia-focused support. Medical care may not be included as part of these fees, but this can vary by facility.
Nursing homes
Nursing homes are specialized care facilities that provide round-the-clock support for older adults with medical needs.
Because nursing homes offer the highest level of care on the senior living spectrum, costs tend to be higher. Genworth Financial reports that a semi-private room in a nursing home costs $8,699 per month, while a private room costs $9,733 per month on average.
These fees include the living space, meals, assistance with the activities of daily living and skilled nursing care. Some seniors reside in nursing homes long term to manage complex or chronic medical issues. Others stay for a shorter time to recover and rehabilitate after surgery or another acute condition.
Kate Granigan, a Boston-based licensed medical social worker, board president of the Aging Life Care Association and CEO of LifeCare Advocates, notes that nursing home costs can depend on several factors, including the type of room, the kind of care you need and your geographic location.
“The cost varies greatly across the country with the highest prices in the Northeast,” she adds.
Does Medicare Pay for Senior Living?
Medicare does not cover the costs of senior living, but it may cover health care costs incurred while you reside in a senior living situation.
Medicare, for instance, provides limited, specific benefits, such as:
— Short-term post-hospital rehab
— Home health care based on strict eligibility requirements
— Part-time or intermittent skilled nursing care, excluding room and board costs
“Medicare does not pay for nonmedical home care, such as assistance with activities of daily living — even if to prevent adverse health outcomes or when related to medical conditions,” Dunning emphasizes.
Some Medicare Advantage plans — which Dunning says more than half of Medicare beneficiaries are enrolled in — may offer some additional limited benefits.
“These Medicare-approved private health insurance plans have the flexibility to offer supplemental benefits that cover in-home support services addressing nonmedical needs,” she says. “But these benefits would not typically cover the full cost of, for example, an assisted living facility.”
[READ: How to Pay for a Nursing Home With No Money.]
How to Pay for Senior Living
For many seniors, figuring out how best to pay for the senior living option they need can be a complicated challenge. Below are some strategies to help you prepare for this major expense.
Plan ahead and start saving early
To pay for senior living, you’ll need a sizable nest egg to draw from. Start as early as you can in planning and saving for retirement and senior care expenses that you may encounter later in life.
“Nearly two-thirds of older adults, during the course of their lifetime, will need home-based services and supports to meet health and personal care needs,” Dunning points out. “This means most people will need support to age well wherever they call home, even if it seems far in the future.”
Financing
If you haven’t specifically saved to pay for senior living later in life, your financing options could be limited. For example, most senior living spaces are offered as rental properties, so a conventional mortgage is not usually an option.
However, there are some financing tools you may be able to leverage, such as:
— Selling your home and using the proceeds to pay for senior living
— Taking out a bridge loan against your home, which can free up some cash until you can sell the home. This option may be useful in urgent situations.
— Taking out a reverse mortgage, in which you sell your home back to the bank and they pay you in monthly installments, which you can use to fund senior care
— Applying for grants, waivers, subsidies and other programs that may be available in some local communities to help seniors afford housing
Medicaid
While Medicare doesn’t cover the cost of senior living, Medicaid may — but there’s a catch.
“Many older adults who cannot afford their housing and care needs are forced to spend down their assets to qualify for Medicaid, which does cover the costs of room, board and care in nursing homes, while coverage for assisted living depends on state requirements,” Dunning notes.
If you have no money, Medicaid may become your best option for paying for senior living, but there are stringent requirements to qualify. It’s best to contact your local Area Agency on Aging or another trusted advisor with expertise in senior care issues for guidance on how best to proceed.
In addition, while Medicaid can be a helpful solution for some people, not everyone can take advantage of it.
“For those who have an income and assets above the thresholds for Medicaid and housing support programs but lack substantial personal savings to afford private pay options, the challenge is significant,” Dunning says.
These people have been dubbed the “forgotten middle.” Their middle-class status means they’re not wealthy enough to afford to pay for care out of their savings, but they’re too wealthy to qualify for many public aid or assistance programs. And this cohort is growing.
“More than half of middle-income Americans aged 75 or older — a projected 14.4 million people — will not be able to afford the housing and care they will need or want by 2029,” she notes.
Long-term care insurance
Long-term care insurance, which is sold by private insurance companies, may cover costs associated with a wide range of senior living needs and options.
However, long-term care insurance can’t cover all the costs associated with senior living, and there can be stipulations in the policy that include certain benefits and exclude others.
Private health or life insurance
Some private health insurance plans may cover certain costs associated with senior living. And some life insurance policies can be cashed in, allowing you to access a lump sum of money to pay for senior living. You’ll need to check your policy documents closely, however, as these will detail all of the rules and restrictions of using this resource.
Social programs (PACE, SHIP, Veterans Affairs, Social Security Disability Insurance)
Many older adults have limited means to pay for senior care and need to consider low-cost senior living options. The good news is there are some social programs that can help lower costs. These include:
— PACE. The Centers for Medicare and Medicaid Services’ Program of All-Inclusive Care for the Elderly offers comprehensive medical and social services for qualifying elderly people. It includes medical and senior care benefits ranging from adult day care and dentistry services to meals, medical care and prescriptions. These services are meant to be delivered in the person’s own home, rather than in a senior living facility, and you must meet strict program requirements to qualify.
— SHIP. State Health Insurance Assistance Programs are offered in every state and provide unbiased help to Medicare beneficiaries and their families. Trained SHIP counselors will work with you one-on-one to find the right senior living and long-term care option.
— Veterans Administration. For qualifying military veterans, the VA offers financial support for senior care for some individuals, their families and surviving spouses. In addition, the VA runs a network of hospitals, clinics and senior care facilities around the country that may be an option for qualifying veterans.
— Social Security Disability Insurance. The Social Security Administration’s disability insurance program provides monthly payments to people with disabilities that prevent or limit their ability to work. These funds can be used to help pay for senior living needs, such as assisted living.
— Section 8. The U.S. Department of Housing and Urban Development Section 8 Housing Choice Voucher program helps qualifying adults age 62 and older, people with disabilities and low-income families find and afford housing. Individuals who are involved with this program live in HUD housing and pay 30% of their adjusted gross income. However, there are limited slots available, and the waiting lists can be long.
— Other options. Low-income senior housing, adult family homes and medical foster care options may offer less expensive ways for seniors to get the care and support they need. Location of the property, services offered and whether government subsidies are available all influence the cost of this type of senior living.
Personal assets (pensions, annuities, investments, real estate)
Saving carefully during your working years is one of the best ways to ensure you’ll be able to afford senior living when the time comes. A variety of personal assets can come into play including:
— Pensions, 401Ks and other retirement accounts
— Annuities and investments
— Real estate holdings
Liquidating these assets to pay for senior care can bring tax liabilities in some situations, so it’s best to work with a certified financial planner, tax attorney or other advisor who has experience in assisting older adults plan for their financial futures.
Explore Top-Rated Senior Living Facilities With U.S. News
Start your search for the best senior care facilities near you with U.S. News’ Best Senior Living 2024 rating. The 3,500 facilities included in this database signify the best communities across the country based on 400,000 survey responses from residents and their family members.
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How to Pay for Senior Living originally appeared on usnews.com
