Retirement Planning

The Cost of Assisted Living

Assisted living can be an attractive option for elderly individuals, but costs can add up quickly. Learn more about assisted living options and ways you can manage the costs.

How Do You Pay for Assisted Living?

Assisted living can be an attractive option for elderly individuals who reach a point in their lives when they need a little extra help with day-to-day life, whether that means getting dressed in the morning or making dinner. Assisted living (unlike around-the-clock care provided at nursing homes) can help reduce stress within the family by providing a reassuring option for loved ones who want to live independently.

Unfortunately, however, many families experience sticker shock when they learn how quickly costs can add up. That's why it's important to understand what kind of care your family member will need and how much it will cost.

Average cost of assisted living

There are a number of factors that can affect the average cost of assisted living, including where you live. In 2018, the median annual cost of an assisted living facility was $48,000, recent industry research shows. This amount, however, varies, depending on the state. In Georgia, the average annual cost is $37,200, whereas in Washington, D.C., the average annual cost is around three times that figure, at $111,195.1

Another factor is the size of the assisted living facility as well as the level of care required. The latter is usually based on how much help you need with daily activities such as bathing, eating, getting dressed and taking medications. The more help you need, the more you will likely have to pay.

Some facilities have an all-inclusive model. For high-end facilities with specialized physical therapy and amenities, you might be looking at an annual tab of $100,000.

What is included in your monthly assisted living fee?

The following services and amenities are typically included in a monthly fee:

  • Housekeeping
  • Prepared meals
  • Transportation services
  • Around-the-clock assistance
  • Activities

Ways to pay for assisted living costs

You might feel overwhelmed at the cost of assisted living and wonder how you will pay for it, but fortunately there are ways to help finance these costs.

1. Long-term care policy

A long-term care policy is insurance that can help cover the cost of long-term care. This is a great option if you plan ahead and invest in a long-term care policy. Long-term care covers costs that are generally not included in a typical health insurance plan.

2. Paying out of pocket

This could be accomplished with your own designated investments or with the generosity of children or other family members.

A Health Savings Account (HSA) is a great way to save money on out-of-pocket costs. It's funded with pre-tax dollars and is not subject to taxes when you take out money for qualified medical expenses. However, in order to contribute, you must be enrolled in a high-deductible insurance plan (HDHP).

3. Selling your home

Selling your home may free up funds to help cover the high cost of assisted living. Be wary, however, of using a reverse mortgage, which uses part of the equity in your home as a form of supplemental retirement income. Fees and interest can add up fast for a reverse mortgage. Loan origination fees on reverse mortgages alone can run into several thousand dollars.

4. Life insurance

A life insurance policy is another option that can provide financial support. Accelerated death benefits, sometimes referred to as living benefits, could enable you, the policyholder, to receive financial benefits before death if you have: a terminal illness; a long-term, expensive illness; permanent nursing home confinement; or a medical condition that incapacitates you. The terms of such riders will vary among carriers and are usually only available at the time the policy is purchased.

5. Veteran's assistance

For long-term care, veterans can contact the U.S. Department of Veterans Affairs to see if they qualify for assistance. Generally, funds may be available for veterans who have less than $80,000 in assets.

6. Medicaid or Medicare

Medicare cannot be used to cover the full cost of an assisted-living facility, but if you are on a limited income, Medicaid can be used in select states to cover some of the costs associated with assisted living.

The value of an assisted living facility

Aside from the high costs of assisted living, there are numerous benefits to having medical professionals and other elderly peers nearby. By minimizing the need for around-the-clock family care, assisted living can help reduce everyone's stress and improve family relationships. It can also alleviate safety concerns: If there is an emergency, someone can be there to help. Plus, plenty of studies show that socialization can keep the elderly more active and engaged than if they lived in isolation.

Coming up with a plan for funding the cost of assisted living and other late-in-life decisions is something to consider if you or a loved one are moving forward with retirement planning.

1. "Cost of Care Survey," Genworth, https://pro.genworth.com/riiproweb/productinfo/pdf/282102.pdf

Was this article helpful?
2
0

All Learning Center articles are general summaries that can be used when considering your financial future at various life stages. The information presented is for educational purposes and is meant to supplement other information specific to your situation. It is not intended as investment advice and does not necessarily represent the opinion of Protective Life or its subsidiaries.

Learning Center articles may describe services and financial products not offered by Protective Life or its subsidiaries. Descriptions of financial products contained in Learning Center articles are not intended to represent those offered by Protective Life or its subsidiaries.

Neither Protective Life nor its representatives offer legal or tax advice. We encourage you to consult with your financial adviser and legal or tax adviser regarding your individual situations before making investment, social security, retirement planning, and tax-related decisions. For information about Protective Life and its products and services, visit  www.protective.com.

Companies and organizations linked from Learning Center articles have no affiliation with Protective Life or its subsidiaries.

WEB.1148911.02.19