How Will We Afford It?

Senior care is very expensive and gets more expensive over time. Everyone asks, “How will we afford it?” Most folks manage through some combination of the following:

Income and Savings

Seniors start by paying for their costs out of their income from retirement pensions, social security, and investments. Ideally your loved one's income covers both their ordinary living expenses plus their health care costs without dipping into savings. But, because costs increase as more help is needed, they may need other sources of funding.

Insurance

While health insurance like Medicare does not generally cover Long Term Care, it is important to find out if your loved one has either Long Term Care Insurance or a life insurance policy that offers Long Term Care benefits. If they have insurance, you and your loved one can talk to their broker to find out exactly what it covers.

Also it may be possible to get some money from a normal life insurance policy while they're still alive. This will typically be called either “Accelerated Death Benefits” or “Living Benefits”. There are a few different ways to do this, and it will depend on the exact policy they carry. This is definitely one to chat with a trusted adviser about as this can also affect Medicaid eligibility, inheritance and taxes.

Downsizing

For most retirees, their home is their single biggest asset, and many folks choose to free up money from their house by downsizing to a smaller place. Downsizing can also help by having a more manageable, senior-friendly home or condo, and many seniors also like feeling less isolated if they move to a retirement community. We’re also seeing a lot of seniors moving in with their kids. Again, this can free up money and also save on expenses like food, electricity, and cable.

Medicaid

Unlike Medicare, Medicaid in many states does cover Long Term Care including things like Home Care, Assisted Living and Nursing Homes, but only for those seniors who can’t afford it otherwise. The rules for Medicaid are different for each state, and many states call it by something else (for example Medicaid in Massachusetts is called “Mass Health”). You can check eligibility in your state on the government’s website.

Reverse Mortgages

Reverse Mortgages, also called Home Equity Conversion Mortgages, are a special kind of mortgage that allows a senior homeowner to get a loan based on the value of their home. The unusual thing is that the loan does not have to be paid back until the owner dies or moves out. But (and there’s always a “but”) the loan keeps growing the longer the owner stays in the house, and when the loan finally comes due, there may be nothing left to pass on as inheritance. Reverse Mortgages are pretty complicated and expensive, and are not very common. If you’re considering one, we highly recommend getting trusted professional advice before taking one on, but for some folks they work really well. If you’re concerned about the cost of getting advice, the Housing and Urban Development office has counselors you can talk to.