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Financing senior living: What you need to know

When you or a loved one first bring up moving to a retirement community, it kicks off a process of determining needs and finding the best location. One of the top considerations any family will have to take into account during this time is how to pay for senior living. Retirement accounts may only provide so much financing for life after retirement, and depending on what levels of care and other amenities are needed, costs may run up against or exceed what's been put aside.

However, affording senior living is much like planning for any other purchase or payment obligation like rent, college or debt. The expenses related to moving to a retirement community can become more manageable when you and/or a loved one strategize how to pay for senior financing. It takes budgeting and maybe some creative thinking, but finding a way to afford senior living is possible.

Here's what you need to know about the financing the cost of senior living and what actions you can take to make that reality more feasible:

Determine the cost

Before deciding how you pay for senior living, you need to first understand what it costs. This begins with assessing needs like health care or assistance with bathing and mobility, for example, which helps peg the type of arrangement best suited to personal needs: independent living, assisted living or memory care. The easy part about this is you can then get a quote from any retirement community you contact. Once you have an idea of that base cost, figure in any other expenses like medications and gas or car insurance if still driving. What's left is an overall picture of what life in senior living will cost, and from that baseline you can form a strategy of financing it.

Be aware Medicare won't pay

One pitfall many seniors must be keen not to fall into is thinking Medicare will just pay for senior living. While Medicare as health insurance is used to pay for a lot of things—prescription medications and a certain number of days spent at hospitals included—it does not finance long-term stays in independent senior living communities, nor assisted living and memory care units. However, if certain income requirements are met, the government can subsidize assisted living through Medicaid, which is mean to help low-income residents.

Consider potential ways to pay

When finally deciding how to pay for senior living, there are a multitude of potential options—and some may even have you thinking outside the box. The clear option here is to use personal savings, but there are a few other sources worth look at, including, but not limited to:

  • Proceeds from a home sale: When you move into a retirement community, well, it tends to mean leaving home. And if you sell your house or residence, you can use whatever profit you have to put toward senior living. While the total may not be able to settle the entire balance, it can take care of a big chunk. Just be sure to figure in taxes and closing costs.
  • Employer retirement accounts: A primary way for Americans to pay for senior living is by using savings accrued over the years in the workforce. Whether they contributed to a 401(k) or a Roth IRA, seniors have a great source of income to use toward senior living costs. However, be aware if you or a loved one used a 401(k), as taxes will have to be paid on funds once they're withdrawn to meet senior living expenses.
  • Investments: Using returns from investments to pay for senior living is another option. Seniors can invest in stocks, treasury bonds and other assets to provide more money in retirement. Be aware of the risks with various investments, however. Equity markets can be volatile, but returns can be big. Comparably, fixed income markets like government bonds provide a steady income that senior can depend on to pay down costs.

Negotiate if you can

Another worthwhile tactic to use when strategizing how to pay for senior living is negotiating with the retirement community of interest. Costs aren't always set in stone, and some locations may even offer discounts or incentives to move to the community. Try to feel out what opportunities there are to either trim costs or consolidate them, in the event that community does offer flexibility. Each community will take a different tact, but if the deal is right, it could work out in your or a loved one's favor.

Financing the cost of senior living is a decision that has to be made, and made carefully. There are a number of factors involved, but speaking with a retirement community itself to help judge costs and plan for expenses is often beneficial. Having that conversation about cost and what can be done to manage it is essential before moving in.

Want to better understand the costs of senior living? Contact us today.