Paying for Senior Living: Funding Sources to Know

Paying for Senior Living: Funding Sources to Know

By Team Writer | November 19, 2024

---

Life is full of surprises but paying for senior living doesn’t have to be one of them. Since the majority of seniors aged 65 and older will require long-term care at some point in their lives, it’s best to understand all the possibilities available for paying for senior living before care is needed. 

You may find that long-term care is more affordable than you think if you know your options for paying for senior living expenses. Here are some you should know.

Funding sources to know for paying for senior living

Long-term care insurance

Obviously, seniors who have long-term care insurance have it easier than those who don’t when it comes to paying for senior living, but it may not be too late to consider a policy. Although many people purchase long-term care insurance long before retirement, the window of opportunity may not be closed for retirees. 

According to the money.com article, “Here’s Who Actually Needs Long-Term Care Insurance — and When to Buy It,” the best age to buy a policy is from the mid-50s to the mid-60s, as long as the purchaser is in good health. Before choosing to buy coverage, however, it’s a good idea to speak with a professional and remember that long-term-care insurance is a use-or-lose-it policy, unlike life insurance.

Personal assets

Although not the preferred option for many seniors, paying for senior living with personal assets is common. Savings, retirement accounts like 401k’s, IRAs, and pensions, and investments such as stocks, bonds, and annuities are all potential funding sources. For some, there are also valuable possessions that can be liquidated such as real estate, vehicles, and collections like coins, jewelry, and art. Again, however, it’s important to discuss options with a qualified financial advisor who will act as a fiduciary on your behalf as noted in the articles.smartasset.com article, “7 Secrets Comfortable Retirees Know About Hiring a Financial Advisor.”

Veterans benefits

It may have been decades ago, but those who are U.S. wartime veterans – or their surviving spouses – may also have access to benefits that may help pay for some senior care expenses. As described in the va.gov article, “VA Aid and Attendance benefits and Housebound allowance,” veterans who need daily care, are bedridden, or have other physical or mental disabilities (even those unrelated to military duty) may be eligible to receive these funds if they also qualify for and receive a VA pension. In addition, seniors who have a war-related disability may be eligible for VA disability compensation, which is a monthly, tax-free payment that can help when paying for senior living. Find out more in the va.gov article, “VA disability compensation.”

Life insurance

Permanent life insurance is one more way to make paying for senior living less burdensome. Whole life insurance (not term life) purchased decades earlier to protect a growing family will have accrued considerable cash value that can be accessed in a number of ways.

• Take out a loan: A life insurance loan is taken with the cash value as collateral and while repaying the loan is not required, there is interest which will accrue and can eventually exceed the cash value of the policy and cause it to lapse. Unpaid loans may also lower the death benefit if death occurs before the loan is repaid. For a more in-depth look check out the businessinsider.com article, “Unlocking Cash from Your Life Insurance: What You Need to Know About Life Insurance Loans.”

• Cash withdrawal: Paying for senior living can also be done through a cash withdrawal.  This option is tax-free as long as the amount withdrawn does not exceed the amount paid in premiums, but, again, it will decrease the death benefit. 

• Life settlement: The sale of a life insurance policy is called a “life settlement” and as noted in the forbes.com article, “What Are Life Settlements? Pros, Cons & How They Work,” it can be an alternative to selling a home. In a life settlement, the policy is sold to a third party typically for more than the cash surrender value but less than the death benefit and the purchaser then makes payments and receives the death benefit when the original owner dies. 

• Viatical settlement: When a policyholder is terminally or chronically ill they can sell their policy at a discount for a lump sum, however they lose the right to assign the death benefit which goes to the purchaser upon their death. To learn more the Investopedia.com article, “Viatical Settlement: What it is, How it Works” is an excellent resource. 

Government programs

Two additional sources of funding include Supplemental Social Security and Medicaid. To qualify, seniors must meet eligibility requirements which can include income, net worth, disability, and other qualifiers that vary from state to state. 

Rose Anna Hughes Home – a competitively priced senior living option in Louisville

When choosing a senior living community keep in mind that Presbyterian Homes of Kentucky makes value a priority which is why our Rose Anna Hughes Home Senior Living Community has the most competitive rates in the area – without sacrificing care or quality of life. Contact us to learn more and schedule a tour.