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How Is Most Assisted Living Paid For?
Date Updated: January 3, 2025
Written by:
Lauren Thomas is a seasoned writer that specializes in long-term care, with a special focus on dementia-related topics. She holds a degree in counseling and uses her knowledge and experience to create insightful content that gives seniors and families the information they need to make important care decisions.
Reviewed by:
Kristi Bickmann, a licensed Long-Term Care Specialist, represents top-rated "Traditional" & "Hybrid" LTC companies. Serving associations such as the American Nurses Association, she's a licensed insurance agent in 27 states. Specializing in insurance products for seniors, Kristi helps hundreds of families every year protect assets, retirement, and loved ones. She understands aging concerns firsthand, having assisted her own parents. Kristi ensures accuracy on topics about senior long-term care and its consequences.
Most assisted living is paid for with private funds from monthly income and retirement savings accounts. Depending on what you qualify for, you may be able to use veterans’ benefits or state-funded financial assistance programs to pay for residential care.
Assisted Living Overview
Assisted living supports older adults unable to safely live alone due to advanced age or functional abilities. It primarily features nonmedical support with day-to-day tasks, including bathing and dressing, as well as meal preparation, housekeeping and transportation. Additionally, many assisted living communities have enriching amenities, such as fitness centers, communal dining rooms and art studios.
The Primary Methods of Payment for Assisted Living
Personal income and assets serve as the most common way to fund assisted living. This includes pension benefits, Social Security income and withdrawals from retirement savings accounts. Additionally, seniors who own houses may rent out their homes or use proceeds from their sales to pay monthly fees.
Other payment options include:
- Medicaid: While Medicaid doesn’t cover assisted living costs directly, many states fund waivers that pay for services seniors receive in residential facilities, including private attendance, housekeeping and daily meals.
- Long-term care insurance: Many long-term care insurance policies pay for a portion of care costs in a variety of settings, including assisted living communities.
- Life insurance benefits: Life insurance policies may cover services in three ways, including living benefits, life settlements and life assurance benefits.
- Veterans’ benefits: Qualified veterans may receive a cash benefit through Aid and Attendance or the Geriatrics and Extended Care program.
Additional Options for Paying for Care
When the typical avenues for paying for assisted living don’t provide enough funding, seniors may tap into other methods of paying for care.
Reverse Mortgages
Reverse mortgages let homeowners aged 62 and over convert their home’s equity into cash they can use to supplement their income and savings. With this option, seniors can pay off their home’s remaining mortgage and use the remaining loan amount to help pay for assisted living. Before choosing this option, be sure you understand the foreclosure risks, hidden fees and the potential impact on your eligibility for public benefits.
The Role of Family Contributions
In some families, pooling funds to pay for care may provide a practical option for covering assisted living expenses for an older relative. Oftentimes, contributing family members agree to arrangements that ensure reimbursement through proceeds from a home sale or benefits from a life insurance policy. For families that choose this option, getting all terms and conditions in writing helps to avoid disagreements and misunderstandings later on.