Introduction to What I Wish I Knew About Paying for Senior Care


Senior living communities have changed dramatically over the last few decades, evolving to meet higher demands and to accommodate a broader spectrum of care needs, preferences and lifestyle options. Baby boomers — currently an estimated 74.1 million Americans  — are driving many of those changes, with many more to come. 

Even with more options in the marketplace than ever before, paying for senior care and housing is likely still the most stressful and confusing part of the decision-making process, with families weighing questions like:
     ●   Can we really afford this community?
     ●   Is home care a possibility, and for how long? 
     ●   Is my mom eligible for assisted living, or does she need to be in a nursing home? 
     ●   What if Dad can’t pay for a higher level of care, but doesn’t want to move? 

Introduction to Pricing: What I Wish I Knew About Paying for Senior Care

A closer look at senior care pricing reveals more nuances and complexities than meets the eye — and there are a number of alternative ways to pay for care that the majority of Americans are not aware of. Bottom line: there are no easy answers when it comes to paying for care. But if you know where to look, you’ll find solutions — including popular resources like VA benefits, bridge loans, long term care insurance, and reverse mortgages.

Roque Santi is the CEO of Elderlife Financial Services, and one of a number of experts in this field. Here, Santi opens the conversation about the real financial questions around senior care that most people typically ask when entering this part of the experience. He also guides us in how to plan for unexpected care costs.
     ●   How do I pay for care and housing?
     ●   What benefits are available to me or my loved one?
     ●   Is there some sort of financing available?

Whether you’re dealing with a higher-end senior living community or with a more traditional, standard care home, people are trying to figure out what they can afford. However, fewer than 5 percent of people have all of their assets and/or potential income sources written down in one place, and most don’t even have a budget.

“A big myth is that people tend to be prepared. But the fact is that very few people are actually financially prepared or educated,” Santi says. “Most people really don’t have a plan unless they’ve sat down and met with an attorney or advisor. Even then, they don’t always have a great plan, but they have some things in place,” he adds.

Let’s Start Off With Senior Living Financial Planning 101

So how do you develop a financial plan for senior living? We talked to another expert on planning, Sean Dowling, CFP® (Certified Financial Planner), and President of The Dowling Group. First, from a purely financial point of view, Dowling starts conversations with clients with the following questions:

  1. What’s your baseline financial plan?
  2. What can your current financial situation support — i.e., what’s the max we can push this to have the nicest, highest quality of life without putting yourself at financial risk?

This requires making some key assumptions and modeling, such as:
  1. What is the cost of living going to increase by?
  2. What are some of the things I want to do — anything special? (Example: Do I want to take a trip with my whole family when I’m 82?)

This is part of the “base case,” from which Dowling helps clients plan for the “what-ifs” and potentially difficult scenarios by thinking about these questions:
  1. What if you end up needing healthcare and what is it going to cost?
  2. If you’re already of retirement age, how will supplemental insurance integrate with Medicare and Medicaid?
  3. For pre-retirees, when do you start Medicare, and what are your plans for supplemental insurance?
  4. How is your current health?

Geographic area is also a consideration. Costs vary depending upon whether you’re located in New York City, Connecticut, or Florida, for example. Could your financial plan support living preference — no matter where you want to live — and to provide the care you may need? 

Be sure to look at the tax benefits too. What is the tax benefit of paying upfront versus paying as you go? What is the tax benefit of a continuing care contract versus an assisted living contract (or other form of senior living), and what is the timing of these benefits? Also, how do those benefits affect your budget?

Other things to consider include:
     ●   How do you create an annuity income stream?
     ●   What is the gain on the sale of your house? 

Every situation is contingent upon several factors including net worth, income, taxes and estate planning, to name a few. A big consideration relates to how long you might need Assisted Living and how costs will escalate over that timeframe. Do you need to plan for 1, 3, 5 or 10 years? ... that makes assisted living a little bit harder to plan for, Dowling explains. In addition, Johanna Miller, Senior Director of Finance at Benchmark says, “You have to expect that your situation can change at any moment, so you need to be sure your plan is flexible enough to adjust to any unexpected changes.”

“A lot of people aren’t sure they can afford senior living,” says Dowling. “But it’s important to do a financial management analysis to review income, assets, liabilities, expenses, and more.” The calculation may show you’ve got enough money to live in a certain place for three years, but that may not be enough if someone is in good health and lives quite a bit longer than three years. “It may be necessary to shift expectations — from a private apartment to a shared room, for example. You have to be mindful of the gap in income and the costs,” says Dowling.

For estate planning, consult with a financial planner or estate planning attorney — and look at the various options — i.e., a will or a trust. “If you have no legal documents in place, you are subject to state laws,” says Dowling. “So it’s important to know the state laws and what that means for your assets.” According to Dowling, probate protects the decedent and the heirs, but it’s a lengthy process — so it’s important to have an estate plan. “Everybody needs one,” he says. 

We developed this exercise to provide an estimate of how many years your loved one has with respect to the resources shared, help you with decisions regarding apartment type, as well as a review the alternate care and financial options.

So How Does Service Location Affect Pricing?

Pricing models vary by the type of care community, as each setting provides different levels of service and amenities, and not all financing options described later can be applied to all settings. Here’s a breakdown of the care settings available.
     ●   Personal Home Care (Companion Care)
     ●   Home Care Services (Skilled Healthcare)
     ●   Adult Day Services
     ●   Independent Living Community 
     ●   Continuing Care Retirement Community (CCRC) or LifeCare Community
     ●   Assisted Living Community
     ●   Memory Care Community
     ●   Skilled Nursing Facility (SNF)/Nursing Home
     ●   Rehab/Post-Acute Care Facility
     ●   Hospice & Palliative Care Services 

If you’re trying to decide whether a parent or older relative should move to your home state for care or stay where in his home state, the Genworth Cost of Care calculator and interactive maps is a valuable too. Also check out the National Center For Assisted Living, with regards to state level regulations for information on staffing requirements (ratios of staff to residents), administration and staff training and education requirements, how medications are provided,  physical requirements, and how their dementia care unit is defined and operated.

Stay tuned for more tips and insights at Open Conversations. 
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Content for Open Conversations was developed in partnership with Caregiving Advice.

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