Long term care: although it's rarely discussed with an aging parent, ensuring you have a plan in place is one of the most important things you can do when planning your golden years.
As health care costs continue to rise, paying for senior care can become increasingly expensive. For example, did you know that the average cost of an independent living facility in the San Francisco Bay Area ranges from $6,000-$10,000 a month for room and board alone? And that's usually in addition to the standard buy in fee of $100,000 to $250,000. Suddenly planning for retirement becomes a much loftier goal than most Americans realize. To check out the average cost for long term care services in your area, click the link here.
So, what are the options to pay for in home care and/or long term senior care? Below we've put together a list of the 10 most common ways adults pay for care.
Of course this first option should come as no surprise. Contrary to popular belief, long term care is not a benefit of Medicare. And with no other options in place, self-pay may be the only option to pay for in home care or assisted living. However, considering the average daily costs of care can range from $200-$500 a day, this method can quickly drain your savings before you know it.
#2 Family Pay
If you can't afford to pay for care out of your own pocket, the next option may be a possibility. However, relying on your adult children to pay for your care is also not a great long term solution, especially in this day in age where Americans are working more and earning less.
#3 Long Term Care Insurance
By far one of the best options, purchasing a long term care insurance plan is an incredibly wise investment. To qualify for long term care, you need to ensure you're independent in all activities of daily living (bathing, dressing, grooming, toileting, transferring, etc.). And purchasing a policy when you are young and spry can ensure you're paying pennies on the dollar each month with great benefits available when you need them. If you wait until you're much older, the monthly premiums become much more expensive.
#4 Reverse Mortgage
If you own your own home and plan on aging in place, the other possibility to pay for home care is to take out a reverse mortgage, which is a government backed program. This is a popular option, especially if the senior is seeking in-home care services or perhaps if a spouse must move into an assisted living facility, while the remaining spouse lives at home.
#5 Department of Veterans Affairs
Known as aide and attendance, the VA offers a pension benefit to either a veteran or a veteran's spouse to pay for home care or care in an assisted living facility or nursing home. "A Veteran is eligible for up to $1,788 per month, while a surviving spouse is eligible for up to $1,149 per month. A Veteran with a Spouse is eligible for up to $2,120 per month and a Veteran with a Sick Spouse is eligible for up to $1,406 per month." There are additional benefits offered by the VA to help pay for care depending on a variety of factors. Keep in mind, however, that it can take anywhere from 6 months to a year from the time you file paperwork with the VA until benefits are approved.
#6 Family Care
If a senior or aging parent doesn't have the funds or benefits to pay for long term care, an adult child or family member is typically forced to leave a paying job and thrust into the caregiving role. In fact, a staggering 83% of caregivers are directly caring for an aging relative. Often times, this leads to lost wages and future career opportunities. According to a MetLife analysis, the average loss in wages, social security benefits, and pensions tops $300,000 per person!
#7 Selling your Home
Even though 90% of seniors would prefer to age in place as opposed to moving to an independent living facility, assisted living facility or nursing home, sometimes selling your home or assets may be the only option to foot the bill for long term care. Remember, a reverse mortgage can only be utilized if you are receiving in home care. If a senior or aging adult requires care in an outside facility, a reverse mortgage is not an option.
#8 Convert Equity from a Life-Insurance Policy
One of the other options is to convert the equity from an existing life-insurance policy. Although each policy differs, some newer products allow the individual to either keep the life-insurance policy as is or use the equity that was paid into it over many years to pay for in home care.
#9 Qualify for Medicaid
"All states have a Nursing Facility Medicaid program that provides general health coverage plus coverage for nursing home services. These services include room and board, nursing care, personal care and therapy services. Nursing Facility Medicaid may pay for a stay in a nursing home if you:
#10 Energy Employees Occupational Illness Compensation Program Act (EEOICPA)
The final benefit is a program established by the Department of Energy (DOE). If you or your spouse is a current or former employee of a specific DOE agency, and either of you succumbed to a specific type of cancer related to radiation or exposure to other hazardous chemicals, you can receive up to $250,000 to cover medical expenses and pay for in-home and/or long term care. For more information on this program, visit the Department of Labor online.
Although there are various options to pay for home care and long term care, most of these require very specific criteria or only benefit certain individuals. It's incredibly important to start the conversation with your parents or aging loved ones to ensure they have a plan in place, if and when they need care. Long term care is an unfortunate reality of life, and ensuring you have the finances set aside is just as important as planning for all of the other expenses we expect we retire--living expenses, vacations, and mad money.
Carlin Longley is a Registered Nurse and entrepreneur who's passionate about helping others.