Beyond Savings: Six Alternatives to Financing Your Senior Care & Assisted Living

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1 Beyond Savings: Six Alternatives to Financing Your Senior Care & Assisted Living

2 About SeniorAdvisor.com SeniorAdvisor.com is the leading site that provides easy access to the information families need when making a senior care decision. Thanks for Contacting SeniorAdvisor.com As you begin considering senior care and assisted living options, we hope this guide can help you answer one of the biggest questions families often face: How will we pay for senior care? Don t feel limited to pension and retirement funds we ve laid out a roadmap of financing options, everything from innovative financing options to little-known veterans benefits and Social Security strategies. As you ll soon see, there are plenty of ways to help make senior care more affordable and retirement more comfortable. SeniorAdvisor.com features trusted reviews and advice on local senior living communities and provides various search methods with seamless links to the best senior communities across the US and Canada. You'll also find top rated senior in-home care providers, elder care attorneys, and a community full of advice for virtually every facet of your retirement planning. No wonder so many families make SeniorAdvisor.com their first stop for planning their loved ones' golden years.

3 1. SOCIAL SECURITY BENEFITS The average retiree gets about 1/3 of his or her income from Social Security and that can make a major difference in anyone s standard of living. About Social Security Everyone entitled to Social Security benefits has a big decision to make: When should you retire and begin collecting your benefits? It s a tricky question to answer. Depending on your lifestyle, health and marital status, you ll need to find a strategy that works for you and helps maximize your benefits. Strategy 1: Delaying Benefits Delaying benefits until age 70 can net you up to 25% more in Social Security benefits. For every year that you wait, delayed retirement credits can increase your check anywhere between 3% and 8%, which can mean a huge difference in your monthly income. If you re in good health, delaying retirement is one of the easiest ways to maximize Social Security. Currently, life expectancy after retirement is 19.9 years for women and 17.2 years for men which can mean decades of drawing larger benefits if you delay. Strategy 2: Take Benefits Early or On-Time Seniors in poor health or who have a family history of early mortality may opt to take benefits on time or even early. If you ve reached retirement age and you simply need your Social Security money in order to make ends meet, taking benefits on time may be your best option. Before You Get Started: As you approach retirement, make sure your affairs are in order you can do it in a few easy steps: 1. Gather your documents income, insurance, legal, investment and savings papers and put them in a single place. Don t forget about passwords too. 2. Give your doctors, lawyers and financial advisors consent to speak with your caregivers or heirs as needed. 3. Put all your important documents in one place and be sure to tell at least one of your heirs or caregivers where to find it. 4. See Organizing Your Finances below for more tips.

4 Strategy 3: Stagger Benefits Married couples have a few strategies available in order to maximize Social Security benefits, including filing for benefits at different times. In the past, a spouse who earned much less than his or her partner had to wait until the other spouse filed for Social Security. But one of the latest rules regarding spousal benefits allows you to file and suspend benefits starting at age 65. Now, the lower wage-earner can receive benefits immediately while the higher wage-earner continues working and accumulating delayed retirement credits. The same goes for couples that have earned similar incomes over the years. One member of the couple may opt to retire while the other member receives spousal benefits while continuing to work. This type of strategy will eventually increase your monthly benefits. Organizing Your Finances: Getting ready to retire or enter assisted living? Use this quick checklist of essential financial documents to help keep you and your beneficiaries organized. Income and assets info Social Security and Medicare info Bank/bank account info Investment information with stockbroker contact Insurance info with policy numbers Property tax info Mortgage, debt and car title info Copy of your will Copy of recent tax returns Location of safe deposit boxes

5 2. VETERANS' BENEFITS As a veteran or veteran s beneficiary, you may be eligible for special assistance that is often overlooked the National Care Planning Council estimates that up to 25% of seniors are eligible for Veterans Aid and Attendance, but fewer than 5% apply. Under the Aid and Attendance Special Pension, the Veterans Administration pays out monthly benefits to any active-duty veterans or spouses in need of medical care. About Veterans Aid and Attendance Married veterans are eligible to receive as much as $2,000 per month and surviving spouses of veterans are also eligible for up to $1,000 per month in assistance. The Aid and Attendance money can be used toward any type of long-term senior care, regardless of whether the disability is duty-related. It can be used for nursing home and assisted living care expenses, or even to family caregivers for services such as eating, dressing, bathing and medication management. Who s Eligible for Veterans Aid and Attendance Any veteran who served at least one day of duty during a foreign war (service does not have to be overseas or in combat) Any veteran with 90 consecutive days of active service Surviving spouse of the veteran (married to the veteran at the time of death) Healthy veterans with a sick spouse Note that the Aid and Attendance pension varies depending on a veteran s assets and income. Before You Get Started: Tips and resources to help you apply for your VA benefits: Ask your retirement, assisted living or nursing home community for any veterans financial counseling services they have many communities take strive to help veterans. Apply online at and fill out the Veterans Online Application, VONAPP. Or, apply in person at your regional VA office, or call and ask about your Aid and Attendance benefits.

6 3. FINANCIAL AID RESOURCES AND NCOA There s a big pool of both private and public money set aside to help seniors with their living expenses anything from food, medication and housing subsidies to foreclosure prevention assistance. There are over 2,000 assistance programs for seniors, according to the National Council on Aging (NCOA), and a large portion of that money goes unclaimed. Get Started with NCOA Visit benefitscheckup.org on the NCOA website and take a short survey. They will identify assistance programs that you may be eligible for and provide instructions to help you apply for these benefits. Since 2001, the NCOA has helped over 3 million seniors receive aid for various items including: Utility bills Medications Cell phone service Food Dental care Alzheimer s care Note that while many of these programs are intended for low-income seniors, some programs may offer assistance for seniors with slightly higher incomes who still have trouble keeping up with expenses.

7 4. Long-term Care and Life Insurance Knowing how to leverage insurance policies can be an effective tool to financing your care. About Long-term Care Insurance Once referred to as nursing home insurance, long-term care insurance policies have evolved to cover a wide range of services for seniors. Policies may cover anything from skilled nursing to assisted living, adult day care, and may pay family caregivers for in-home care or provide monthly stipends for general senior care expenses. This type of flexibility allows seniors the freedom to choose the type of care they want. The downside of long-term care insurance is that it can be expensive, especially as some insurers have increased premiums over recent years. And, if you never end up needing long-term care, your insurance investment may never pay off. If you re considering long-term care insurance, do your research and check out some of the new financial products that don t come with the same risks, like long-term care/life insurance hybrids or long-term care annuities. Hybrid policies guarantee long-term care after you have paid your lump sum annuity or life insurance premiums, and distributions for your care are income tax-free. If you never use your care benefits, death benefits will be paid out to your beneficiaries. Hybrid policies often aren t as flexible as long-term care policies, so be sure that you understand your coverage. You may find that certain items like home care aren t covered. Hybrid policies are also generally more expensive than traditional long-term care insurance, but remember that your investment will be paid out to either you or your beneficiaries. About Life Insurance Life insurance can be a quick source of funds for seniors needing urgent care, with options ranging from death benefit loans, cash surrender, accelerated death benefits and life and viatical settlement. Navigating these waters can be tricky, and evaluating both your care needs and tax consequences are important to maximizing value. Life Insurance Options The cash value of your policy the amount of money built up through interest-earning excess premiums can be accessed by policyholders via withdrawals, loans, or a total cash surrender. In a cash surrender, you give up your policy s death benefit in exchange for a payout. When considering this option, note that surrender fees may be high and that your money will be taxable. If you plan on replacing your policy at a later date, it may be difficult or expensive to find similar coverage based on your age and health. Death benefit loans offer low-interest lump sum payments that can be used for any purpose. Money is borrowed from your policy s cash value and you won t be subject to a repayment schedule. However, if the money you borrow isn t paid along with interest, death benefits to your beneficiaries will be reduced by the balance of your loan.

8 Accelerated death benefit loans are a new option that are reserved mainly for the terminally ill. Policyholders can access their death benefit early in order to pay any expenses. Policyholders will still need to pay their premiums, but unlike a death benefit loan, accelerated death benefits don t need to be repaid. Your beneficiaries still receive a death benefit reduced by the amount of the loan. Life and viatical settlements offer lump sum payments that can be used for any purpose. Policyholders effectively sell their life insurance to a third party investor the investor will continue to pay the premiums on your policy and will eventually collect the policy s entire death benefit. Note that a viatical settlement is generally reserved for people with a life expectancy of less than 5 years. Before You Get Started: Ask yourself the right questions as you consider drawing on your life insurance: 1. How will beneficiaries and their future financial needs be affected? 2. How will debts and expenses incurred by the policyholder s death be paid? 3. In the case of the policyholder dying quickly, is the short-term cash worth trading in tax-free benefits? 4. In the case of the policyholder recovering, how will finances be affected without life insurance? Considerations Before tapping into your life insurance funds, there are some consequences to always keep in mind: Life settlements can be bought and sold without your knowledge. Third party investors will have access to your medical records and can request health updates, so be aware of the limitations on your privacy. Any change to your financial status will involve tax implications. You may have to pay taxes on the money you receive from your life insurance. Changes in financial status can also affect your Medicare or Supplemental Social Security eligibility, so it s vital to understand if and how your benefits will change.

9 Finding the Right Option Which option is right for you? It all depends on your circumstances, health and purpose of the money. Still, there are a few golden rules that can help guide you in the right direction. To get the most money from you policy, life settlements are generally suggested for policies with little or no cash value, while policyholders with a high cash value will get more from a cash surrender. Death benefit loans and accelerated death benefits are the best options for policyholders who want to preserve death benefits for their beneficiaries. Cash surrenders and life settlements may come with high fees, but they are useful for policyholders who have outlived their beneficiaries, are in danger of having the policy lapse, or are in extreme financial distress. Whether you re considering long-term care insurance, a hybrid option, or a life insurance settlement, be sure to discuss the benefits and drawback with your beneficiaries before making any decisions. In the case of life insurance, you will want to consult a tax professional before taking out a settlement.

10 5. Reverse Mortgage Homeowners have a few options to tap into the equity they ve accumulated in their property. One of those options is a reverse mortgage. About Reverse Mortgages Simply put, a reverse mortgage is a home loan that converts the equity in your home into tax-free monthly payments. Rather than the homeowner paying a lender or bank, the situation is reversed so that the lender makes payments to the homeowner. This type of loan doesn t need to be repaid until the home is sold, vacated or the homeowner dies. Advantages Seniors looking to supplement their monthly income may find significant benefits in reverse mortgages. Some of the main advantages include: You can use the money any way you want, from paying your monthly bills to buying life insurance to finally taking that trip to Hawaii You ll never owe more than your home is worth at the time when and if you sell, and your heirs won t owe a dime either Your Social Security and Medicare benefits won t be affected Disadvantages But before signing up for a reverse mortgage, seniors should be aware of the expenses and ramifications associated with these types of loans: Your fees may be higher than a typical loan, and closing costs can run anywhere from 2%-8% You could be forced to sell the home if you leave for any reason, like an extended hospital stay Your home equity may decline quickly as interest compounds over the life of your loan You won t be able to pass down your home to your heirs Before You Get Started: 1. Always research lenders thoroughly. Be sure you understand all the conditions of the loan. Some lenders have been known to take advantage of senior citizens by offering loans with punitive terms or very high fees. 2. Contact a HUD-sponsored counseling agency. They can provide free or low-cost advice and help you get in touch with an FHA-approved lender. Visit for details. 3. Discuss the reverse mortgage option with your spouse and heirs before making any decisions.

11 Who s Eligible for a Reverse Mortgage Homeowners must be at least 62 years old and must use their home as a primary residence in order to qualify for a reverse mortgage. To maximize benefits, the best candidates for a reverse mortgage are healthy seniors and couples who plan on staying in their home after retirement. In the case where one member of a married couple will require nursing home care while the other member remains at home, a reverse mortgage may still be a good option to increase monthly cash flow. If you believe you will need assisted living or nursing home care in the future, a reverse mortgage may not be the best choice selling or renting your home is generally a more lucrative option.

12 6. Bridge Loans and Home Purchase Programs Bridge loans and home purchase programs offer quick solutions to seniors who need to unlock some of the capital in their homes. About Bridge Loans If it s time to make the move to assisted living care, it s not always practical to wait months or years to sell your house. Bridge loans were designed specifically to help seniors in these situations. For temporary financial assistance that can be used towards assisted living and skilled nursing, Elderlife Financial s line of credit can help with bills, move-in costs and other expenses now as you wait for long-term financial sources. Up to six family members can apply for the Elderlife Line of Credit, so financial responsibilities for a senior s care can be shared without burdening one particular person. More applicants also make it easier to qualify for these rapid loans based on financial risk and credit scores. Often, loans can be approved in as little as 24 hours so families can avoid a financial crisis while figuring out more long-term financial solutions. About Home Purchase Programs Senior care facilities can also be helpful financial resources for seniors who are ready to make the move quickly. In order to help seniors transition from their homes into a community, some providers have started offering home sale programs. One particular program helps seniors through the entire process of selling their homes from pricing to staging while allowing them to move into a continuing care community with only a small down payment. This means seniors can get the care they need immediately without worrying about selling their homes first. Full payment is deferred interest-free until the home is sold. In cases where the house doesn t sell, the provider will buy the home at a pre-determined price. There are several plan options to choose from to match your financing needs.

13 A Note from SeniorAdvisor.com Thanks for reading Beyond Savings: Six Alternatives to Financing Your Senior Care & Assisted Living. We understand that paying for senior care can seem like an insurmountable task but it s not. Hopefully, you ve found a few resources to help you plan for your future. The next steps are the most important, so get ready to do your research and talk to as many professionals as you can. A happy, comfortable retirement is waiting for you, so get creative with your financing and use as many sources as you can. We re always ready to help, too. Visit us at today.