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How to Pay for Assisted Living: Understanding Cost Structures and Payment Strategies accent

February 7, 2024 | By

Assisted living can provide the ideal union of independence and support, so it’s no wonder many older adults choose to make this move to enjoy a simpler and more fulfilling lifestyle. However, you may find yourself asking, how does assisted living work financially? Costs are involved with assisted living, but those costs may be more manageable than you think — especially when you consider how it streamlines your budgeting and the strategies that can help you pay for assisted living.

How Much Does Assisted Living Cost?

Many factors can affect the actual cost you pay for assisted living. As of 2021, the national average monthly cost of assisted living was $4,500, according to Genworth. Couples can expect to pay less than twice the cost for an individual because they share a living space. 

How Are Assisted Living Costs Structured?

Assisted living communities structure pricing differently, so comparing costs isn’t always straightforward. Make sure you understand how a community determines pricing so you can make an informed decision.

Entry Fee vs. Monthly Lease
You may be able to choose between entry-fee and fixed-lease pricing models.
The entry-fee model starts with a large upfront payment when you join a community. This option decreases monthly costs and can be advantageous for those with assets to sell or long-term care insurance. 

On the other hand, the fixed-lease model operates like a typical home rental, requiring no substantial upfront payment but resulting in higher monthly fees. This option suits individuals with predictable monthly incomes who prefer not to pay a lump sum. It also offers flexibility for older adults uncertain about a long-term commitment to a community.

Levels of Support
Assisted living is not a one-size-fits-all lifestyle. For some residents, assisted living may look like a relatively independent lifestyle with the added convenience and enrichment a senior living community provides. For others, it may involve frequent visits from team members to assist with activities of daily living.

Some assisted living communities offer an all-inclusive rate, but in others, cost increases with higher levels of support. Communities employ their own systems to determine levels of support and costs. Some could include five or more pricing tiers, whereas others may use point systems that can be customized to your needs. Pay attention to the level of customization available. For example, in a tiered structure, you may find that a specific need will place you at a certain level, regardless of whether you meet any other criteria in that pricing tier.

Cost Adjustments as Needs Change
Keep in mind that the price you are quoted when considering an assisted living community may or may not reflect the price you’ll pay down the road if your needs evolve. Be sure to talk with each community about how they determine when it's time to adjust your level of assistance and how that impacts the cost. 

If you suspect you may need more support now or in the near future compared with the pricing level that a community is referencing for you, ask about the cost for the level of support you truly need to enjoy all the comforts, convenience, and community that assisted living can provide. 

Budgeting for Assisted Living

Neither private health insurance nor Medicare covers assisted living, though both may cover medically required care. Medicaid does not cover the room and board part of assisted living, but many states offer Medicaid waiver programs that can help lower the costs of assisted living.

For those with long-term care insurance, most of these policies cover at least some parts of assisted living.

How to Pay for Assisted Living

If assisted living would enhance your quality of life, it’s well worth looking at your budget and finding a way to make this lifestyle work financially. Consider these payment strategies: 

  • Personal savings and assets: Savings accounts, investments, and other assets can help cover your costs. After all, now is the time to benefit from your financial stewardship over the years! 
  • Retirement income: Retirement income sources — such as pensions, annuities, and retirement savings — can help cover ongoing costs associated with assisted living.
  • Real estate sale: If you own a house, selling it can help you pay for your new home in an assisted living community. If you want to hold onto your property, consider turning it into a rental to generate monthly income or taking out a reverse mortgage to liquidate some of the equity in your home.
  • Long-term care insurance: If you have a long-term care insurance policy, it may cover some or all of the costs of assisted living. Review your policy to understand the benefits and coverage.
  • Veterans benefits: If you or your spouse are a veteran of the U.S. Armed Forces, you may be eligible for veterans' benefits to help cover assisted living costs.
  • Social Security and Supplemental Security Income (SSI): Social Security and SSI benefits can provide some income to help cover the monthly costs of assisted living.

Talking to a financial advisor or senior living expert can help you learn more about how to pay for assisted living, given your personal financial situation.

The Value of Assisted Living

Assisted living can deliver immense value, enhancing and simplifying your life. In addition to many practical benefits, assisted living offers intangible benefits that are hard to put a price on, such as a greater sense of community and the peace of mind of knowing you can access all the amenities and support you need, right there in your community.   

Want to learn what you can expect to pay for assisted living and whether you could save money by moving to assisted living? Use our cost calculator!

The Complete Guide to Assisted Living

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