Independent living offers a vibrant, maintenance-free lifestyle surrounded by a community of peers. If you’re interested in community living, you may be excited by the incredible amenities, fun social events, and time to focus on what you love. But that excitement often is followed by a practical question: How do I pay for this?
Cost is one of the most common concerns for older adults who are considering community living, but financing this transition may be more feasible than you think. By consolidating your current monthly expenses and leveraging the assets you’ve built over a lifetime, you may be able to fund a move to independent living.
How Much Does Independent Living Cost?
Before we can discuss how to pay for independent living, it helps to have an idea of what this lifestyle costs. Independent living costs can vary, but they typically average $3,000 to $4,000 per month. Actual costs depend on a variety of factors, including:
- Community location
- Available amenities
- Home size
- Community model
Keep in mind that some payment models include an upfront fee to join a community, whereas others may involve only monthly fees. Be sure you understand the fee structure for any community you’re considering.
What’s included in the cost of independent living? In addition to covering the cost of your private residence (which may be a townhome, apartment, or detached home), the cost of independent living may include:
- Home maintenance
- Utilities
- Security/safety systems
- Transporation
- On-site dining options
- Classes, workshops, clubs, and other enriching experiences
- Amenities such as fitness centers, recreation spaces, salons, libraries, and more
In other words, when you consider the cost of independent living compared to your current costs, you should think beyond your mortgage or rent. Independent living is a lifestyle option that simplifies your budgeting and offers valuable perks. You can eliminate costs such as property taxes, homeowner’s insurance, HOA fees, trash removal, lawn care, home repairs, gym memberships, and more.
How to Pay for Independent Living: Five Revenue Sources to Explore
Most residents use a combination of "liquid" assets and long-term investments to cover their costs. Here are the most common ways to fund this next chapter:
1. Real Estate Assets
Selling a primary residence is the most common way to fund a move to independent living. A home sale is especially helpful if you’ve established significant equity in your home or own it outright. Plus, thanks to the Section 121 exclusion, many people can keep up to $250,000 (or $500,000 for married couples) of their home’s profit completely tax-free. You can also turn to investment properties to liquidate your assets or create a reliable monthly income to offset ongoing independent living costs.
2. Personal Savings and Investments
Now is the time to take advantage of years of responsible saving. For example, you may tap into accounts such as:
- Traditional savings accounts
- 401(k)s
- IRAs
- Stocks, bonds, and mutual funds
When planning large withdrawals or asset sales, it’s always wise to consult with a financial advisor to ensure these moves are optimized for your long-term financial goals and to discuss any tax implications.
3. Reliable Monthly Income
Monthly income can be especially helpful in offsetting the ongoing costs of independent living. Many residents draw on:
- Social Security: Both standard benefits and Supplemental Security Income (SSI) can be applied directly to monthly fees.
- Pensions: Fixed monthly payments from former employers can be a valuable source of income.
- Job earnings: It’s a common myth that you must be retired to live in an independent living community. If you’re interested in remaining in the workforce in some capacity or pursuing a passion project that earns income, this can help cover your costs.
4. Veterans’ Benefits
If you or your spouse served in the military, you may be eligible for specific financial assistance from the U.S. Department of Veterans Affairs (VA). VA Aid and Attendance provides monthly benefits to help cover the cost of assistance with activities of daily living (ADLs). It does not cover the cost of housing in an independent living community, but it can help if you receive some assistance there. (Keep in mind that, if you need a higher level of ongoing support, assisted living may be a better fit.)
5. Life Insurance Conversions
Life insurance policies can offer another means of liquidating assets. You may be able to sell your policy to a third party for a life settlement — a lump sum that is higher than the cash surrender value. Or, if you have a whole life policy, you can withdraw or borrow against the accumulated cash value to pay for your move.
Frequently Asked Questions
If you have specific cost-related questions, you can find answers by consulting with the sales team at an independent living community you’re considering. Here are a few general questions that frequently come up regarding how to pay for senior independent living.
Will Medicare or Medicaid cover independent living?
No, Medicare and Medicaid do not cover costs associated with independent living. Although independent living can help support a healthier lifestyle, it is not a form of health care.
How do most seniors pay for independent living?
Independent living residents finance this move in a variety of ways. The vast majority of residents use a combination of home sale proceeds and other assets, alongside monthly retirement income, to cover their costs.
Can Social Security be used to pay for independent living?
Yes, Social Security checks can be used for any purpose the recipient chooses. Although this monthly income isn’t likely to cover the full cost of independent living, Social Security can partially cover costs, making community living more affordable.
Planning to Make Independent Living More Affordable
Now is the best time to consider where you want your next chapter to unfold and how you plan to get there. When you aren't rushed, you can take the time to carefully compare communities and find one that best fits your preferences and budget. It is also important to remember that the most desirable communities often have waitlists. By budgeting early, you can comfortably set aside a small, often refundable deposit to secure your place in line. When your preferred floor plan becomes available, you will be financially ready to say "yes.”
It’s normal to wonder about how to pay for independent living, but this lifestyle may be more financially feasible than you thought. Want to learn more about your possible costs and how they compare to the cost of remaining in your current home? Use our cost calculator!
