Understanding the financial aspects of senior living is one of the greatest challenges for families and seniors. Just separating financial fact from fiction can be a full-time job for the uninitiated. Before you begin your senior living journey, take a look at six of the most prevalent misperceptions about financing senior care so you can move ahead with less stress and more knowledge.
Misperception #1 — Medicare will help pay for senior living expenses.
Medicare is health care coverage and Medicare Part A and Part B do not cover long-term care (aka custodial or nursing home care). However, Part A may cover skilled nursing care in a skilled nursing facility for a short period of time, as in post-surgery rehabilitation following a qualifying hospital stay. Find out more in our blog, “Understanding Medicare and Medicaid — What’s the Difference?”
Misperception #2 — Supplemental Social Security Income can help pay for senior living expenses.
SSI can indeed be used to pay for senior care, but only if the person qualifies to receive it. SSI is intended for those who meet income and asset requirements that are low.
According to payingforseniorcare.com, “Supplemental Security Income eligibility has both income and asset limits. To be eligible, one's countable monthly income cannot exceed the benefit amount. As of January 2019, that amount is $771 for an individual and $1,157 for a married couple. Some examples of countable income include employment wages, Social Security benefits, Veterans Affairs (VA) benefits, and pension payments.”
So, for those who do qualify, yes, SSI can be used to pay for senior living expenses, but it should not be counted on until application is made and accepted.
Misperception #3 — Long-term care insurance covers everything.
Long-term care insurance is a proactive way to be prepared for future health care needs, but all policies are not created equal. Moreover, the constantly changing costs of health care can make even a great policy look not so great a few years down the road as costs continue to escalate. AARP’s article, “5 Things You SHOULD Know About Long-Term Care Insurance,” takes an in-depth look at LTC insurance as well as other ways you can finance long-term care. If you have questions or concerns about your policy, don’t hesitate to contact your agent for the answers and assistance you need to make the best decisions.
Misperception #4 — I can’t afford to move to senior care until my house is sold.
Often, a home is a senior’s greatest asset, and one they consider their senior living savings account. But when a move to senior living has to be expediated, finding money for the move before a home sells and closes can become stressful for everyone involved.
One possible solution to this conundrum is a bridge loan. Many people have had bridge loans when needed to span the time between buying one home and selling the old one. In the case of senior care, these are generally unsecured loans (which means interest may be higher than a home equity loan) and there may be caps on the amount of the loan.
A bridge loan can also be applied for by multiple family members who combine their credit power as co-borrowers taking the responsibility off their loved one’s shoulders. Another benefit of a bridge loan is that it allows more time to update and repair a home prior to listing to maximize the profits after sale. To learn more about bridge loans for senior care, read the article, “Assisted Living and Home Care Bridge Loans from Elderlife Financial,” from payingforseniorcare.com.
Misperception #5 Life insurance can’t be used for senior care.
Most people think of life insurance as a benefit to survivors, but not the insured person. While this is often true, there are ways to put a life insurance policy to work paying for certain senior care needs. According to the U.S. Department of Health and Human Services, LongTermCare.gov website, there are four primary options available.
1) Combination products: A combination of long-term care and life insurance in one policy.
2) Accelerated death benefits or ADBs: These allow an insured to receive an advance on the death benefit, tax-free, for terminal illness, a life-threatening diagnosis, extended long-term care, or the permanent need for nursing home care.
3) Life settlements: A plan that allows the insured to sell their life insurance policy to raise cash.
4) Viatical settlements: Similar to a life settlement but only allowed for those who are terminally ill.
Misperception #6 Veteran’s benefits don’t cover senior care.
Veterans and their survivors may be able to receive funds for senior care if they are eligible for a Veterans Administration pension and “require the aid and attendance of another person, or are housebound,” in addition to their regular pension payment.
The two specific programs — Aid & Attendance and Housebound — are described on the VA’s website along with links to necessary forms for application. Keep in mind there may be a substantial waiting period from when an application is filed and when the veteran begins receiving benefits, but the veteran’s pensions are retroactive, so a bridge loan may be secured in the interim.
In addition to all the possibilities above, payingforseniorcare.com provides a guide to “Financial Assistance, Costs and Payments Options for Eldercare in Michigan.” The page includes a Resource Locator Tool, as well as a Cost of Care Calculator. All or any of these options can help seniors make the best decisions and the right moves for them.