The Complete Guide to Senior Living Finances

Do you ever worry about the future, wondering what your health care needs, housing situation, and lifestyle will look like? Although predicting every aspect of the future is impossible, you can prepare for a variety of scenarios and enjoy peace of mind by developing a well-thought-out financial and care plan.

A solid aging plan delivers many benefits, one of the greatest being the financial independence and security it can promote. The cost of senior living can come as a surprise to those who are unfamiliar with it and suddenly find themselves with a need or desire for care. Some erroneously assume their health insurance will cover these costs, and others may not give senior living costs much thought at all. Even those with long-term care insurance may not understand what exactly these policies cover and under which circumstances.

Armed with accurate information, you can understand and plan for senior living costs, ensuring they fit within your budget. As we’ll explore in the following chapter, costs for senior living vary widely based on a variety of factors. Knowing how to navigate these costs is crucial to creating an effective plan for your future.

How much does senior living cost? It depends. Senior living encompasses a wide range of services and lifestyle options, each of which can come with its own costs. Your financial situation and insurance policies can also influence what you pay.

Let’s look at some key considerations in estimating your potential senior living costs, both for community living and at-home options.

Community Living

Community living is an excellent fit for many people. Independent living, assisted living, long-term care, and memory support all fall within this category. If you’re interested in community living, you’ll want to consider these financial factors.

Housing Considerations

Housing is a key component of the cost of every level of community living. Keep in mind that “housing” in a senior living community refers to more than just a roof over your head, as it also includes a maintenance-free lifestyle. 

To accurately compare the cost of remaining in your current home to moving to a senior living community, you’ll need to factor in all the ongoing expenses associated with living at home. Consider the costs you may be able to give up by moving, such as:

• Mortgage payments
• Homeowner’s association (HOA) fees
• Home insurance premiums
• Landscaping services
• Housekeeping/cleaning services
• Home maintenance and repair costs

Level of Community Living 

One of the most significant factors regarding cost is the level of living you need and desire. Each level of senior living has its own cost structure and type of care. For example, memory support and long-term care tend to be more costly than assisted living because they involve more extensive health care and assistance from senior living team members. On the other hand, independent living offers valuable amenities but does not include health care services, making it a more affordable option for active older adults. 

When researching community living costs, you’ll want to narrow your search to the specific level of living or service you’re interested in. You may find some average figures on the internet that reference senior living as a whole, but they may not accurately reflect the cost of the lifestyle and services you’re considering.

Size and Type of Living Space

In community living, the type of personal residence you choose can greatly impact the price. Senior living communities can offer everything from studio apartments to single-family homes, so you’ll want to research floor plans (and corresponding costs) for any community you’re considering.

This is also a great topic to explore while on a senior living community tour. Seeing different types of living spaces in person can help you visualize the layout and size that resonate the most with you. Whether you’re eager to downsize and take advantage of lower costs or want to enjoy spacious accommodations, you’ll find the best option for you.

Amenities and Services

Senior living communities can vary considerably in the amenities and services offered. For example, some senior living communities may offer only a dining hall and activity room for residents, whereas others provide multiple dining venues, large fitness centers, on-site banking, salons, and much more. Amenity-rich senior living communities can be incredible places to live, but they are likely to come with higher monthly costs to support the many valuable on-site resources.

Geographic Location

As with real estate and many other types of expenses, geographic location can significantly impact the cost of senior living. For example, in Iowa, the average cost of assisted living is $52,404 per year. In some other states, that average can be much higher.

Location is not the primary determiner of cost, but if you’re open to moving, you may want to seek out a quality community in a more affordable area. If you’re looking to stay in your current location, you’ll want to familiarize yourself with typical costs for your city or state.

Duration of Residency or Membership

When planning for the future, keep in mind that prices may increase over time. The cost of living tends to trend upward due to inflation, and senior living is no different. Talk to senior living providers you’re considering about how they handle price increases and consider how your costs may change down the road.

Individual vs. Couple

Your budget breakdown will likely look different depending on whether you’re moving to a senior living community as an individual or as part of a couple. Couples often can take advantage of a lower cost per person compared to singles if they share a living space within a community. However, individuals can also save on costs by opting for smaller living spaces if desired.

When it comes to at-home services, some services (e.g., help with household chores) will cost the same regardless of how many people are in the household, whereas others, such as in-home health care, will be charged on a per-person basis.

Insurance Coverage

In many cases, people pay for senior living without much help from insurance. However, if insurance is helping you cover all or a portion of your senior living costs, this can affect your out-of-pocket expenses. 

For example, long-term care insurance (LTCi) policies can cover certain costs when a policyholder needs care. However, if you have an LTCi policy in place, keep in mind that these insurance plans typically mandate a waiting period before covering costs. This can leave policyholders with high upfront expenses for care. LTCi policies may also specify coverage caps on daily rates.

Living at Home

Some people prefer to remain in their homes rather than move to a senior living community. Or they may choose to move to a 55+ community, which can offer some amenities and vibrant social connections but does not include any in-home assistance or access to a continuum of care. They simply pay a lease as they would in any other apartment or condo community. 

Wherever you call home, there are still many ways to take advantage of senior living services and plan for your future. Consider how your costs may look depending on the approach you take to senior living services at home.

Continuing Care at Home Program

Through a continuing care at home (CCaH) program, you can live at home independently while factoring future care into your finances. 

These programs can offer different benefits and payment structures. The ideal program structure will provide ongoing practical support and guidance to help you thrive at home while guaranteeing access to higher levels of care in the future. Depending on your needs, this care can come in the form of at-home services or community living. 

For example, as a member of WellAhead, WesleyLife’s CCaH program, you immediately gain access to a personal wellness coach, wellness amenities on our senior living campuses, and select at-home services. All these offerings can help you enhance your well-being and empower you to continue living independently for as long as possible. If you need more care in the future, you’re guaranteed access to that care through WesleyLife. You’ll simply continue paying your WellAhead membership fee. 

On the face of it, enrolling in a CCaH program may appear to cost more than simply living at home. However, these plans can benefit both your health and your finances. A CCaH provides a predictable monthly cost you can factor into your budget, and you don’t need to stress about accessing or affording care in the future. 

At-Home Services

Older adults living at home can take advantage of at-home services from a senior living organization. At-home services can include everything from help getting ready in the morning to assistance with household chores to meal deliveries.

For some, a weekly visit to check in and take care of a chore or two may be sufficient, whereas others may benefit from more ongoing and extensive in-home support. At-home services can even include medical care to help manage a chronic condition or address temporary needs following an injury, illness, or procedure. 

The cost of at-home services depends on the types of services you elect to receive and the pricing model. At-home services can be offered a la carte or as part of a membership model.

Whether you move to a community setting or remain in your current home, you have the opportunity to tailor your senior living services and corresponding costs to align with your needs and preferences.

To understand and compare senior living costs, you need to know the fee structure, not just a dollar amount. Note that some senior living communities may offer flexibility in payment structures so you can select the one that best fits your financial situation.

Community Living Pricing Structures

In community living, you’ll typically see one of these pricing models: 

• Entry-fee model: Lower your monthly costs by starting with a larger, one-time payment.
• Fixed-lease model: Forgo an upfront payment and pay a higher monthly cost.
• LifeCare (or Type A) plan: Pay a higher entry fee and monthly service fee that also covers more extensive levels of care in the future.
• Fee-for-service (or Type C) plan: Pay a lower entry fee compared to other pricing models. If you require a higher level of care in the future, you’ll pay the market rate (which will likely be higher than the current rate).

At-Home Services Pricing Structures

For at-home services, service providers may offer options such as:

• Flat fee per service
• Hourly rate
• Daily or weekly rate

Medicare may also help you cover the cost of in-home nursing care, lowering your out-of-pocket expenses.

Keep in mind that at-home services encompass a broad continuum of services, including nursing care, meal deliveries, housekeeping, and more. You can also receive these services through different programs with different pricing structures.

Continuing Care at Home

To become a member of WesleyLife’s CCaH program, you pay:

• A one-time entry fee
• An ongoing monthly membership fee

Each month, your membership covers a certain number of at-home services and on-campus amenities. Plus, as long as you’re a member, you can receive more extensive care if the need arises. Rather than paying the market rate for the care you need, you’ll simply continue paying your monthly WellAhead membership fee; the program will cover 100% of all primary costs in a WesleyLife community or with services provided by WesleyLife at Home.

Learn more about WellAhead pricing structures in The Complete Guide to WellAhead.

Are you wondering how to pay for senior living? Clients draw on a variety of funding sources to cover their at-home services or community living. Consider these options.

Personal Funding Sources

Look at your finances, consult with your financial advisor, and consider whether any of these options is available to you:

• Personal savings and investments: If you’ve been saving for your future, senior living can be an excellent way to make the most of your hard work and financial planning.
• Assets: Selling assets, such as a home you plan to move from, can cushion your budget considerably and help you afford senior living.
• Social Security: If you receive Social Security, this can provide a steady monthly income to help cover costs.
• Pensions: If you receive a pension, this is another source of monthly income to factor in.
• Long-term care insurance: LTCi can offer coverage for senior living services. Ensure you understand the details of your policy and what it will cover under what circumstances.
• CCaH program: A CCaH program may also provide coverage for certain senior living services, such as in-home care or community living.

Government Programs 

You can also look into a variety of potential funding sources through government-sponsored programs, including:

• Medicare: Medicare does not cover senior living, but it may cover certain health care costs associated with senior living.
• Elderly Waiver: Medicaid-eligible older adults should see whether their state offers assistance for senior living services. Many states offer elderly waivers for those who opt to receive services in their home rather than a long-term care center.
• Veteran Benefits: If you receive a pension from the U.S. Department of Veterans Affairs (VA) and require ongoing care, you may be eligible for a monthly benefit through the VA Aid and Attendance benefits or Housebound allowance.
• Affordable housing programs: Affordable housing programs and low-interest loans from the government can help make a move to senior living more affordable. For example, the housing choice voucher program (i.e., Section 8) can help eligible individuals with rent assistance.
• SNAP: The Supplemental Nutrition Assistance Program (SNAP) can help eligible individuals pay for both groceries and Meals on Wheels — daily meal deliveries for older adults and military veterans at home.

Every person’s financial situation, needs, and goals are unique, but some guiding principles can help all of us with smart financial planning. Consider these tips as you approach senior living finances and prepare for your future:

1. Envision your future. Start by determining what your ideal lifestyle looks like as you age. Would you like to remain in your home, move to a 55+ community, or create a new level of independence and support in a community setting?  Whatever you want your future to look like, having a goal in mind can help you start laying a solid foundation through smart financial planning.
2. Carefully budget and track expenses. Keep a careful record of your expenses to better understand your current costs and what you can afford. Do you need to factor in set monthly or annual costs? How much do you typically spend on categories such as clothing, food, and entertainment? All this information can help you spend more consciously and plan more accurately.
3. Explore all possible payment and benefit options. As discussed in the previous chapter, many avenues can help you pay for senior living. Be sure to explore all your options to account for any possible assistance or viable financial solutions.
4. Employ smart tax strategies. Older adults can take advantage of certain tax benefits. For instance, medical expense deductions can save you from paying taxes on senior living health care expenses or even LTC insurance premiums. When planning for your future, you should also carefully consider how you’ll structure your finances (including retirement accounts and trusts) to ensure funds are available for care.
5. Consider working with a financial advisor. If you don’t feel confident in your own financial expertise, enlisting the help of a financial advisor can work wonders. These savvy professionals can help you better understand your financial situation and explore options for covering your future costs.
6. Avoid scams and fraud to protect your financial assets. Scams come in various shapes and sizes, but they can all devastate your finances. Be vigilant to avoid handing over your personal information or money to an ill-intentioned individual or organization. Protecting your financial assets allows you to spend your money on the lifestyle you desire.

What’s the ideal senior living solution that fits your budget and desired lifestyle? There’s an answer for everyone!

By understanding the factors that influence costs, exploring all available funding options, and implementing smart financial strategies, you can develop an informed plan that helps you enjoy financial security while taking advantage of your ideal senior living services. Whether you’re planning for yourself or a loved one, you can approach senior living knowing you’ve made an informed, thoughtful decision for the years ahead.

Learn how the cost of senior living compares to your current living costs with our interactive Cost Calculator!