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How to budget for senior care

Many people plan for their retirement, making sure they have the funds to live comfortably once they no longer receive a weekly paycheck. However, a health crisis or the natural course of aging could change the trajectory of your retirement and force you to consider the need for advanced or prolonged care. It isn’t something most people want to think about, but not planning for that care can create incredible stress and financial hardship for you and those you love.

There are many types and levels of care, but let’s focus on these four: Short-term subacute rehabilitation, independent living, assisted living and long-term skilled nursing.

What kind of care will you need? And how will you pay for it?

People who experience a sudden change in health and are hospitalized may require additional services in a skilled nursing setting before returning  home. Subacute rehabilitation can be a stepping-stone between hospital and home for people who have had orthopedic surgery, a medical event like a stroke or heart attack, or who have been injured in an accident. Throughout your stay, a multidisciplinary team of nurses, therapists, therapy aides, dietitians and social workers aid in your recovery.

A short-term subacute rehab stay is often covered in part or full by your health insurance, although you may be responsible for a co-pay. In some cases, such as with scheduled orthopedic surgery, your rehab stay can be pre-planned, so you know in advance where you’re recovering and how much it will cost. Make sure the rehab facility you choose accepts your insurance. They may be able to pre-approve your coverage and even reserve your room.

Maybe you don’t need medical care but would like to downsize and free yourself from home maintenance and upkeep. Independent living communities, sometimes referred to as retirement communities, appeal to this category of older adults. Living arrangements are designed around the needs of mature clientele, with features that address safety, mobility and an easy lifestyle. Home maintenance, lawn care and trash pick-up are generally included, with housekeeping, restaurant dining, laundry and other services available, usually for an additional fee.

Housing styles run the range, from townhomes and condominiums to patio homes and apartments. There may be a community center where you can socialize with other residents, dine, enjoy entertainment, and participate in games and activities. More upscale communities may offer golfing, tennis, swimming and fitness gyms.

The cost of living in a retirement community will depend in part on the type and size of living arrangement and the extra services and amenities featured. Be aware that some places charge homeowner association fees or community fees. The most exclusive may require a hefty up-front buy-in.

If you gradually become less independent, assisted living may be an option. The decision to move to an assisted living community is often made under guidance of a physician, who determines that an individual requires help with activities of daily living. In an assisted living community, trained staff lend a hand with such tasks as dressing, bathing and medication management.

The cost of assisted living care depends in part on the type of accommodation and the level of care provided. The American Senior Housing Association places the average cost of assisted living at around $3,600 a month.

Depending on the assisted living facility, your monthly rent will likely include accommodations, care, 24-hour supervision, daily meals, transportation and utilities. Other things, like phone and cable service, may be extra.

For the most part, assisted living services are paid through a combination of private funds, including savings, retirement plans, investments, pensions, Social Security retirement benefits, sale of a home and other property. Assisted living is not covered by Medicare.

If you or your living or deceased spouse was a veteran, you may qualify for the Veterans Aid and Attendance Pension Benefit. This program can provide a monthly financial contribution to help defray the cost of assisted living. In New York State, some assisted living communities are licensed under Medicaid to offer the Assisted Living Program (ALP) to provide specialized care for residents who medically qualify.

Social Security Disability Insurance and Supplemental Security Income typically do not provide enough benefit to cover the cost of assisted living. Additional sources of income would be required to put toward the monthly payment.

Part of the admission process may involve completing a detailed financial application, which gives both the individual and the assisted living community a good idea of the depth of a person’s financial resources.

“The financial application helps people understand the cost for their room and board, plus whatever care services are required,” said Kim Laviolette, Elderwood’s Regional Director of Operations.

“Elderwood uses a tiered service plan to determine the care portion of their monthly rent, based on the results of an initial assessment,” said Ms. Laviolette. “We individualize their care, so they only pay for the services they use, enabling them to age in place for as long as possible.”

When more care is required, many families turn to skilled nursing communities. Also called long-term care facilities or nursing homes, these communities provide round-the-clock care to people in frail health who can no longer live on their own. The care team includes nurses, nursing assistants, social workers, dietitians and dietary aides, housekeeping and laundry staff, maintenance personnel and activities staff.

The most comprehensive level of care, it is also the most expensive, with estimates averaging between $85,000 and $105,000 a year – likely more if you need specialized memory care. According to the most recent National Study of Long-Term Care Providers, about one-half of Americans reaching age 65 will need long-term care services at some point in their lives. The average projected length of stay is 2.2 years. However, up to 20 percent of people may need care for more than five years.

The money to pay for that care generally comes from the individual’s liquidated assets, but payment may be supplemented or paid outright by a family member. Once the individual’s assets are depleted, or nearly depleted, they may apply for Medicaid. Approval can take several months, but once the application process is finalized, Medicaid provides for the individual’s care in full.

Another alternative is long-term care insurance. Long-term care insurance policies are aimed at healthy individuals in their 50s and 60s who are concerned about care in their later years. There are many variables regarding the types of policies, how much they cover and for how long. You may be denied a policy due to your age or a pre-existing health condition. Furthermore, you may put thousands of dollars into the policy over a decade or two with no guarantee that coverage will ever actually be needed. However, long-term care insurance typically pays up to 80 percent of the cost of skilled nursing care, which can greatly relieve the financial burden on the individual and their family, if and when such care is required.

No one wants to spend money on something they don’t need; but everyone hopes they’ll be prepared if a need emerges. The best time to prepare for the possibility of advanced care is years before it is actually necessary.

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