How to Pay for Independent Living: Tips & Resources

Independent living facilities offer an appealing option for active and healthy seniors. These settings offer many benefits of at-home living without worrying about tasks like lawn care or food preparation. Independent living facilities may offer healthy meals, stimulating relationships with other residents, and amenities like exercise classes or hair salons. 

When considering how to pay for independent living, we may have some good news: certain options may make it a viable alternative. This helpful guide on how to pay for senior independent living has all the details.

The cost of an independent living facility can vary greatly depending on multiple factors — including location, the amenities offered, and more. Some top-of-the-line residences may offer high-end luxury touches such as gourmet dining or personal training in a high-tech fitness center. Others provide a simpler but comfortable living experience.

In general, independent living involves a community-style residential center where you have your own living quarters and care for yourself but receive assistance with household cleaning, home maintenance, and cooking. The facility is likely to offer local transportation and dining facilities. They may not, however, have medical professionals on staff or provide help with activities of daily living (ADLs), such as bathing and dressing. 

 

Options available in the typical independent living community:

• Housekeeping and laundry services
• Transportation within the area
• Meals served in a dining room or on-site restaurants
• Suites or detached units that include kitchens or kitchenettes
• Live-in management, 24-hour security, or both
• An activity program of classes, entertainment, and other events
• A gym or activity center with exercise and wellness programs
• An on-site barber shop and beauty salon
• A concierge to help you plan outings and take care of errands
• Group travel
• Religious services

If independent living sounds like it could be the right solution for you, your first question might be, "How do I pay for it?" There may be multiple options, depending on your financial picture. Below, we'll explore 10 financial sources that may provide some of the necessary funding for your move, such as long-term care insurance or a reverse mortgage. It's unlikely that all of our ideas will apply to your situation, but you may be able to combine several to make independent living a financially viable option.

Long-term care insurance is a type of policy generally sold to older adults to cover big-ticket items like in-home care, medical equipment, and memory care. In some cases, policyholders can use this insurance for services needed in an independent living situation. They'll need to review their policy documents, however, to confirm their coverage types.

When shopping for the best long-term care insurance for your needs, ask your agent about the parameters of your coverage and compare the benefits offered by more than one company. If you think independent living is in your future, look for policies that will help pay for in-home services in these settings. 

If your policy does include this benefit, it likely pays out a daily amount directly to the insured person — your loved one or the caregiver — if the recipient is unable to perform some ADLs. They can use the money to pay for caregiver assistance within the facility or for the cost of the facility itself.

If you aren't sure if you have this benefit, call your insurer to discuss your coverage.

If you qualify for Medicaid, you may be able to access government programs that pay for in-home care while you live in an independent living facility. Be aware, however, that there is often an extensive vetting and application process for accessing these funds, and there are strict limits to the amount of financial resources you can have.

One government option you may want to explore is the Cash and Counseling Program. This program began more than 15 years ago as a pilot Medicare program in a few states and has grown with its success. Names for this program vary by state — in California, for example, it's called the "In-Home Supportive Services" program; in Pennsylvania, it's "Services My Way."

This program aims to allow participants to manage their care by choosing their caregivers, including family members. In many states, this may include care received while in independent living facilities.

If you think you might be eligible for a Cash & Counseling Program, a good place to start your journey is at the website of the National Resource Center for Participant-Directed Services, a nonprofit housed at Boston College that offers more information on applying to and participating in these programs.

Many veterans have mixed success in accessing benefits offered by the government. Still, if you served in the military, persistence can pay off when considering how to pay for independent living. For example, if you have a service-connected disability, you may be able to find funding support through the VA's Independent Living track. This funding can, among other things, help provide adaptive housing modifications to allow you to live independently.

Although many VA benefits keep veterans in their own homes for as long as possible, a visit to your VA center may help you understand if there are ways the government can support your move to an independent living facility. Many independent living facilities have counselors on staff who can help you work through the red tape that often accompanies veteran's benefits. 

Selling your home to pay for the up-front costs of moving into an independent living facility can make sense. In fact, senior real estate specialists (SRES) are trained to meet the needs of older adults who sell or refinance their homes. These professionals can offer you the best options and information on the housing market in your region. 

You may also want to consider a bridge loan, a type of short-term loan that can provide the necessary funds while you wait for your house to sell. Bridge loans may also suit veterans waiting on VA benefits to move into a facility. Bridge loans are usually available for amounts ranging from $5,000-$50,000, with an average interest rate that may be slightly higher than conventional mortgage rates at the time. 

If selling your house seems too drastic, or there are other reasons you want to keep your home in the family, you might consider renting it out for short- or long-term periods. If you are still paying off a mortgage, you can apply rental funds to that purpose, with any overage going toward your independent living costs. If you've paid off your mortgage, then rental fees can offer a solid monthly payment you can use to pay your facility's fees.

Renting out your home may seem like a lot of work, and it can require some elbow grease at the beginning to get the house ready for new tenants. You can hire property management companies to handle the day-to-day tasks involved in being a landlord, like lawn maintenance and collecting rent.

A reverse mortgage is a type of financial arrangement that allows older adults to receive a loan against the equity they have built up in their home over the years. You can use this money to pay for anything you wish — including independent living fees. You do not need to repay the loan immediately; instead, you pay back the entire loan, including principal and interest, when you sell the house. 

Are reverse mortgages worth it? If you have considerable equity in your home and need a funding source for the up-front costs of moving into your chosen facility, they can be. The amount you receive is based on a range of factors that include your age, the property's value, and the type of distribution you decide on. You can choose to receive your money as a lump sum, a regular monthly cash advance, or as a credit line, similar to a HELOC.

There are a few caveats to consider, however. Banks generally charge higher fees for reverse mortgages, and the application process can be complicated. Your home cannot fall into disrepair while the reverse mortgage is active, and if you have Medicaid, the loan payments count as income when determining your eligibility for government assistance. If you have a financial advisor, discuss this step with them before committing. 

If you purchased life insurance years ago to ensure that your loved ones would be cared for in the event of your passing, you may have equity built up in that policy if it is a type of permanent insurance, such as whole life or universal life. Permanent types of life insurance generally have a cash value that you can borrow against. If you withdraw money from the cash value and do not pay it back before your death, however, it will affect the amount that your beneficiaries receive.

There are other ways to maximize your life insurance equity. Some insurers will buy back their policies, generally for 50-75 percent of the face value, depending on your age, policy amount, and more. Check with your agent to see if this is possible with your policy.

If not, there are entities called life settlement companies that may be willing to purchase your policy, depending on state and national laws. These companies then hold on to your policy to maturity or resell it to hedge funds or other investors. In exchange, you receive a lump sum payment. Keep in mind that once you sell the policy, your heirs will no longer be the beneficiaries of the policy's death benefit.

Annuities are sold by life insurance companies, but they aren't a type of insurance. Instead, they are financial vehicles that can pay you an income as long as you live. You can defer payments until necessary, which may make them a good option if you're not ready to move but want to prepare financially. You may use the proceeds of your annuity for independent living or other senior living situations, such as assisted living. 

You can arrange to receive your annuity payments as a lump sum or over time to use for monthly costs. Some seniors may take their pension funds and invest in annuities, which can yield tax benefits. Annuities can be structured in many ways, so talking to a financial advisor can help you determine the best options for your needs. 

Annuities offer guaranteed payouts that can offer peace of mind to seniors worried about running out of money. Another benefit of annuities is that the original investment is not considered an asset by Medicaid if you qualify.

If you have children and grandchildren, your choice to move to an independent living facility is likely to affect them in several ways. For example, they might wish to have a say in your plans for your family home. Even if you do not have children, it's likely that you have other family members who care about you and want what's best for you. They may be a source of financial support or offer you support in other ways.

Sharing your plans for independent living with your family can create a productive discussion about your future and what it means to your loved ones.

For most adults, Social Security benefits are one part of their financial strategy for negotiating their senior years. Although your basic benefits are determined by the Social Security Administration, you do have some say in how much and when you receive it. The amount you receive is calculated in part by the age at which you choose to start the distribution. You may begin receiving your benefits as early as 62, but waiting until you are 64 or 65 — or even as late as 70 — increases the amount you will receive. 

Social Security can be complicated, and it's important to review any materials you receive from the Social Security Administration. There may be additional benefits if you are a surviving spouse and care for dependents. Having your financial advisor review your Social Security benefits may be helpful when you are planning to move into an independent living facility. 

If you are wondering how to pay for senior independent living, the answer can be a little complicated. Many seniors cobble together the financial backing they need from a range of sources, like Social Security, annuities, pensions, and family support. Unfortunately, some sources that work to pay for nursing homes or other advanced care facilities may not be available for independent living, but that doesn't mean the resources aren't out there. Our guide to paying for independent living gives you some solid ideas on where to go for financial support as you enter this new phase of life.

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