Paying for elder care at home

Understanding options for senior care

As loved ones grow older, the need for a bit of help with everyday chores becomes almost inevitable. But that doesn’t necessarily mean a move to a nursing home is next. For many, full-time medical care isn’t necessary. Maybe all that is needed is an aide for a few hours a day to help with cooking meals and making sure medications are taken at the right time. In cases like this, home care is often the best option. Plus, there are many benefits to staying in your own home if you can remain independent and healthy. It can mean more freedom, familiar surroundings, and contact with friends and the places you’ve grown to love.

Often, the biggest question when you or a loved one reaches this transition will be how to fit it into the family’s budget. The costs of care can be expensive, but proper preparation can help.

Depending on the care needed, there are three main solutions that vary in cost and services provided. They are:

Elder care in the home

The obvious first step when one needs a bit of extra help is home care, either from a home health aide or a registered nurse. The aide or nurse gives one-on-one attention and support, and there is no need to relocate or pay for unneeded care. Whether you go through an agency or hire directly, home care provides flexibility in costs, services, and amount of care, which can be adjusted as needed.

Assisted-living facilities

Assisted living is the next step up from home care. It usually consists of a small residential community that offers various amenities and services to help with everyday life. Typically, you’ll still have your own room, or even a full apartment. And, while nurses are often on-site, there usually isn’t extensive or 24/7 medical care. Many of these facilities provide community recreation and daily events to keep residents active and engaged.

Nursing homes

When an elderly person needs more full-time supervision or help with medical issues, a nursing home is likely to be a better option. Most nursing homes have trained nurses and staff ready to assist around the clock with everything from hygiene to therapy.

Home care costs and how to pay for senior care

Costs will vary widely by state and location. Care near San Francisco can be significantly higher, for example, than care in rural Ohio. If you are not prepared, these costs can have a large impact on your family’s finances. If you do not have long-term care insurance, you’ll need to find a way to manage a new budget scenario, whether it’s by accessing retirement savings, taking out a mortgage on your home, selling assets, or accessing the cash value of an insurance policy.

The national median hourly rate for non-medical in-home care is $35.² So, if you need 20 hours of care a week, it will cost about $36,400 per year. If more than 20 hours a week is required or you need an aide who can provide medical assistance, these costs can escalate quickly. And if your care needs eventually require a residential setting, costs can rise considerably. The national median cost of a private room in a nursing home is $129,575 per year.² For many families, these costs can put significant pressure on their finances.

Related: Calculate your long-term care costs

Government programs like Medicare or Medicaid

Many are surprised to learn that Medicare does not cover long-term care. You’ll still use it to cover hospital care, doctor services, medical supplies, and prescription drugs, but services related to everyday activities are excluded. Medicaid, a public assistance program for low-income families and individuals that is funded by both the state and the federal government, does cover some services if you meet your state’s eligibility requirements. Income and asset limits vary by state and individual circumstances, so Medicaid eligibility requirements can differ depending on where you live.³

Related: Does Medicare or Medicaid cover assisted living?

Paying out of pocket

Many families self-fund long-term care. There are several options, with pros and cons, for coming up with the necessary money. Some life insurance policies have ways that you can access the death benefit while you are still living to help pay for long-term care, but this lowers the eventual death benefit. If the family member has retirement savings, turning that into a guaranteed income stream with an immediate annuity might be an option.* Some who own their homes outright might consider using that equity or taking out a reverse mortgage, but that often means the property will not be inherited by family members. Another common option is to have an elderly parent move in with an adult child, but this can put a large burden on the person who takes on that responsibility. At the end of the day, what is right for your family will be different from what is right for your neighbor’s family.

Long-term care insurance

Similar to life insurance or disability insurance, long-term care insurance can be purchased to guard against the costs of necessary daily care, whether it’s at home, in an assisted-living facility, or in a nursing home. There are many different types of policies and options you can put into place. Long-term care benefits can even be combined with life insurance in some policies.

How long-term care insurance can help

Most of us save throughout our working lives to prepare for a comfortable retirement, but planning for retirement expenses isn’t always easy when unexpected cost arise. Long-term care can be one of those expenses, whether you need help at home or care in a facility. Having coverage in place can help manage some of those costs and reduce the amount you may need to draw from your retirement savings.

Traditional vs. combination long-term care insurance

Traditional long-term care policies cover in-home and facility care, or sometimes care by certified family members. They provide coverage that focuses on long-term care and are usually best for families that already have life insurance and retirement savings.

If you need more versatile coverage, you can combine long-term care and life insurance into one package. You pay premiums for a defined period, and in return you get a long-term care benefit if you need it—or a death benefit for your loved ones if you don’t. Your policy may even come with return-of-premium options,** so you can get your premium back in the future if you discover that you need it for something else.

When is the best time to start thinking about long-term care insurance?

As with most insurance, age and health matter when determining rates and eligibility. It’s often advisable to explore options and begin preparing when you are in your 40s and 50s, while you are still healthy. That said, it’s never too soon (or too late) to discuss your options.