A Guide to Financial Assistance for Senior Care
October 9, 2019
One of the most common questions we get in our effort to help families find the right senior living option, is: “Do I, or will I, have enough money to take care of my needs when I get older?” It’s the scariest question we all may face, unless we have unlimited wealth. There’s not only the cost of a senior living community (assisted living, independent living, coops, skilled nursing, etc.), with its rent and care costs, but there is home health care, respite care, adult day care and so on. Daunting doesn’t begin to describe the feeling. Therefore, to start with the basics, following is a list of financial assistance or resources available to seniors – now, or if you’re still working and are looking down the road. Retirement Accounts If a senior worked for an employer at any time since the 1970s, they may have a retirement fund. You will need to find the documents containing the account number and related information to access this account. The most common types of retirement accounts are: 401k; 403b; 457b; Thrift Savings Plan; and IRA. Less common now are pensions. A 401k is the most common type of retirement plan because it is available to employees at their workplace. The 403b plan is also referred to as a TSA or tax-sheltered annuity. This type of plan is available to select ministers, nonprofit organization employees, and public-school employees. A 457b retirement plan is available to employees of schools, hospitals, churches, or charities run by local or state governments. The Thrift Savings Plan is part of the Federal Employees Retirement System. This is available for those in civil service or members of the military. Pensions have become less common in the U.S. It’s considered as an incentive to work at a company and is funded and managed by the company. Some unions provide this for their members as well. Unfortunately, many employers later find that they are unable to fulfill the monetary obligations that they agreed to. Personal Finance Options Other means of financial support, if you were financially successful in your working years, received sizable inheritances, or were in the military. These people are more likely to have purchased their own home or to own real estate and may have five types of personal finance options available:
- Reverse mortgage: A reverse mortgage is a financial agreement with the Federal Housing Administration (FHA) to exchange the equity of a home for payments. This is mostly used as a form of supplemental retirement income and is only available for homeowners 62 years and older. When the senior homeowner passes away, the surviving heirs must repay the mortgage loan in order to keep the house. The heirs have six months after the homeowner’s death to start making loan payments.
- Real estate ownership: This can be a stable form of income. Real estate properties with dwellings can be rented out for an income or, the property can be sold to help cover financial expenses of seniors.
- Marketplace investments: This includes purchasing stocks, bonds, and mutual funds. With each of these investments, a senior can increase their income through interest income and/or investment dividends.
- IRA: While an IRA was also included in the retirement account category, it is based on investments. An IRA is established at a bank or brokerage firm and involves investments in stocks, bonds, mutual funds, and cash deposits. There are two main types of IRAs—Traditional and Roth. Each type of IRA differs in the amount that an individual can invest and withdraw annually without penalty.
- Veteran’s programs: These programs include those such as Veteran’s Pension for those over 65 and Veteran’s Disability pension for wartime vets who can no longer work. The U.S. Veterans Benefits Administration has benefits such as a pension, disability benefits, health care, life insurance, etc. If you think you’re entitled to benefits, check their website to see how to apply.
- Health Insurance: The most common type of health insurance is private health care coverage from an insurance company. This medical insurance is sourced from the individual and can include prescription drug coverage, as well as dental and vision care. It does not include Medicare; that is a government-backed health care plan.
- Annuities: This is a long-term investment that an insurance company will issue as a way of protecting your finances. Your contributions will reduce the risk of outliving income. First, you purchase an annuity and contribute money to it, while you have a steady income. Then, in your retirement, you receive regular payments on what you’ve contributed, which will theoretically last the rest of your life.
- Life Insurance: Despite what you may think, you can still buy life insurance in your 60s. There are certain policies you can obtain which cater to seniors and don’t require an exam. In particular, you may want to look into term life insurance policies, which pay out if you die within a specified period of time—usually 10, 15, or 20 years, depending on your age when you purchase it.
- LTC Insurance: Long-term care insurance, better known as LTC or LTCI, is a type of insurance product that helps pay for the costs associated with long-term care. This insurance covers care generally not covered by health insurance, Medicare, or Medicaid. Included in coverage is personal/adult day care services, nursing home care, and home health care for ages 65 or above.
- Viatical: When life insurance is converted to fund elder care, it will be considered a viatical settlement. This type of life settlement is a good solution for assisting an elderly person living at home. It can also be used to fund long-term care expenses, medical expenses, or bills. Approximately 60-90 percent of the policy’s face value can be netted by the policyholder, who will receive payments in one lump sum.
- Social Security: The original purpose of Social Security was to provide retirees, along with those whose disabilities prevent them from working, with a living wage. Unfortunately, social security isn’t enough to provide a living wage for most people today and therefore, shouldn’t be relied on as a complete income replacement, but rather as a supplement, alongside other income streams. Nevertheless, Social Security benefits for retirement are available at age 62. However, for seniors who wait until they reach full retirement age, they are eligible to earn more per month. The full retirement age ranges from 65 to 67 depending on when the senior was born. For individuals who were born prior to 1935, the age is 65, while those seniors born between 1943 to 1954 must be 66 to be considered fully retired.
- Medicare: Medicare is the national social insurance program available to seniors over age 65. Individuals can also receive Medicare prior to turning 65 if they also receive Social Security Disability Insurance. Medicare comes in four different parts: Part A Hospital Insurance; Part B Medical Insurance; Part C Medicare Advantage; and Part D Prescription Drug Coverage.
- Medigap: Medicare Supplement Insurance, also known as Medigap, is a type of medical insurance used to cover costs that Original Medicare doesn’t cover. This is sold by private insurance companies. Medigap insurance coverage is used to pay for medical costs, such as medical costs outside of the U.S., deductibles, copayments, and coinsurance.
- Medicaid: Medicaid is the largest financial source for long-term care in the U.S. For seniors who are financially in need, Medicaid and Medicare work together to provide a more comprehensive health care benefit. It also covers medical costs for seniors who were not able to take out private health care coverage or long-term care insurance in their adult years due to financial constraints.