Reverse mortgages and long-term care insurance
For couples who are trying to finance assisted living care for one spouse while the other remains at home, Steinberg says a reverse mortgage can be a viable option. Available to homeowners who are 62 or older, a reverse mortgage lets you convert some of the equity in your home into cash.
The average assisted living resident is an 86- or 87-year-old who moved in at 84 and will remain in that setting for 28 months, Kyllo says. If your anticipated need for assisted living is still 30 years to 40 years down the road, you might look into buying long-term care insurance. This insurance is more affordable the younger and healthier you are at the time of purchase, but if you wait too long, you may not be eligible for it. If you are older than 85, already living in a long-term care facility or have been diagnosed with a condition that will require long-term care, you probably won't be able to get a long-term care policy.
Long-term insurance benefits for assisted living vary widely, from $50 to $300 per day, says John Ryan, a Certified Financial Planner and owner of Ryan Insurance Strategy Consultants in Greenwood Village, Colorado.
If you purchase a so-called partnership policy and your cost of care later becomes more than your insurance and income will cover, you'll have an easier time qualifying for Medicaid to fill the gap. The policies are administered through the Long-Term Care Partnership Program, a collaboration involving the federal and state governments and private insurers.
Under these policies, you can shield some of your assets from the state if and when you need to apply, and qualify, for Medicaid in order to receive additional long-term care services. The amount of assets that Medicaid will disregard is equal to the amount of the benefits you actually receive under your long-term care partnership policy. To find out more, go LongTermCare.gov.
"The downside to that is that income is not an excludable asset, so if (someone) has, say $3,000 a month in income from a retirement plan, they would be required to spend that money toward care before Medicaid would pay," says Ryan. "Most people, all things being equal, will choose a partnership policy because the rates are not any different."