How To Pay For Senior Living (2025)

So you’ve decided you or your loved one needs senior living - how much is it going to cost?

A 2023 study by Genworth determined that the U.S. average for assisted living is $5,350 a month, though it could be less (or even more) depending on where you live!

Budget is a huge factor in determining what’s available to you. Unfortunately, there’s also a huge misconception that Medicare will cover the cost.

That is simply not the case.

Understanding Senior Housing Costs

Before diving into how to pay, it's helpful to understand what kinds of senior housing are available. These range from senior apartments and independent living (which are typically for active seniors who don’t need daily assistance) to assisted living, memory care, and residential care homes, where help with daily activities is provided.

No matter the type of senior housing, most of it is private pay, meaning it’s up to the individual or family to cover the costs. So, where does the money come from? Let’s explore the options.

How To Pay For Senior Housing: 10 Options

Private Pay Options

1. Savings & Investments

This includes:

• Retirement accounts (401(k), IRAs, pensions)

• Personal savings

• Stocks, bonds, and mutual funds

These financial resources are often the first place families look when covering senior living expenses.

2. Social Security Benefits

Many seniors rely on their monthly Social Security payments to help with living costs. While this usually won’t cover the full cost of senior living, it can help supplement other financial resources.

3. Proceeds from Selling a Home

If your loved one owns a home, selling it can free up significant funds to cover senior housing. Many seniors have built substantial equity in their homes over the years, making this a primary way to pay for long-term care.

4. Reverse Mortgages

A reverse mortgage allows homeowners aged 62 and older to convert home equity into cash while continuing to live in their home. This can be useful for covering in-home care or bridging the financial gap before transitioning to senior housing.

5. Life Insurance Policies

Some life insurance policies can be cashed out or borrowed against to help pay for senior living. However, this option depends on the specific policy and terms, so it’s important to check with the insurance provider.

Government Assistance Programs

While Medicare doesn’t cover most senior living costs, there are a few government programs that can help in specific situations.

6. VA Benefits (Aid & Attendance Program)

If your loved one is a veteran or the spouse of a veteran, they may qualify for the VA Aid & Attendance benefit. This program provides financial assistance for those needing help with daily activities, including assisted living and memory care.

7. Medicaid

Medicaid is a state and federally funded program for low-income seniors. While Medicaid does not cover independent living, it may cover nursing home costs and, in some states, some assisted living expenses. Each state has different rules, so check local Medicaid guidelines.

Long-Term Care Insurance

Some long-term care insurance policies cover assisted living, memory care, and in-home care. These policies typically require the policyholder to need assistance with daily activities (bathing, dressing, etc.) before benefits kick in. However, coverage varies greatly by plan, so reviewing policy details is essential.

Family Contributions & Other Financing Options

8. Financial Support from Family

Adult children or other relatives sometimes contribute to senior housing costs. This can be a formal arrangement or a pooled fund among siblings to help share the expense.

9. Bridge Loans

Bridge loans can be helpful if funds are tied up in a home sale or other assets. These short-term loans provide temporary financial support until a more permanent funding source becomes available.

10. Renting Out the Family Home

If selling isn’t an option, renting out the home can provide ongoing income to cover senior living costs.

What About In-Home Care?

Some seniors prefer to stay at home and bring in caregivers. Here’s how different types of care are paid for:

• Non-Medical Home Care (Caregivers, Companions, etc.): Private pay (savings, Social Security, long-term care insurance, VA benefits)

• Home Healthcare (Skilled Nurses, Physical Therapy, etc.): Covered by Medicare if prescribed by a doctor after hospitalization

  
  

Hospice Care & Medicare

If your loved one is at the end-of-life stage, hospice care is covered by Medicare. However, families should note that once someone enters hospice, they cannot continue receiving other Medicare-funded therapies like physical therapy.

Planning for Senior Living Costs

The best way to prepare for senior living expenses is to plan ahead. Have conversations early with your loved ones about their financial situation, preferences, and potential care needs. Explore all available funding options and consider consulting a financial advisor who specializes in senior care planning.

Final Thoughts

Paying for senior living can feel overwhelming, but with the right information, you can make confident decisions. Whether using savings, VA benefits, Medicaid, or private pay, there are multiple ways to fund senior housing and care.

The key is knowing your options and planning ahead to make the transition as smooth as possible for you and your loved one.

If you found this guide helpful, share it with friends and family who may be facing similar decisions!

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