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Private Funds for Assisted Living
Paying for Assisted Living Using Private Funds & Personal Assets

Private Funding for Senior Housing

Private funds for assisted living

Most people depend upon a full-time job for an income but once retirement approaches, attitudes can change about working. Hopefully, by the time a person reaches the age of retirement, they have saved enough to live comfortably in an assisted living facility if one chooses to do so. If, on the other hand, a person did not save enough to pay for assisted living, there are several sources of income to help.

Paying for assisted living is expensive and many retirees rely on Social Security, retirement account withdrawals and part-time work to pay for long-term care and living expenses. According to a recent Gallup survey of more than 2,000 U.S. adults, including 636 retirees, more and more people over the age of sixty are working part-time.

The retirees, who worked hard at building substantial funds for long-term care, expect to see a rise in assisted living costs in coming years, making it necessary to budget carefully. Many assisted living residents are paying for their expenses using private funds..

Sources of Private Funds Used to Pay for Assisted Living

Withdraw from a Pension

Over 36% of retirees say they have a steady stream of pension payments to draw from in retirement. Today, only 24% of current workers expect to receive traditional pension payments in retirement - the others offer 401k.

Retirement Accounts

401K, IRA or similar types of retirement accounts help fund assisted living and the retirement years. But only 23% of retirees say retirement account withdrawals contribute significantly to their annual income.

Savings Accounts

Savings and CDs are a major source of retirement income for 14% of retirees. According to financial experts, retirees need a minimum of six months to a year's worth of expenses in liquid accounts that has no income generation potential. Then retired people are not worried about how to financially survive for the next year.

Annuities or Insurance Plans

An annuity can ensure that a retiree is able to afford assisted living. Immediate annuities promise a steady stream of payments, no matter how long you live. The catch is that you must hand a large chuck of money over to an insurance company that you can't get back for emergencies or give to heirs, and the costs of this investment can sometimes be high. By providing a guaranteed monthly income, these investment funds will best supplement retirement benefits.

Trusts

Many pay for assisted living using private assets
Many Pay for Care with Private Assets

A legal entity allowing a person (the trustor) to transfer assets to another person (the trustee). Once established, the trustee manages and controls the assets for the trustor. Trusts give flexible control of assets for minor children or for an older adult or a person with a disability. The two most common trusts that pay for long-term care services are Charitable Remainder Trusts and Medicaid Disability Trusts.

Stock Market Investments:

About 13% invested in stocks or stock mutual funds to save for retirement. A person needs to forecast out for the next 30 years to make sure retirement funds cover inflation.

Social Security

The most common way retirees pay for retirement. 61% of them claim it as a major source of annual income.

Home Equity

A retiree can use their home equity to help fund retirement but many don't know that it offers an excellent asset that they can borrow against when it comes to long-term care. Doing so can relieve stress on family members and help older adults secure comfortable care. The options are; sell the home and downsize or take out a second mortgage or reverse mortgage. Close to 20% of retirees expect to use the home equity to help pay for retirement years.

Home equity loans are the traditional way of retrieving equity in a home. Most seniors use conventional home equity loans to pay off debts, existing mortgages and make home repairs. However, since a conventional home equity loan requires pay-back with interest, it doesn't completely free up home equity. Reverse mortgages offer a better way of unlocking equity without the downside of a home equity loan.

Part-time Work

If a retiree finds that Social Security and other sources of income does not provide the needed revenue to pay for assisted living, they can use a part-time or full-time job to help. There are employers who have joined with the American Association for Retired Persons (AARP) to attract older workers and listed on the AARP website. The companies recognize older people as an important part of the American workforce. They believe older Americans bring experience, leadership, and skills to do a variety of jobs.

21% of the people working now plan to count on part-time work as a major source of retirement income, but only 3% of retirees say they receive significant income from continuing to work in retirement. Retirees (5%) less than 70 years of age, are more likely to receive a significant amount of income from a job than those age 70 and older (2%).

Rent and Royalties

Rental property income is another significant source of income for of retirees. And about 6% of workers hope rent or royalties will be a significant portion of their retirement plan.

Financial experts view rental income as risky when counting on it for retirement income. A lot of factors could affect an individual property and its ability to produce income. All it takes is having one bad tenant, turning the investment into a nightmare. Instead consider participating in a real estate investment trust where you get the benefit of income but it's spread across hundreds of real estate investments instead of one piece of property.

Lines of Credit

The need for assisted living comes unexpectedly, and many times before financial resources and planning. A line of credit serves as a bridge for resources until arrangements are in place for permanent financial help. There are lines of credit specifically for assisted living and senior care loans. This is a viable resource for retirees to pick before selling the home, or when the Veteran Aid & Attendance benefit arrives even before long-term care insurance kicks in. It's an option to consider for senior housing costs.

Life Insurance and Life Settlement Solutions

Life insurance policies can convert into a long-term care plan. Note it is not a long-term care insurance policy, annuity, any form of LTC insurance policy, nor is it an accelerated death benefit. It converts to a pre-paid, long-term care benefit plan that covers monthly costs and is a unique financial option for retirees because there are no wait-periods, no care limitations, no costs to apply, no requirement like terminally ill, and there are no premium payments. The policy holders use their right to convert an in-force life insurance policy to enroll in the benefit plan and are able to immediately direct payments to cover their assisted living and long-term care costs.

Carol Marak
Carol Marak

After seven years of helping her aging parents, Carol Marak has become a dedicated senior care writer. Since 2007, she has been doing the research to find answers to common concerns: housing, aging and health, staying safe and independent, and planning long-term.