Although memory care is commonly financed through savings, there are several additional funding sources that many people don’t know about. There are also many professionals who can provide clarity on this complex and naturally emotional topic.
“When parents need long-term care, especially if it’s sudden, it can be very overwhelming,” says Michelle Ash, a certified financial planner in Jacksonville, Florida, and Chartered Advisor for Senior Living™. “Try to stop, take a breath, and make a list of financial sources that can help you access some short-term immediate funds while you get your head around the bigger financial picture.”
From veterans benefits to home equity to life insurance policies and more, learn how to pay for memory care and how to find financial guidance or resources to reduce stress along the way.
Dementia care for veterans is provided through a range of health care services depending on their needs, according to the U.S. Department of Veterans Affairs. The VA Aid and Attendance program — a benefit for veterans pension recipients and their spouses — can provide financial assistance for memory care.
To qualify for Aid and Attendance, a senior must meet one of the following requirements:
Seniors must be 65 years or older, or completely or permanently disabled to qualify for veterans pension. Other qualifications include:
View our VA Benefits and Long-Term Care Guide to learn more and how to apply.
Does your loved one have an IRA or pension plan? These resources can be helpful even if a person hasn’t reached retirement age. A Roth IRA or Roth 401(k) includes dollars that have been put away by the owner. These monetary vehicles for long-term care expenses may be the bulk of what someone uses to pay for long-term care expenses, and they’re typically tax free to pull out as long as you play by certain IRS rules, says Ash.
Two criteria must generally be met in order to remove funds from a Roth IRA account without paying taxes:
One benefit of your retirement account is that these funds are typically liquid and relatively easy to obtain. You may also be able to remove them year by year, so if there are tax consequences they may be mitigated, says Ash. Depending on your care needs and financial situation, you may also be able to deduct long-term care costs from your taxes.
“If you have a big deduction for medical expenses, which long-term care often is, then you might be able to offset those dynamics,” says Ash. “Using IRA dollars for long-term care isn’t always a bad thing to do — sometimes it can be a good source.”
It’s important to note that there are additional options for individuals who are younger than age 59 and a half requiring memory or another type of long-term care. If you have a disability and provide proof, then you may be able to take money out of the IRA and receive a waiver for the 10% penalty. The same concept generally applies to pensions as well. For example, if a person is disabled or has dementia, it’s likely the pension plan will pay benefits early. This means a person with Alzheimer’s disease can use funds without paying any withdrawal penalties.
If a person is retirement age and collecting social security benefits, that income can be put toward memory care. Additionally, if your loved one is diagnosed with early-onset Alzheimer’s before retirement age, they may qualify for Social Security Disability Insurance (SSDI) benefits. Early-onset Alzheimer’s disease, and other disabling conditions listed in the Compassionate Allowances program, can expedite reviews of SSDI applications and provide quicker assistance.
For many seniors, their home is their largest asset or investment. It’s often a logical source to pay for memory care.
Here are a few ways to use your home to afford memory care:
This short-term loan option can pay for memory care costs immediately while you’re liquidating assets or waiting for a home to sell. The advantage is you receive funds quickly. The downside is bridge loans typically have higher interest rates.
Our advisors help 300,000 families each year find the right senior care for their loved ones.
Some senior life insurance policies can be exchanged for Alzheimer’s care. Certain life insurance policies may be sold for a lump sum, which allows you to receive monthly payments. Some life insurance policies can also be converted into months or years at a residential care facility.
“If you have a policy that builds cash value inside it, which basically means that it has a savings account inside of it, then an individual may be able to do a couple of different things to use those resources for long-term care,” says Ash.
If you decide you no longer want the death benefit, you could cash out, or cancel, the policy and use the money to pay for memory care. Another option may be to take out a policy loan, says Ash. You use some money to pay for long-term care, but if it’s not all used, the rest remains a death benefit for beneficiaries. Be sure to talk with the insurance company or their agent about possible impacts to the policy, so you make an informed decision about whether or not this is a good idea for you.
A life insurance, long-term care hybrid policy is becoming more and more popular, says Ash. “Many people have bought policies that have a death benefit as well as long-term care features.”
If you have a life insurance policy and need ways to pay for memory care, check on the specific details with your insurance company. Many have special provisions that may help you afford memory care.
Long-term care insurance is a type of insurance for senior care. Sometimes, families don’t realize their parents have long-term care insurance. While coverage depends on the policy, it generally covers the cost of memory care.
Generally, if you need help with at least two activities of daily living, long-term care insurance will pay some or all memory care expenses. “If you have cognitive impairments then you may meet the definition to qualify for monetary assistance,” says Ash.
Medicare doesn’t typically pay for memory care, though it may cover temporary care in a skilled nursing facility.
Medicaid, on the other hand, is health insurance for low-income U.S. citizens. It covers some aspects of short- and long-term care for seniors who meet Medicaid’s state and federal guidelines. Services vary based on state regulations, so it’s best to check the guidelines in your state. Not all memory care facilities accept Medicaid.
“It can be a good idea to consult with an elder care or an elder law attorney who can ultimately look at your particular state and tell you what it takes to qualify for Medicaid and what you need to know,” says Ash.
For additional payment assistance, consider the following:
You may be able to gather new ideas on how to pay for memory care, or perhaps a new perspective, by speaking with others:
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